CFTC’s right to prosecute virtual currency fraud comes under fire
Not all virtual currencies are the same and, hence, not all of them should be treated as commodities and be subject to the CFTC oversight, argue the defendants in a cryptocurrency scam case.
The defendants in a virtual currency fraud case have questioned the right of the United States Commodity Futures Trading Commission (CFTC) to take action against cryptocurrency scams and to bring such cases to court.
On Friday, March 30, 2018, Randall Crater, Mark Gillespie, and My Big Coin Pay, Inc., accused of misappropriating over $6 million from customers via a fraudulent scheme involving virtual currency called “My Big Coin”, filed their Motion to Dismiss with the Massachusetts District Court. The document, seen by FinanceFeeds, challenges the CFTC’s claim that virtual currencies are commodities under the Commodity Exchange Act (CEA) and that the CFTC is the body that oversees this market segment.
Let’s recall that, earlier in March, the CFTC’s stance was supported by Judge Jack B. Weinstein of the New York Eastern District Court. The CFTC has voiced its intentions to use the Court’s ruling in other cases targeting virtual currency scams, including the case against My Big Coin Pay.
My Big Coin Pay, Inc. and all the entities and individuals associated with it now argue against such a treatment of virtual currencies. According to them, not all virtual currencies are equal. In particular, the defendants argue that the CFTC misunderstands the Judge’s interpretation of the law. They assert that the Court’s ruling that virtual currencies are commodities applies only to Bitcoin and not to My Big Coin.
The defendants say that My Big Coin is a virtual currency, with no physical or tangible existence and that it is not a “good” or an “article.” Instead, they say, intangible “services, rights and interests” are only included in the CEA’s definition of the term “commodity” if there are futures contracts traded on them. The only virtual currency on which futures contracts are traded is Bitcoin but this treatment should not apply to My Big Coin, the defendants say.
Because there are no futures contracts traded on My Big Coin, it is not a “commodity” as that term is defined in the CEA, the CFTC has no jurisdiction to bring this action, and there is no subject matter jurisdiction for this Court, the defendants assert.
According to the CFTC Complaint, from at least January 2014 through January 2018, the defendants fraudulently solicited My Big Coin Pay customers in the United States by making false and misleading claims and omissions about MBC’s value, usage, and trade status, and that MBC was backed by gold. Defendants also allegedly fraudulently solicited numerous customers in the District of Massachusetts, receiving in excess of $5 million from those customers.
The case is captioned Commodity Futures Trading Commission v. My Big Coin Pay, Inc. et al (1:18-cv-10077).
