Similarly, over the past several months, the CFTC has filed several enforcement actions against individuals and companies for potential fraudulent activity, among them:

Jan. 16, 2018: An enforcement action under seal against several individuals and a Las Vegas corporation for misappropriating more than $6 million from customers. According to the complaint, the company at issue maintained a website and distributed solicitation materials for investing in a virtual currency that included misrepresentations. Customer funds were allegedly transferred into personal bank accounts and used to purchase luxury goods.

Jan. 18, 2018: An enforcement action against a Colorado-based individual and his U.K.-registered company for using a website to solicit customers to deposit bitcoins for a pooled investment in binary options trading with a promise of high returns. The complaint accuses the defendants of making Ponzi-style payments to commodity pool participants from other participants' funds, misappropriating funds, and failing to properly register with the CFTC.

Jan. 18, 2018: A civil enforcement action against a New York-based individual and New York-based company for fraud and misappropriation in connection with the purchase and trading of bitcoins and litecoins, and providing purported "virtual currency trading advice." The complaint accuses the defendants of not following through on their promise to provide advice or make the requested purchases and trades. According to the CFTC, the defendants "used their fraudulent solicitations to obtain and then simply misappropriate customer funds." On March 6, 2018, a New York federal judge issued a preliminary injunction prohibiting the defendants from engaging in fraud in violation of the Commodity Exchange Act (CEA) and requiring them to preserve their books and records. Even more notably, the judge's order concluded that "[v]irtual currencies can be regulated by CFTC as a commodity" because they "are goods exchanged in a market for a uniform quality and value, and fall within the CEA's definition of 'commodities' as 'all other goods and articles … in which contracts for future delivery are presently or in the future dealt in.'"

These enforcement actions appear to be the beginning of a major campaign to regulate this market and are consistent with the trend of increased monitoring and enforcement by the CFTC.

Instant Insights /

Crypto Industry Sweep: ICOs Under Increasing Scrutiny by U.S. Regulators

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