Cryptocurrencies can be regulated as commodities by the U.S. Commodity Futures Trading Commission, which also has authority along with other regulators over dealings in virtual assets, a federal judge ruled.
US District Judge Rya W. Zobel in Massachusetts ruled that the CFTC had the standing to bring a fraud lawsuit against privately held My Big Coin Pay, the corporate parent of the online cryptocurrency payment platform and virtual wallet website MyBigCoin.com.
Zobel upheld the CFTC’s determination in 2015 that virtual currencies are commodities, saying it was supported by the plain meaning of the word “commodity” and that the CFTC had broad leeway to interpret the federal law regulating commodities.
In its lawsuit, the CFTC filed federal charges for fraud and misappropriation against three separate digital coin operators, alleging that they had defrauded customers and broken other commodity trading rules.
Specifically, the CFTC charged New York resident Randall Crater, Mark Gillespie of Michigan and their company with misappropriating money from customers they had solicited for providing virtual-currency trading and other services.
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In a criminal complaint filed in Massachusetts district court, the CFTC describes how My Big Coin sold digital tokens known as ‘MBC’ as part of a purported ICO that allows investors to enjoy a lavish lifestyle, including travel, entertainment, jewelry purchases and “much more across the world.”
The CFTC alleges that between approximately January 2014 and January 2018, the defendants and the Las Vegas-based corporation fraudulently solicited more than $6 million from investors.
The agency alleged that the MBC website made false statements to prospective investors, as well as purposefully misrepresenting that the token was backed by gold, partnered with MasterCard, when in fact it was not.
Founded in December of 2013, My Big Coin is a virtual currency wallet and platform that allegedly allows merchants and consumers to process transactions with its own digital currency.
Regulation of cryptocurrencies is still in its early stages in the U.S. as lawmakers have not passed any laws addressing it directly.
Commenting on the ruling, CFTC Director of Enforcement James McDonald said: “This is an important ruling that confirms the authority of the CFTC to investigate and combat fraud in the virtual currency markets. This ruling, like the one in McDonnell from Judge Weinstein in the Eastern District of New York, recognizes the broad definition of commodity under the CEA, and also that the CFTC has the power to prosecute fraud with respect to commodities including virtual currencies. We will continue to police these markets in close coordination with our sister agencies.”