The Commodity Futures Trading Commission (CFTC) has fined a crypto startup and its owner a hefty fine for conducting unlicensed financial activities. The commission announced yesterday that it had entered a consent order that finally resolved its action against 1pool Limited. The firm is based in the Marshall Islands.
The CFC had accused the company and its owner, Patrick Brunner of three different crimes. The first was offering retail commodity transactions margined in Bitcoin Core (BTC) illegally. The firm offered these services to U.S customers who were not eligible, the statement read.
It also accused the firm of failing to register as a futures commission merchant. This is despite acting as one, by accepting BTC as margin for trading. 1pool also failed in its supervisory duties, CFTC further argued. This is because it failed to implement an adequate know-your-customer and customer identification program.
The consent order imposes a $175,000 civil monetary penalty. It further requires the disgorgement of $246,000 of the gains made within that period. 1pool will also have to return all the BTC held in U.S customers’ accounts. After doing so, the CFTC will require that it submits a certification that it has completed the paybacks. According to the announcement, 1pool has 93 BTC in its custody belonging to U.S customers. At the time the commission charged the company, these BTC tokens were worth $570,000. This was back in September 2018. They are currently worth $360,000, but 1pool will have to refund the original amount.
In total, 1pool will have to pay $990,000 in resolution to the CFTC action against it.
The CFTC’s director of enforcement took the opportunity to sound a warning to other such operators. He stated:
“Intermediaries should take notice that they will be held accountable by the CFTC for failing to comply with registration requirements and failing to implement policies and procedures that are crucial in protecting U.S. customers and our markets. Through the Division’s Bank Secrecy Task Force, Enforcement will continue to investigate and prosecute such violations.”
The Bank Secrecy Task Force is a coordinated effort within the commission that targets financial entities that fail to comply with AML and KYC requirements.
The CFTC has previously charged other crypto startups and their founders with similar crimes. Last month, it charged My Big Coin founder with fraud and unlawful monetary transactions. This was after the founder had unsuccessfully argued that cryptos aren’t commodities.
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