Three U.S. agencies have taken action against international bitcoin-funded securities dealer 1pool Ltd., aka 1Broker. The Securities and Exchange Commission (SEC) says 1Broker violated federal securities laws. The Commodity Futures Trading Commission (CFTC) says it violated the Commodity Exchange Act. Meanwhile, the company says it is working on letting customers withdraw their funds.
The SEC announced Thursday that it has filed charges against Marshall Islands-registered 1pool Ltd., aka 1Broker, and its Austria-based CEO, Patrick Brunner, "for allegedly violating the federal securities laws in connection with security-based swaps funded with bitcoins.” The agency explained:
Investors could open accounts by simply providing an email address and a user name – no additional information was required – and could only fund their account using bitcoins.
The SEC alleges that an undercover special agent with the Federal Bureau of Investigation (FBI) "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 commission further alleges that Brunner and 1Broker failed to transact these swaps "on a registered national exchange, and failed to properly register as a security-based swaps dealer.”
The SEC’s complaint "seeks permanent injunctions, disgorgement plus interest, and penalties.”
On the same day, the CFTC filed a civil enforcement action against 1pool Ltd. and Brunner, stating:
The CFTC’s complaint charges the defendants with engaging in unlawful retail commodity transactions, failing to register as a Futures Commission Merchant (FCM), and supervisory violations for failing to implement procedures to prevent money laundering as required under federal laws and regulations.
From at least February 2016, the defendants "offered or engaged in unlawful retail commodity transactions in the form of ‘contracts for difference’ (CFDs) that had as underlying assets commodities,” the CFTC alleges. However, these transactions are not conducted in accordance with the Commodity Exchange Act (CEA).
The agency detailed:
The CFTC seeks disgorgement of ill-gotten gains, civil monetary penalties, restitution, permanent registration and trading bans, and a permanent injunction against further violations of the CEA and CFTC regulations as charged.
Also on Thursday, the FBI seized the 1Broker.com domain. A notice on the agency’s website states three violations: money laundering, "willfully operating as an unregistered broker/dealer of securities,” and "willfully operating as an unregistered futures commission merchant.” An FBI seizure notice now appears on the 1Broker.com website.
Responding to the SEC’s announcement, 1Broker tweeted:
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.
The company clarified that the above statement "also applies to non-US customers.” 1Broker further tweeted, "All open positions were closed at the current market prices. Market price movements will not affect your trades from now on,” noting, "Our top priority now is to get the permission from the SEC to process customer withdrawal requests on an alternative domain.”