Acting in tandem, both the US Security and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) filed charges today against 1pool Ltd. a/k/a 1Broker.com and its CEO, Patrick Brunner. The charges include money laundering, wire fraud, and operating an unregistered securities exchange.
Violating Federal Security Laws
1Broker.com allowed users to invest in real-world markets directly using Bitcoin. The platform offered dozens of commodity, stock, and index markets that users could participate in. To register for an account, users merely needed to provide an email address and username. No other KYC/AML checks that have become standard across the rest of the cryptocurrency space.
According to an SEC press release, 1pool Ltd, also known as 1Broker.com, “solicited investors from the United States and around the world to buy and sell security-based swaps.”
Federal agents, acting undercover, were able to buy several security-based swaps on the 1Broker platform from the United States. 1Broker failed to meet the discretionary investment thresholds mandated by federal security laws. Additionally, 1Broker did not transact the swaps on a registered national exchange and was not registered as a security-based swaps dealer.
Along with the SEC charges, the Commodity Futures Trading Commission (CFTC) filed their own set of charges against 1Broker.com that stemmed from the same misconduct that got the SEC involved.
After the charges were filed, the 1Broker.com domain was seized by the FBI according to an announcement on the FBI website. Some of the charges mentioned along with the warrant were money laundering, wire fraud, operating as an unregistered broker of securities, and operating as an unregistered futures commission merchant.
Interestingly, at press time, 1Broker.com appears to still be online in the US, although account creation functionality is disabled.
Lots of talk in the cryptocurrency space over the past several months have been regarding the legality of digital assets. The Securities and Exchange Commission made their stance much more clear in June, stating that Ethereum was not a security despite the possibility of staking in the future.
According to the SEC, a token or coin that has a sufficient level of decentralization (to the point where no one party is in charge) will not be classified as a security. Bigger name coins such as Bitcoin, Bitcoin Cash, and Ethereum fit the requirement for decentralization while ICO tokens used to fund specific companies may be looked at as securities in the future.
Coinbase has been actively looking to add additional assets to their platform and has even received SEC approval to operate as a securities exchange. This gives them the green light to list almost any coin that meets the rest of their requirements.
What do you think about the current landscape of identity verification in the cryptocurrency space? Is regulation going to be a good or bad thing? Let us know in the comments below!
Images courtesy of FBI, Shutterstock