In what seems like the first coordinated strike from government agencies, the U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and the Federal Bureau of Investigation (FBI) have taken action against a securities broker for violating federal laws in connection with security-based swaps funded by bitcoin.
On September 27, 2018, the SEC announced that it had filed charges at a U.S. District Court for the District of Columbia against Marshall Islands-based securities company 1pool Ltd., also known as 1Broker, and its Austria-based CEO Patrick Brunner for trading security swaps to American investors and others across the world without meeting the "discretionary investment thresholds required" by federal securities law.
The SEC further claims that 1Broker was fraudulently issuing swaps as it was not a registered "securities-based swaps dealer," and it also failed to transact on a registered national exchange.
Commenting on the claims, Shamoil Shipchandler, director of the SEC's Fort Worth regional office, said the SEC would protect U.S. investors on any platform regardless of the currency used in the transaction.
"International companies that transact with U.S. investors cannot circumvent compliance with the federal securities laws by using cryptocurrency."
The SEC is seeking permanent injunctions, penalties and "disgorgement plus interest" against 1Broker and its CEO.
Responding to the SEC's allegation, 1Broker assured customers of the safety of their funds and said they were ready to cooperate with the SEC.
The CFTC filed a similar complaint against 1Broker for illegally offering off-exchange, transactions, not registering as a Futures Commission Merchants (FCM), and failure to implement anti-money laundering and supervisory features.
The statement from the CFTC reads in part:
"Entities required to be registered as FCMs such as 1pool, are required by Commission Regulations to diligently supervise all activities of their officers, employees, and agents relating to their business as an FCM, including the handling of customer accounts, and to implement and maintain adequate supervisory systems and procedures."
The Federal Bureau of Investigation followed this up with a seizure of the 1Broker.com domain name. The Bureau claims the domain was taken down after a U.S. District Court for the District of Columbia found probable cause that it's in violation of federal laws.