Three Cryptocurrency Operations Sued by the US Derivatives Regulator


Charges were filed against three separated cryptocurrency operators after they were accused of fraud by the US derivatives watchdog.

Patrick McDonnell, a New York resident, and CabbageTech, his company, was charged with fraud, by the Commodity Futures Trading Commission (CFTC), saying that the defendants “preyed on customers interested in bitcoin and litecoin.”

In the second case, the CFTC accused Dillon Michael Dean of Colorado and Entrepreneurs Headquarters, his UK-registered company, of running a Ponzi scheme, through which the agency said that the Dean and his company solicited bitcoin amounting to at least $1.1m (£793,000) from over 600 members of the public.

The third case remained undisclosed.

The said move is the latest in a series of regulatory crackdowns against bitcoin and the other cryptocurrencies that are available elsewhere in the world.

As a response to the first case, the CFTC’s director of enforcement, James McDonald, stated: “This action is among the latest examples of the CFTC’s continuing commitment to act aggressively and assertively to root out fraud and bad actors involved in virtual currencies.”

Last December, the CFTC gave the green light to the bitcoin futures contracts, which were subsequently launched by the Chicago Board Options Exchange and CME Group during the same month. According to Reuters, the agency came under fire for not looking for a wider industry feedback before the approval.

This week, Japan, China, and South Korea all announced some form of regulatory crackdown in an effort to address concerns of fraud and money laundering that are associated with digital currencies.

Today, the US Securities and Exchange Commission (SEC) said that it had seen a growing interest for exchange-traded funds (ETFs) that have value in cryptocurrencies. However, it warned that it there are “significant” issues regarding investor protection that still need to be examined before the funds are offered to retail investors.