The United States SEC has filed charges against 1pool Ltd., an international securities dealer that was offering Bitcoin-funded security-based swaps. The announcement came in an official statement by the Commission published on September 27.
Officially based in the Marshall Islands, 1pool Ltd. is the legal entity associated with 1broker.com and Patrick Brunner, the company’s CEO. The SEC’s charge accuses Brunner and his company’s offerings of Bitcoin-funded securities of being in violation of federal securities laws.
SEC charges Bitcoin-funded securities dealer and CEO https://t.co/u71IIH4lTv
— SEC Enforcement (@SEC_Enforcement) September 27, 2018
Investors on 1Broker could register as users “by simply providing an email address and a user name…and could only fund their account using bitcoins,” reads an official statement from the Commission. Further, “1Broker failed to transact its security-based swaps on a registered national exchange, and failed to properly register as a security-based swaps dealer.”
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One of the SEC’s First Motions Against a Foreign Cryptocurrency Company
The Commission’s complaint, which was filed in the US District of Colombia, is seeking permanent injunctions, disgorgement plus interest, and penalties.
The CFTC has also filed a separate motion against 1Broker.
The case is one of the earliest examples of the United States government going after a foreign cryptocurrency company. “International companies that transact with U.S. investors cannot circumvent compliance with the federal securities laws by using cryptocurrency,” said Shamoil T. Shipchandler, Director of the SEC’s Fort Worth Regional Office. Additionally, “the SEC protects U.S. investors across a variety of platforms, regardless of the type of currency used in their transactions.”
The SEC Cracks Down on Crypto
The 1Broker case is only the latest example of a growing list of law enforcement actions that the SEC has taken against companies in the cryptocurrency space over the last several months. Last month, Colorado securities commissioner Gerald Rome ordered three companies to show cause for promoting the sale of unregistered securities during their ICOs.
The SEC also brought charges against the operators of TokenLot LLC, a self-described ‘ICO Superstore,’ earlier in September for operating as unregistered broker-dealers. The SEC also recently came down against Tomahawkcoin and (for the first time ever) a cryptocurrency hedge fund.
Some of these efforts have been identified as part of Operation Cryptosweep, an organized effort by the North American Securities Administrators Association, to eliminate fraud from the crypto space.