1Broker Crypto Platform Hit With SEC, CFTC Charges, Claims Funds are Safe
The U.S. Securities and Exchange Commission (SEC) along with the Commodity Futures Trading Commission (CFTC) are suing a Marshall Islands-based securities dealer 1Broker for allegedly violating federal law through a Bitcoin-based security swap scheme.
In its press release the SEC announced that it filed charges against 1pool Ltd., aka 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.”
The SEC is further claiming that 1Broker was not registered a “security-based swaps dealer” and “failed to transact its security-based swaps on a registered national exchange.”
“The SEC alleges that a Special Agent with the Federal Bureau of Investigation, acting in an undercover capacity, successfully purchased several security-based swaps on 1Broker’s platform from the U.S. despite not meeting the discretionary investment thresholds required by the federal securities laws,” the regulator’s statement says.
According to the claims, investors could only purchase these swaps with 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.
Shamoil Shipchandler, the Director of SEC’s Fort Worth Regional Office who handled the case, added:
“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.
1Broker meanwhile took to Twitter insisting that users’ funds are safe and that the company is willing to cooperate with the authorities.
Statement regarding the SEC allegation: All funds are currently secure and we will fully cooperate with the authorities. If approved by the SEC, we will enable withdrawals for US customers as soon as possible.
A more detailed statement will follow.
— 1Broker (@1Brokercom) September 27, 2018
However, 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.”
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