Regulators file charges vs dealer paid in BTC

BTC futures firm 1Broker hit with securities law violations

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The U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have filed separate charges against 1pool Ltd. and its owner Patrick Brunner, whose 1Broker trading platform had accepted orders paid with BTC.

According to the regulators, Brunner had not followed requirements under federal law, namely, registering as a security-based swaps dealer, and as a Futures Commission Merchant.

SEC’s Fort Worth Regional Office Director Shamoil Shipchandler said, “The SEC protects U.S. investors across a variety of platforms, regardless of the type of currency used in their transactions.”

Both the SEC and CFTC, who filed their respective complaints at the U.S. District Court for the District of Columbia, said that 1Broker traders were only asked for an email address and a user name, after which they were only allowed to pay in BTC.

A special undercover agent of the Federal Bureau of Investigation (FBI) had purchased several security-based swaps from the 1Broker website, “despite not meeting the discretionary investment thresholds required by federal securities laws,” said the SEC, adding that the swaps were not transacted on a registered national exchange.

The CFTC said, “Defendants failed to diligently supervise by failing to implement an adequate know-your-customer and customer identification program (KYC/CIP).”

CFTC Director of Enforcement James McDonald said that since “at least February 2016,” 1pool had offered or engaged in its transactions, specifically the selling of “contracts for difference,” which allowed investors to earn depending on price changes of underlying commodities, specifically, gold and West Texas Intermediate crude oil.

“The Defendants did not conduct these transactions on or subject to the rules of any board of trade that has been designated or registered by the CFTC as a contract market, as required by the Commodity Exchange Act (CEA),” the CFTC said.

Both the SEC and CFTC, in their complaints, sought disgorgement of all gains made through 1Broker, the imposition of monetary penalties, and a permanent trading ban.

1pool, whose 1Broker website was closed by the SEC, said, “Currently, our top priority is to allow customer withdrawals. The company holds enough funds to cover all withdrawal requests, of course. Before we can take the required steps to do that, we have to seek the permission from the authorities.”

It also maintained that “[t]he services offered by 1Broker posed no threat to investors and since the launch in 2012, we were able [to] build a very good reputation among traders.”

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