The Commodity Futures Trading Commission is moving quickly to assert its jurisdiction to police fraud in the cryptocurrency industry.
Just two days after U.S. Judge Jack B. Weinstein of the Eastern District of New York ruled in favor of the CFTC, affirming its definition of cryptocurrency as a commodity, the regulator gave notice of “supplemental legal authority” to My Big Coin Pay Inc – a crypto services company it charged with fraud and misappropriation of funds in January.
Weinstein’s ruling was the result of a separate fraud case the CFTC is pursuing against a crypto trading scheme called CabbageTech and its operator, Patrick Kerry McDonnell.
Quoting from that ruling, the notice advises My Big Coin Pay that “virtual currencies ‘fall well-within…the [Commodity Exchange Act’s] definition of ‘commodities'” and the Commission “has standing to exercise its enforcement power over fraud related to virtual currencies sold in interstate commerce.”
The CFTC, the Securities and Exchange Commission and the IRS all currently define cryptocurrencies differently and have designated them as commodities, securities and property, respectively.
As for My Big Coin Pay, the Commission alleges that the firm and associated parties Randall Crater and Mark Gillespie misappropriated more than $6 million from their customers, including by transferring customer funds into their personal accounts and subsequently spending the money on personal expenses and luxury goods.
The notice demonstrates that the CFTC’s efforts to establish legal precedent are underway, and potentially provides insight into how it will continue to regulate the industry.
Law image via Shutterstock
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.