Alleged cryptocurrency fraudster challenges CFTC's regulatory powers over Bitcoin - FinanceFeeds

Alleged cryptocurrency fraudster challenges CFTC’s regulatory powers over Bitcoin

Patrick McDonnell, a defendant in a virtual currency fraud case, says he is “a sacrificed pawn in a bigger game”.

The cryptocurrency fraud case which has resulted in a landmark ruling stating that virtual currencies are commodities does not seem to end as one of the defendants – Patrick McDonnell, continues to oppose the allegations made against him. On Wednesday, April 25, 2018, the defendant submitted an answer to the Complaint filed against him by the Commodity Futures Trading Commission (CFTC).

There are three claims that McDonnell repeats throughout his response:

  • “Plaintiff fabricated complaint lacks sufficient information and truth. Defendant firmly denies any/all wording and wrongdoing falsely claimed”.
  • “Plaintiff complaint improperly lies with the Court as the CFTC has no legal authority to regulate Bitcoin and/or Virtual Currency transactions”.
  • “Plaintiff in bad faith has introduced to the Court specific wording designed to deceive while filing a fabricated complaint…”.

Put otherwise, the alleged Bitcoin fraudster disagrees with all allegations made by the CFTC and insists that virtual currencies are not commodities and, hence, the CFTC has no right to take an enforcement action against him.

Let’s recall that the judgement that virtual currencies are commodities was supported by the Chicago Mercantile Exchange (CME). In its amicus letter, CME informed the Court of the reliance CME and financial market participants have placed on the determination by the CFTC in 2015 that virtual currencies such as bitcoin are “commodities” within the meaning of Section 1a(9) of the CEA. If the Court had ruled that a virtual currency such as bitcoin was not a commodity, this would have put in jeopardy CME’s and its market participants’ expectation to rely on the CEA and the CFTC’s regulatory protections for commodity derivatives contracts based on virtual currencies.

Patrick McDonnell, however, has challenged such an approach to Bitcoin. He insists that the CFTC complaint is “financially and politically motivated created out of thin air to secure the U.S. regulatory sphere surrounding Bitcoin and Virtual Currency markets”. He also claims that “the Chicago Mercantile Exchange (“CME”) was financially motivated to join the case”.

In conclusion, McDonnell says he is “a sacrificed pawn in a bigger game, this case in not about a “so-called” fraud or misappropriation of investor funds, it is about controlling Bitcoin which has become a threat to world financial systems”.

The case in question is captioned Commodity Futures Trading Commission v. McDonnell et al (1:18-cv-00361) and was launched by the CFTC at the New York Eastern District Court in January this year. In brief, Defendants Patrick K. McDonnell, of Staten Island, New York, and CabbageTech, Corp. d/b/a Coin Drop Markets (CDM), a New York corporation, are charged with fraud and misappropriation in connection with purchases and trading of Bitcoin and Litecoin.

+ Read This Next