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The U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) are suing a Marshall Islands-based securities dealer for allegedly violating federal law through a bitcoin-based security swap scheme.
The SEC announced in a press release that it filed charges against 1pool Ltd., also known as 1Broker, as well as its CEO Patrick Brunner for selling security-based swaps to U.S. and international investors without following proper "discretionary investment thresholds." Notably, investors could only purchase these swaps with bitcoin, according to the claims.
The agency also alleges the company, as well as CEO Patrick Brunner, did not follow proper registration requirements for a security-based swaps dealer. Not to mention refraining from conducting transactions on a “registered national exchange.”
In addition to the action from the SEC, the Federal Bureau of Investigations (FBI) said they seized the 1Broker.com domain.
The agency said the domain was taken after a District Court found probable cause that “it was used, or was intended to be used” to violate laws related to money laundering, wire fraud, and improper registration.
A case filed by the Commodity Futures Trading Commission (CTFC) on September 27th asserted 1Broker was not properly registered with the CTFC.
The action against 1Broker comes weeks after a District Judge affirmed that securities laws could be relevant in a fraudulent ICO case.
Judge Raymond Dearie wrote that federal securities laws ought to be interpreted in a flexible manner. The judge also reportedly mentioned that allegations against fraudsters would seem to support ICOs in the question of cryptocurrencies classified as securities.
In September, the SEC also issued a formal cease and desist order against Crypto Asset Management for coming into violation with securities laws. The regulatory agency said the firm was not registered as an investment company.
Shamoil Shipchandler, director of the SEC's Fort Worth regional office, said in a statement that "the SEC protects U.S. investors across a variety of platforms, regardless of the type of currency used in their transactions ... International companies that transact with U.S. investors cannot circumvent compliance with the federal securities laws by using cryptocurrency."
The regulator is looking for a permanent injunction against Brunner and 1pool, along with penalties and "disgorgement plus interest."
In addition, the CFTC filed charges against 1Broker for similarly violating federal laws by failing to implement anti-money laundering and supervisory features.
The FBI later reported it had seized the 1broker.com domain, claiming the company has violated money laundering and wire fraud laws, in addition to "operating as an unregistered broker/dealer of securities" and "operating as an unregistered futures commission merchant."
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