The United States Securities and Exchange Commission (SEC) has filed charges against 1pool Ltd, a securities dealer registered in the Republic of the Marshall Islands and its founders for allegedly selling unregistered security-based swaps to U.S residents, according to statements from the commission on September 27, 2018.
SEC Crushes another Bitcoin-based Business
According to an SEC statement, international securities dealer registered in the Republic of the Marshall Islands, 1pool Ltd. and its Austria-based chief executive Patrick Brunner, have violated the U.S securities laws by selling security-based swaps to U.S investors without registering as a security-based swaps dealer or getting its crypto investment product listed on a registered national exchange.
For the uninitiated, a swap is merely a derivative contract that makes it possible for two entities to exchange all kinds of financial instruments. In the case of cryptocurrency-based derivatives, these products offer investors a degree of safety from the digital asset’s volatility.
Per the SEC, in addition to soliciting investors from the United States and around the world to trade bitcoin-funded swaps, the firm also failed to conduct any form of know-your-customer (KYC) and anti-money-laundering (AML) checks on its clients. Investors only needed to provide a valid email address and a username to do business on the platform and bitcoin is the only accepted method of account funding.
The financial watchdog also stated that an undercover agent with the Federal Bureau of Investigation (FBI) effortlessly bought several security-based swaps on the 1Broker platform despite the discretionary investment thresholds being unmet.
Conclusions, Punishment, and Next Steps
The agency’s complaint filed in U.S District Court for the District of Columbia now seeks permanent injunctions, disgorgement, and other penalties against the firm and its owners.
Director of the SEC’s Fort Worth Regional Office Shamoil T. Shipchandler noted that the SEC would continue proactively protecting U.S. investors on all investment platforms irrespective of the type of currency used to transact on the platform.
“International companies that transact with U.S. investors cannot escape compliance with the federal securities laws by using digital currency,” said the official. Per the SEC, the Commodity Futures Trading Commission (CFTC) has also filed charges against 1Broker for violating its statutes.
While the U.S. is still drafting a robust regulatory framework for ICOs and the local cryptospace, the SEC has been curbing the activities of rogue actors, and it seems to be winning the battle so far.
On September 13, BTCManager informed that the SEC ordered TokenLot, the “‘ICO superstore,” and its founders to pay more than $550,000 in fines for functioning as unregistered broker-dealers.