No, really: Cryptocurrencies are commodities in US

For years, the U.S. Commodity Futures Trading Commission (CFTC) has been clear on its stance—cryptocurrencies are commodities, just like oil and corn. And if that message isn’t clear enough, there are now a couple of federal judges confirming that yes, digital tokens are indeed commodities subject to the authority of the U.S. regulator.

Chris Giancarlo, chairman of CFTC, noted that Federal Judge Rya Zobel has ruled that the U.S. derivatives watchdog has the “authority to prosecute fraud and manipulation in the crypto space.” This is in connection with the case of My Big Coin Pay, which had argued that virtual currencies were not commodities—as they were commonly defined—hence, the CFTC has no jurisdiction in their case against My Big Coin Pay’s operator, Randall Crater.

However, the Massachusetts judge backed the CFTC in its interpretation of virtual currencies as commodities, and in the process, dismissed My Big Coin Pay’s petition to have the case set aside.

In her ruling, Zobel referred to the Bfxna Inc. dba Bitfinex case of June 2016. In this case, the CFTC had fined Bitfinex $75,000 at the time for failing to register as a futures commission merchant and offering illegal off-exchange financed retail commodity transactions. According to Zobel, this case shows the clear definition of cryptocurrencies as commodities.

Zobel’s ruling comes on the heels of another court order in August, which also recognized CFTC’s authority over digital currencies.

The case was against Patrick Kerry McDonnell, operator of Cabbage Tech Corp. or Coin Drop Markets. CFTC accused McDonnell of fraud in connection with virtual currencies, claiming the man had been introducing himself as an expert offering crypto investment advice, only to disappear with investors’ money.

McDonnell’s case fanned the flame of which U.S. agency has jurisdiction over cryptocurrencies. Because cryptocurrencies are still relatively new, legislation does not cover them yet, so there was a question whether the CFTC could “exercise its jurisdiction over fraud that does not directly involve the sale of futures or derivative contracts.” U.S. District Court for the Eastern District of New York Judge Jack B. Weinstein ruled in favor of the CFTC, saying cryptocurrencies are considered as commodities and the CFTC therefore has the authority to regulate them.

Zobel also cited the 2015 Coinflip case, which was essentially the first case where cryptocurrency has been properly defined as commodities by the U.S. regulator. According to the CFTC, the then-San Francisco-based crypto exchange facilitated commodity options-related transactions without complying with the Commodity Exchange Act (CEA) and the CFTC regulations. Because crypto options are deemed as “commodities,” CFTC said the company should have been properly registered and will be subjected to laws governing swaps.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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CFTC goes after crypto fraudsters accused of impersonating regulators

Two people are facing a slew of charges, including fraudulent solicitation, impersonation and forging official documents in the United States—all in an effort to steal cryptocurrency.

Last Friday, the Commodity Futures Trading Commission (CFTC) filed charges against Morgan Hunt, of Arlington, Texas, and Kim Hecroft, of Baltimaor, Maryland. The two were accused of engaging “in a fraudulent scheme to solicit Bitcoin [BTC] from members of the public, through false or misleading representations or ommissions, to invest in trading products” like binary options, diamonds or margined foreign currency contracts.

Hunt, who may be doing business as Diamonds Trading Investment House, and Hecroft, who operates First Options Trading, were also accused of forging account statements, impersonating a CFTC investigator and forging official CFTC documents.

According to the complaint filed at the U.S. District Court for the Northern District of Texas, Hunt and Hecroft used documents allegedly authorized by the General Counsel of the CFTC for their scheme. Using the documents, they managed to trick members of the public into paying a “tax obligation” to the CFTC if they want to withdraw funds from their crypto accounts.

At least two people were confirmed to have fallen victim to Hunt and Hecroft’s scam, which allegedly started in January 2017. According to the CFTC, the two used Facebook and emails to communicate with their clients. Hecroft allegedly tricked a customer into transferring more funds in BTC by letting the victim believe they were paying their taxes to the CFTC. Hunt, meanwhile, arranged for an accomplice to pose as a CFTC investigator in a phone conversation with his customer.

James McDonald, director of enforcement at the CFTC, clarified that the commission does not collect taxes on cryptocurrencies. He warned the public to be more vigilant against such incidents, saying, “The CFTC is on guard against fraudsters who try to take advantage of the CFTC’s reputation in order to cheat customers, and will take swift action against such misconduct.”

