Monday, 21 January, 2019

The US derivatives regulator has sued three cryptocurrency operations

US regulators charge three bitcoin operators with fraudMore US regulators charge three bitcoin operators with fraudMore
Nellie Chapman | 21 January, 2018, 03:25

DBA Coin Drop Markets (CDM), a NY corporation, charging them with fraud and misappropriation in connection with purchases and trading of Bitcoin and Litecoin.

Based just outside Manhattan, in Staten Island, New York, CabbageTech operated under the name "Coin Drop Markets".

In its complaint, which was filed in the U.S. District Court for the Eastern District of NY, the CFTC alleges that the firm "engaged in a deceptive and fraudulent virtual currency scheme to induce customers to send money and virtual currencies to CDM, purportedly in exchange for real-time virtual currency trading advice and for virtual currency purchasing and trading on behalf of the customers".

The defendants "deceptive (ly) and fraudulent (ly)" solicited customers and "simply misappropriated" their investment money, alleges the civil complaint, filed in Brooklyn federal court. Since around January 2017, the company promised customers real-time trading advice but never provided it and essentially disappeared after receiving payment, the complaint said. CabbageTech and Entrepreneurs Headquarters both had their web sites down.

However, the company's customers lost "most, if not all, of their invested funds due to (the) defendants' fraud and misappropriation", alleges the complaint.

After taking money for the tips and investment services, the CFTC alleged in a filing to a NY district court that Coin Drop and McDonnell simply shut down the site, deleted social media accounts, and absconded with the coins.

Governments around the world are debating how to address risks posed by virtual currencies.

In response to the first case, James McDonald, the CFTC's director of enforcement, said: "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".

On Friday, the CFTC, which oversees the derivatives markets in America, announced a pair of civil lawsuits against businesses it claims defrauded customers out of their hard-earned wonga with cryptocurrency get-rich-quick schemes.

McDonnell and Dean could not be immediately reached for comment on Friday via their company websites, which appeared to have been taken down.