September 29, 2018 12:06 AM
Both the CFTC and the SEC have announced they have taken action against an international securities exchange that accepted payment in bitcoin.
Yesterday, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) separately filed complaints against Patrick Bruner and his companies 1pool and 1broker. Bruner, through these companies, is accused of violating US securities and commodities laws through online trading platforms that accepted payments only in bitcoin.
Though these actions are being taken by US regulators, neither Bruner nor the companies are based in the US. Bruner is Austrian, and his companies are headquartered in the Marshall Islands.
According to the SEC complaint[1], 1broker offered what are called contracts for differences (CFDs), which allow accountholders to purchase a long or a short position on a publicly traded US company. Depending on the fluctuation of the price of the underlying stock, the CFD will increase or decrease in value, though the CFD holder never owns any of the underlying asset. The SEC considers stock-based CFDs to be "securities swaps" and consequently holds they are required to be registered with the commission.
1broker was also selling CFDs that were based on commodities. Consequently, the CFTC, which regulates the trading of commodities, has also gotten involved. In its complaint[2], the CFTC alleges 1broker sold CFDs based on commodities such as gold and Texas crude oil. The CFTC considers those CFDs to be "commodity futures." Consequently, 1broker should have registered as a "futures commission merchant," which it failed to do. Additionally, the complaint alleges these products were sold to those who were not "eligible contract participants," since certain commodity futures can only legally be sold to corporate entities with net worths in excess