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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US court junks My Big Coin Pay’s attempt to dismiss CFTC lawsuit

The issue of whether virtual currencies can be legally deemed commodities is an important one, at least as far as the U.S. Commodity Futures Trading Commission (CFTC) is concerned. The regulator only has jurisdiction over commodities, and without supportive interpretations of the law, they are powerless to act.

However, the CFTC has become increasingly aggressive towards alleged crypto scams in recent months, the latest concerning a virtual currency called My Big Coin (MBC), in which the regulator has been proactive in bringing enforcement action against its promoters.

This week, a court in Massachusetts has backed the CFTC in their interpretation of virtual currencies as commodities (and thus within the regulator’s jurisdiction), in the process dismissing a petition from the coin’s promoters to have the case set aside, Finance Feeds reported.

My Big Coin Pay, the company behind MBC, had argued that virtual currencies were not commodities as commonly defined, and as such, the CFTC had no jurisdiction in their case against Randall Crater of My Big Coin.

The complaints concern allegations of fraud and/or manipulation in connection with the virtual currency, and could see Crater and the other named defendants subject to further enforcement action at the hands of the CFTC. Now, with the court ruling against the defendants, the verdict comes as the latest judgement to support the CFTC’s position.

Summing up, Judge Rya W. Zobel said that there was no question CFTC had sufficiently satisfied the court that My Big Coin was in fact a commodity.

According to the ruling, “Here, the amended complaint alleges that My Big Coin is a virtual currency and it is undisputed that there is futures trading in virtual currencies (specifically involving Bitcoin). That is sufficient, especially at the pleading stage, for plaintiff to allege that My Big Coin is a “commodity” under the Act.”

The allegations primarily focus on misrepresentations around My Big Coin, which was marketed as a fully functional virtual currency, along with a number of other falsehoods, including representations that My Big Coin was backed by gold and that it could be used for payment in any location that accepts Mastercard.

The CFTC further alleged the group intentionally switched the price of their cryptocurrency, in such a way as to mimic an organic market, with those caught up in the scheme subsequently unable to access their funds.

With the recent ruling falling in favour of the CFTC, the regulator now has a renewed impetus to tackle cryptocurrency scams.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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Another win for crypto: Bank giants fined billions for malpractice

First, Visa and MasterCard settled a class-action lawsuit over price fixing that reportedly cost the credit card giants as much as $6.2 billion. Now, reports are surfacing that major banks could be fined as much as $400 billion by 2020 for malpractice. So much for crypto being the bad guy, as traditional finance pundits would have everyone believe.

Quinlan and Associates indicates that research into US and European banks could potentially face the huge fines by regulators. The majority of the penalties are a direct result of the financial crash from 2008. The $400 billion does not include fines from other areas, such as unfair billing practices or money laundering.

This past Monday, JP Morgan Chase was fined by the Commodity Futures Trading Commission (CFTC) $65 million after it was found guilty of not doing enough its part to protect the US Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX) from 2007 to 2012. ISDA was established in 1998 and ISDAFIX is a reference rate value for fixed interest swap rates, correlated to dollars, pounds, Swiss Francs and Euros.

The CFTC said that JP Morgan published false interest rates just prior to the daily reference was captured between the five-year period. In submitting false data, the firm saw its derivatives positions benefit at the expense of other interest rate products that used the same common interest rate value.

BNP Paribas also received a hefty fine from the CFTC. The bank was ordered to pay $90 million after investigators determined that traders in the bank’s investment wing were actively bidding and executing trades at the moment the ISDAFIX was being released. This enabled them to influence the index, which impacted foreign exchange benchmark rates. The CFTC also fined the Royal Bank of Scotland $85 million for illegal practices similar to those of JP Morgan and BNP.

Some may recall that another bank, Well Fargo, has had its share of financial difficulties and missteps every year for the past couple of years. Most recently, the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau hit the bank with fines of $500 million each after they determined that the bank had set unfair mortgage interest rates and forced customers to sign up for unnecessary car insurance.

Traditional financial giants may try to argue against crypto until they turn blue, but the truth is that crypto offers better protection and more transparency – and more confidence – than do the banks.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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