US Watchdogs Sue 1Broker over Illegal Activities
Three regulators of the United States announced they filed charges against 1pool Ltd., also known as 1Broker, for violating federal securities laws.
The Securities and Exchange Commission (SEC) lodged charges versus the Marshall Islands-registered firm and its Austria-based chief executive officer, Patrick Brunner, “for allegedly violating the federal securities laws in connection with security-based swaps funded with bitcoins.”
The SEC noted 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.”
Moreover, the agency stated both Brunner and 1Broker failed to facilitate these swaps “on a registered national exchange, and failed to properly register as a security-based swaps dealer. 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’s filing stated that it will be seeking permanent injunctions, disgorgement plus interest, and penalties.
Aside from the securities watchdog, the Commodity Futures Trading Commission (CFTC) claimed the entity in question breached the Commodity Exchange Act and filed a civil enforcement action against them.
“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,” the CFTC said.
According to the CFTC, the defendants “offered or engaged in unlawful retail commodity transactions in the form of ‘contracts for difference’ (CFDs) that had as underlying assets commodities from at least February 2016.
“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,” it said.
Such transactions are not in line with the existing law.
Earlier, the FBI seized 1Broker.com’s domain which is now seen on the firm’s website. The company is “willfully operating as an unregistered broker/dealer of securities” and “willfully operating as an unregistered futures commission merchant.”
Such a move, the FBI said, is “in accordance with a seizure warrant issued pursuant to 18 U.S.C. 981 and 982, for violations of 18 U.S.C. 1956, 15 U.S.C. 78ff, and 7 U.S.C. 13 issued by the United States District Court for the District of Columbia as part of a joint law enforcement operation and action by Federal Bureau of Investigation, US Attorney’s Office for the District of Columbia, [and] US Department of Justice – Computer Crime and Intellectual Property Section.”
Sought for comment, 1Broker expressed its preparedness to cooperate with American authorities amid the ongoing legal battles.
“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,” it said in a Twitter post.
The option to withdraw money from their funds is applicable to non-American clients as well.
“All open positions were closed at the current market prices. Market price movements will not affect your trades from now on. Our top priority now is to get the permission from the SEC to process customer withdrawal requests on an alternative domain,” 1Broker said.