A complaint filed on January 18, 2018 by the Commodity Futures Trading Commission (CFTC) alleges that since April 2017 until now, the CEO of The Entrepreneurs Headquarters Limited (TEH), Dillon Michael Dean, engaged in fraudulent activities.
In the recently filed document, the CFTC isn't pulling any punches. It "seeks civil monetary penalties, and remedial ancillary relief, including, but not limited to, trading and registration bans, restitution, disgorgement, rescission, pre- and post-judgment interest, and such other and further relief as the Court may deem necessary or appropriate."
The tale of Dillon Michael Dean's exploits is convoluted, but so perfectly strikes the same tone as many other investment schemes currently trumpeted in the internet's Wild West, that it leaves observers astounded at the likelihood of many similar yarns just waiting to unspool.
According to the complaint filed in the Eastern District court of New York, Dean attempted to solicit approximately $1.1 million in the form of bitcoin from over 600 individuals who were to "participate in a pooled investment vehicle for trading commodity interests." The CFTC contends that the CEO chose to misappropriate the funds of customers rather than invest them, engaging in Ponzi scheme-style payouts to other customers, and in turn lying about balances to cover his tracks.
It is further alleged that during the endeavor to solicit investors, defendants made omissions and told lies regarding Dean's experience, track record, and how funds would be allocated; customers were led to believe that 40 percent of their funds would be pooled towards binary options while the rest would be allocated to a bitcoin-based reserve, to facilitate withdrawals for customers. The options came in three forms, one of which promised an astounding 11-17.5 percent weekly return. The remaining options offered assistance to customers trading on their own personal North American Derivatives Exchange (Nadex) accounts. In addition, customers were told that an individual using the Facebook handle "Propht Taurai Moyo" was also trading on their behalf.
However, rather than honoring the terms of their agreements with customers, the CFTC alleges that "in reality, Defendants [TEH and Dean] did not trade any of the funds contributed by customers for the benefit of the pool."
According to the SEC, the TEH website kept customers in the dark. Customer account balances in electronic statements were purposefully misrepresented, showing large returns credited to the accounts, supposedly available for withdrawal.
Reportedly, TEH only accepted bitcoin as the sole means for customers to deposit capital into accounts. TEH gave out instructions on how to set up accounts on its official website, and guided people to transfer BTC to those TEH accounts from personal wallet addresses. At least 2,000 were solicited in this manner through various Facebook groups by accounts either managed by Dean, or through affiliated individuals given administrative authority over the Facebook groups.
On June 6, 2017, one of the appointed administrators sent the following message to the TEH Facebook user base:
"URGENT MESSAGE..IT HAS BEEN BROUGHT TO OUR ATTENTION THAT SOME HAVE HAD THERE [sic] ACCOUNT HACKED AND WALLET CHANGED…ASAP GO CHANGE YOUR WALLET ADDRESS AND SAVE PLUS ENABLE ALL SECURITY[.] IF YOU HAVE A PENDING WITHDRAW [sic] DOUBLE CHECK THE ADDRESS IT'S GOING TOO!!! [sic] AND CHANGE YOUR EXSISTING [sic] PASSWORD AS WELL!!!!!"
Dean himself followed up on August 9, 2017, saying:
"CRAZY I detected a hacker, but everything is ok, and I have stopped whoever it was. I have hared [sic] that some accounts got hacked, if they did, message me and I can fix the issue. If you need to send me a message, send a fried [sic] request first if your [sic] not friends so the message goes to my primary inbox."
Dean then narrated a complex and consistently misspelled account of travails with what he claimed was an anonymous hacker, a tale which unspooled throughout August and which ended with Dean's announcement August 17, 2017 that "all the data has been lost because of the hacker."
During the fallout from this news, customers who were critical of TEH's activities were systematically removed from the company's social media groups by administrators, and TEH eventually transitioned to a closed Facebook group dubbed, "Official Entrepreneurs Headquarters Group."
In the meantime, the supposed transition to a new site was completed; but customers looking at their balances now discovered them lacking the promised exorbitant 11-17.5 percent weekly returns.
TEH and Dean skirted client requests for return of their principal investments, providing a litany of excuses.
On December 9, 2017, Dean posted into the newly-formed closed Facebook group:
"Withdraws; SLOWWW blockchain…btc was losing it there for a while lol I am waiting on a few large transactions to be moved over into our BTC wallet for the mass payment for everyone's withdraws."
This may prove to be the final message from Dean, as he has stopped responding to customer requests and emails, according to the CFTC, which estimated that Dean's solicitation and fraudulent activities resulted in the misappropriation of over $1 million of customer funds.
All the while, TEH had not been registered as a commodity pool operator (CPO), and further, Dean did not register as an associate person (AP) of a CPO – both of which would have been required for TEH and Dean to operate under the auspices of legality.
The CFTC also stated that the administrators Dean appointed did not have sufficient knowledge of the marketplaces in which they advertised investments, but posted messages and engaged in streaming videoconferences where vast returns were promised based on Dean's trading activities.
The CFTC said that Dean has also set up a trading venture, Real Trade Profits (RTP), using a similar solicitation technique as that of TEH.
According to the RTP website, "We have a [sic] automated payment platform that will automatically pay interest on all of your deposits into RTP. Simply deposit and earn 20%-50% of all the profits we make that day which averages 1-10% return on your money everyday [sic] of the week . . . . Your principal is returned to you at the end of the pay period, and you are able to withdraw all profits as well." The RTP site had 65 members, as of December 4, 2017, according to the CFTC.
Dean and TEH stand accused of violations of the Commodity Exchange Act and its regulations, including operations fraud and CPO fraud, as well as failure to register as a CPO and as an AP of the CPO. It seeks relief in the form of an immediate injunction, and essentially bans TEH and associates from trading any type of commodity or registered entity. The CFTC asks that additional civil penalties be assessed by the court as well.
ETHNews will provide follow-up coverage relative to the judgement assessed by courts on this matter.