The FBI has been keeping close tabs on securities dealers in the United States, and it has finally found another dealer breaking the law. The Commodity Futures Trading Commission (CFTC) has fined 1pool Ltd a total of $990,000 for illegally offering retail commodity transactions that were margined in bitcoin, failing to register as a futures commission merchant (FCM), and failing to meet its supervisory duties by not having the required anti-money laundering procedures in place.
Caught Red Handed
The undercover FBI agent contacted 1pool to buy security-based swaps and managed to do so. Unfortunately, 1pool didn’t adhere to regulations set out by the CFTC that dictate proper identification must be provided by all individuals taking part in security trading. The FBI agent reported his findings to the CFTC and it brought down its hammer of justice with overwhelming might.
Not the CFTC’s First Catch
The CFTC has been hard at work cracking down on companies and traders illegally trading Bitcoin and other cryptos. In November 2018, one crypto trader was slapped with an $800,000 fine and five years behind bars for illegally trading Bitcoin on LocalBitcoins. He would buy Bitcoins for a fair market price on regulated exchanges, and would then sell them for a huge markup on LocalBitcoins in the following hours. Another American trader was fined more than $1.1 million and given 15 months in jail for misappropriating Bitcoin and Litecoin from various people. The CFTC is searching for traders breaking the law and will eventually catch each and every one – there is simply no hiding from the CFTC.
Hedge Funds Under the Microscope
The CFTC is also keeping a close eye on various hedge funds, as many crypto related funds are in fact turning out to be Ponzi schemes. Most recently, the CFTC took down Gelfman Blueprint, Inc. (GBI) and its CEO Nicholas Gelfman for running a Ponzi scheme dressed as a hedge fund. The CFTC had been hunting Gelfman for a number of years and finally caught him in October 2018. Gelfman’s Ponzi scheme was rather elaborate and was hard to detect, but eventually the truth came out as clients began losing money hand over fist.
1pool appears to still be operating, as it is legally entitled to. However, it must either ban all American clients or step up its KYC and AML practices to avoid more fines in the future. There is nothing illegal about offering retail commodity transactions that are margined in bitcoin – as long as they are properly registered with the local financial authorities.