GTK Enforcement Actions and Enforcement agency

GTK – three enforcement actions and one enforcement agency statement (ESMA):

  1. CFTC Charges Colorado Resident Dillon Michael Dean and His Company, The Entrepreneurs Headquarters Limited, with Engaging in a Bitcoin and Binary Options Fraud Scheme
    The complaint alleges that defendants solicited customer deposits using the online media and false claims. The defendants claimed that customers’ funds would be pooled and invested in commodity options on behalf of customers. But, as alleged, defendants were not actually engaged in trading on behalf of their customers, and defendants’ purported trading profits were fictitious. The defendants misappropriated over $1 million in customers’ funds, while Dean has launched another similar purported trading venture under the name Real Trade Profits, using a website to solicit customers to deposit Bitcoin for a pooled investment in binary options trading and promising high rates of return.
  2. CFTC Charges Patrick K. McDonnell and His Company CabbageTech, Corp. d/b/a Coin Drop Markets with Engaging in Fraudulent Virtual Currency Scheme
    The CFTC complaint alleges, McDonnell and CDM 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 under McDonnell’s direction. In fact, as charged in the CFTC Complaint, the advice was never provided, and customers who provided funds to McDonnell and CDM to purchase or trade on their behalf never saw those funds again. In short, McDonnell and CDM used their fraudulent solicitations to obtain and then simply misappropriate customer funds.
  3. The Massachusetts Securities Division is charging a resident of the state with violating securities laws through an initial coin offering (ICO)
    According to the complaint, the company and its founder, violated Massachusetts securities law in the way they designed, promoted and sold “Caviar tokens,” which are units of cryptocurrency that entitle their owners to receive a portion of the profits from Caviar’s investment activities.
    The Massachusetts Securities Division — which labeled Caviar’s ICO a “cryptocurrency scheme” — wants Caviar to shut down the ICO, return all the money paid so far, and pay an administrative fine.
  4. ESMA published a statement explaining, that it was considering the possible use of its product intervention powers, to address investor protection concerns posed by the marketing, distribution and sale of CFDs and binary options to retail investors.
    It is now seeking evidence from stakeholders on the impact of the following proposed measures:
    Contracts for Difference
    The specific potential measures under consideration are:
    i. Leverage limits on the opening of a position by a retail client. These would range from 30:1 to 5:1 to reflect the historical price behaviour of different classes of underlying assets;
    ii. A margin close out rule on a position by position basis. This would standardise the percentage of margin at which providers are required to close out a retail client’s open CFD;
    iii. Negative balance protection on a per account basis. This would provide an overall guaranteed limit on retail client losses;
    iv. A restriction on the incentivisation of trading provided by a CFD provider; and
    v. A standardised risk warning by CFD providers. This would include an indication of the range of losses on retail investor accounts.
    ESMA is also considering whether CFDs in cryptocurrencies should be addressed in the measures.
    Binary Options
    The potential measure under consideration is a prohibition on the marketing, distribution or sale of binary options to retail investors.