On September 27, 2018, the Securities and Exchange Commission announced that it filed charges against an international securities dealer and its Austria-based CEO for allegedly violating the federal securities laws in connection with security-based swaps funded with bitcoins.
According to the SEC’s complaint, 1pool Ltd., a/k/a 1Broker, registered in the Republic of the Marshall Islands, and its CEO, Patrick Brunner (“Brunner”), solicited investors from the United States and around the world to buy and sell security-based swaps. 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 alleged that a Special Agent with the Federal Bureau of Investigation, acting in an undercover capacity, 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 SEC also alleged that Brunner and 1Broker failed to transact its security-based swaps on a registered national exchange, and failed to properly register as a security-based swaps dealer.
“The SEC protects U.S. investors across a variety of platforms, regardless of the type of currency used in their transactions,” said Shamoil T. Shipchandler, Director of the SEC’s Fort Worth Regional Office. “International companies that transact with U.S. investors cannot circumvent compliance with the federal securities laws by using cryptocurrency.”
The SEC’s complaint, filed in United States District Court for the District of Columbia, seeks permanent injunctions, disgorgement plus interest, and penalties. In a parallel action, the Commodity Futures Trading Commission announced charges against 1pool Ltd. arising from similar conduct.