On September 27, the US Securities and Exchange Commission (SEC) filed charges against an international securities dealer and its Austria-based CEO for allegedly violating the federal securities laws in connection with security-based swaps funded with Bitcoins. According to the SEC’s Complaint, 1pool Ltd. a/k/a 1Broker, registered in the Republic of the Marshall Islands, and its CEO Patrick Brunner, solicited investors from the United States and around the world to buy and sell security-based swaps. Investors…
The U.S. Commodity Futures Trading Commission (CFTC) announced the filing of a Complaint in the U.S. District Court for the Eastern District of New York charging Defendants Blake Harrison Kantor, who frequently uses the alias Bill Gordon, and Nathan Mullins, and the entities Blue Bit Banc, Blue Bit Analytics, Ltd. with operating a fraudulent scheme involving binary options and a virtual currency known as ATM Coin. The district court, on April 17, 2018, entered a…
As early as September 2015, the CFTC took the position that virtual currencies such as Bitcoin are commodities. See In re Coinflip, Inc., No. 15-29 (C.F.T.C. Sep. 17, 2015). Based on that jurisdiction, in January, the CFTC brought a suit against Patrick K. McDonnell, of Staten Island, New York, and CabbageTech, Corp. d/b/a Coin Drop Markets (CDM). McDonnell brought a motion challenging the jurisdiction of the CFTC. In a decision yesterday, the district court held that,…
In a speech yesterday, Sigal Mandelker, the under secretary for terrorism and financial intelligence for the US Department of the Treasury, pushed for stronger regulation of cryptocurrency. She stated that Treasury regulates virtual currency exchangers as money transmitters and requires them to abide by Bank Secrecy Act obligations. Of specific concern is that these exchanges be mindful of the anti-money laundering (AML) and combating the financing of terrorism (CFT) obligations. She said: Virtual currency businesses…
SEC Chairman Jay Clayton and CFTC Chairman Christopher Giancarlo testified today before Congress on the subject of virtual currencies. The prepared remarks of both contained very little that they had not already said in previous public comments. (For example, Mr. Clayton repeated that the ICOS he has seen would qualify as a “security” and this need to be registered) Each also referred to the enforcement actions that their agencies had taken (mostly over the past…
The CFTC disclosed today that, on January 16, in a case initially filed under seal, the CFTC sued and froze the assets of the creators of a supposed cryptocurrency called “My Big Coin” who allegedly took $6 million from unwitting buyers and used it to fund shopping sprees and pay off earlier investors. My Big Coin Pay Inc. — a Nevada corporation whose product, the CFTC noted, sounded similar to Bitcoin — its founder Randall…
We have previously discussed the position taken by the U.S. SEC with respect to cryptocurrencies. But the US Commodity Futures Trading Commission (CFTC) also has a role to play. On September 17, 2015, the CFTC brought its first cryptocurrency action against an unregistered Bitcoin trading platform. Coinflip, Inc. d/b/a Derivabit (Coinflip) and its chief executive officer Francisco Riordan were charged operating a facility for the trading or processing of commodity options (offering to connect buyers and…