The FTC’s lawsuit against Scott Chandler, Louis Gatto, Eric Pinkston and Thomas Dluca is turning into a bit of a circus.

At the heart of the theatrics are two core issues; Scott Chandler handing over his illgotten bitcoin and Thomas Dluca deleting incriminating emails.

As per the granted preliminary injunction back in April, Scott Chandler was required to turn over any bitcoin held for liquidation.

Chandler isn’t too happy about this, based on an unsupported assertion that he’s ‘been investing legitimately in cryptocurrency (Bitcoin) since prior to the‘ FTC’s case.

The FTC meanwhile are having none of it, and filed a show cause for contempt hearing motion against Chandler on October 6th.

Citing the need to hold Chandler accountable for his “serial
promotion of deceptive schemes”, the FTC argues that by not turning over his bitcoin, Chandler has and continues to violate the preliminary injunction.

It also appears that Chandler may have deleted relevant emails
in violation of Section VII, which requires production of relevant electronically stored information, and Section XII, which requires preservation of evidence.

Accordingly, this Court should hold Defendant Chandler in contempt for violating the Preliminary Injunction.

Forensic analysis of a laptop Chandler turned over to the FTC revealed one of the email accounts contained 47 unread messages as of February 13th.

When the FTC was given access to the account on June 14th, the email account contained only five messages.

Analysis of the laptop also revealed Chandler’s use of additional emails, none of which were declared or turned over.

Pertinent to Chandler’s claim of “legitimate investment” in bitcoin, the FTC linked Chandler to several cryptocurrency Ponzi schemes – in addition to those cited in their original compliant.

Chandler also had accounts at various websites that appear to contain electronically stored information about his participation in those money-making schemes, including accounts associated with the following relevant schemes: Jet-Coin, Hashcoinex, Gladiacoin, Bit90x, CoinXL, WalletPllus, Network, Ormeuscoin, and MyDigitalBTC.

Various social networks Chandler used to participate in fraudulent schemes are also cited, none of which Chandler has declared or given the FTC access to.

It’s pretty obvious Chandler’s acquisition of bitcoin is primarily through fraudulent schemes.

I suspect when pressed Chandler will be entirely unable to convince the court of legitimate bitcoin investment. At least not any significant amount.

As per his October 15th and 16th filings, Chandler has asked for a hearing to “flesh out” ‘the legitimate v. alleged illegitimate cryptocurrency issue/controversy‘.

The FTC has stated it doesn’t object to Chandler’s motions, so I suspect a hearing will be scheduled to hear both the FTC’s show cause and Chandler’s stay motions together.

Returning to the topic of deleting emails, the FTC has also taken Thomas Dluca to task for trying to hide evidence.

Dluca has been required to preserve electronically stored information and business records since the March 12th TRO.

At the time the TRO was granted, the FTC were aware of

emails that likely related to the operations of Bitcoin Funding Team, My7Network, Fund My Cause, Magic 10, 25 Dollar Legacy, and various other money-making opportunities.

Instead of preserving the emails however, Dluca instead “deleted all emails” from the account before granting the FTC access.

Whereas Chandler is fighting the FTC though, Dluca has acknowledged his violation of the TRO and preliminary injunction.

As per a stipulated order was filed on October 11th, the FTC and Dluca have asked the court to accept the deleted emails would have

  1. been relevant and unfavorable to Dluca;
  2. supported the FTC’s factual allegations; and
  3. tended to negate Dluca’s filed affirmative defenses.

The proposed order goes on to state Dluca will be barred from introducing any evidence of the contents of the deleted emails. Good faith and mootness defenses Dluca has filed in answer to the FTC’s complaint will also be struck.

As at the time of publication a decision on the FTC’s and Chandler’s respective motions has yet to be made. As previously stated I’d expect a hearing to be scheduled at some point.

Dluca’s sanctions order is more straight forward, requiring only approval from the court (yet to be given as of October 17th).

Stay tuned…


Update October 24th 2018 – Scott Chandler’s Motion for Reconsideration has been denied.