Federal Judge — CFTC Can Regulate “Cryptocurrency” Fraud
In good news for investors, a Massachusetts federal judge recently ruled that the Commodity Futures Trading Commission (CFTC) has the authority to fight fraud in the booming virtual currency market. The decision follows on the heels of a ruling in New York where a different federal judge reached the same conclusion.
Through the Commodity Exchange Act, Congress authorized the CFTC to fight fraud involving “commodities.” As the virtual currency sector has grown, the CFTC has sought to use its authority to crack down on fraudsters who promise investors that they can get rich quick by buying their cryptocurrency. But to do so, the CFTC needs to convince the courts that virtual currencies are “commodities” within the Commission’s authority to regulate.
In the Massachusetts case, the CFTC did just that. The CFTC brought the case against My Big Coin Pay and various individuals, alleging that the defendants pitched customers on a bunk virtual currency-“My Big Coin”-that they promised was backed by gold, could be used wherever MasterCard was accepted, and was actively traded on several exchanges. Instead, the CFTC alleges that investors couldn’t withdraw My Big Coin, and defendants spent the nearly $6 million they raised on travel, fine art, and a host of other luxury goods. In trying to dismiss the case, defendants argued that My Big Coin wasn’t a commodity the CFTC could regulate. But the judge didn’t buy it, explaining that Congress intended an expansive definition of “commodity” that would allow the CFTC to “comprehensively protect and police the markets.”
And there’s an urgent need for the CFTC to police the cryptocurrency markets. In a recent advisory, the CFTC warned that it has been receiving complaints about virtual currency exchange scams, including Ponzi schemes, and advised customers to exercise caution before investing.
Whistleblowers can also help police the virtual currency market. Through its whistleblower program, the CFTC handsomely rewards individuals who come forward to report violations of the Commodity Exchange Act. In fact, several months ago, the agency made multiple whistleblower awards totaling roughly $45 million. Constantine Cannon has significant experience representing whistleblowers before the CFTC. Please contact us if you would like to have a free and confidential discussion with one of our experienced whistleblower lawyers.
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