CFTC Sticks 1pool Ltd and CEO with $990,000 Penalty Due to Unregistered Bitcoin Transactions

As of mid-March 2019, the Commodity Futures Trading Commission (CFTC) has ordered Marshall-Islands registered 1pool Ltd and its Austrian-based CEO Patrick Brunner with penalties totaling $990,000. The CFTC said the recent action should set a precedent for additional enterprises that fail to comply with the commission’s requirements.

CFTC Orders $990,000 Penalty to 1pool Explained

According to the CFTC, Marshal Islands-registered 1pool offered illegal retail commodity transactions which were margined in Bitcoin, failed to register as a futures commission merchant (FCM) and failed to have the required anti-money laundering (AML) procedures in place.

Back in late September 2018, the 1broker domain was seized by federal authorities of the United States government. At the time, 1pool released a statement saying:

“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.”

Last week, 1pool CEO Patrick Brunner released a statement describing how he and 1pool have “settled the two lawsuits without admitting or denying the factual allegations of their complaints on March 4th 2019”. Brunner’s statement did not release any details concerning the settlement.

Details of 1pool Ltd Settling with US Authorities Explained

The CFTC order requires the disgorgement of more than $245,000 of gains and imposes a civil penalty of $175,000.

In addition, 1pool is ordered to reimburse all known U.S. customers who have Bitcoin held in 1pool accounts. 1pool must prove that it has repaid an approximate total of 93 bitcoins to U.S. customers. The CFTC valued those bitcoins at approximately $570,000. The total financial penalty that 1pool must face nears $990,000.

The CFTC has said that the recent action should set a precedent for what’s to come. According to James McDonald, the CFTC’s Director of Enforcement, all other enterprises that fail to comply with the commission’s registration requirements will be held accountable:

“Through the Division’s Bank Secrecy Task Force, Enforcement will continue to investigate and prosecute such violations.”

The case involving 1pool and the CFTC highlights a major reason in blockchain’s ongoing trend: a transition towards security tokens.

As opposed to the $20 billion raised through Initial Coin Offerings (ICOs) in 2018, Security Token Offerings (STOs) admit— from the start— the classification of a security. They therefore must not only abide by existing securities laws, but must also be capable of proving such compliance to regulatory authorities.

Authorities and financial regulators around the globe continue to remain skeptical of blockchain-based assets. Yet with the untapped potential of security tokens, and financial giants including Fidelity and NASDAQ entering the space, security tokens could not only go on to replace the ICO, but the IPO– with regulatory safety.

What do you think of the CFTC’s action against 1pool? How should the CFTC act when it comes to other digital assets, beyond Bitcoin? Let us know what you think in the comments section below.

 Image courtesy of the CFTC.