Foreign Trading Platform and Its CEO to Pay $990,000 for Illegal Bitcoin-Related Transactions with U.S. Customers

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CFTC

Foreign Trading Platform and Its CEO to Pay $990,000 for Illegal Bitcoin-Related Transactions with U.S. Customers

March 15, 2019

CFTCThe Commodity Futures Trading Commission (CFTC) announced today that a federal court entered a Consent Order (Order) resolving a CFTC action against 1pool Ltd., located in the Marshall Islands, and its chief executive officer and owner, Patrick Brunner, 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. 

The Order imposes a civil monetary penalty of $175,000 and requires the disgorgement of  $246,000 of gains.  The Order also requires the defendants to pay to all known U.S. customers the bitcoin held by defendants in U.S. customers’ accounts and includes the defendants’ certification that they have repaid to U.S. customers approximately 93 bitcoins, valued at approximately $570,000.  In total, the defendants are paying a total of $990,000 in resolution of the CFTC action.

CFTC’s Director of Enforcement Comments

James McDonald, CFTC Director of Enforcement, stated:  “Intermediaries should take notice that they will be held accountable by the CFTC for failing to comply with registration requirements and failing to implement policies and procedures that are crucial in protecting U.S. customers and our markets.  Through the Division’s Bank Secrecy Task Force, Enforcement will continue to investigate and prosecute such violations.”

The court’s Order stems from a CFTC complaint filed on September 27, 2018, in the U.S. District Court for the District of Columbia.  [See CFTC Press Release 7809-18].  The Order finds that the defendants engaged in unlawful retail commodity transactions in the form of contracts for difference margined in bitcoin with U.S. customers who were not eligible contract participants, acted as an FCM for such U.S. customers by accepting bitcoin as margin for trading without being registered with the Commission, and failed to diligently supervise by failing to implement an adequate know-your-customer and customer identification program.  The Order permanently enjoins the defendants from further violations of the Commodity Exchange Act and the CFTC’s regulations as charged.

The CFTC thanks the U.S. Attorney’s Office for the District of Columbia, the Department of Justice – Computer Crime and Intellectual Property Section, and the Federal Bureau of Investigation for their assistance.  The CFTC also wishes to thank the Securities and Exchange Commission.

Salma Mack from the CFTC’s Office of Data and Technology also provided assistance in this matter.

This case was brought in connection with the CFTC Division of Enforcement’s Bank Secrecy Act Task Force, and the CFTC staff members responsible for this action are Harry E. Wedewer, Christopher Giglio, Mary Lutz, Candice Aloisi, Lenel Hickson, and Manal Sultan.

* * * * * * *

CFTC’s Bank Secrecy Act Task Force

The CFTC’s Bank Secrecy Act Task Force is a coordinated effort across the Division of Enforcement to identify and charge those who fail to carry out their Bank Secrecy Act (BSA) and anti-money laundering (AML)-related supervisory responsibilities in connection with markets regulated by the CFTC.  Compliance with BSA and AML requirements is crucial for the enforcement work of the CFTC as well as the regulatory and law enforcement efforts of other agencies.

FCMs and Introducing Brokers (IBs), whether registered or required to be registered, have supervisory obligations related to the BSA, including to have and implement suspicious activity reporting (SAR) and know-your-customer/customer identification program (KYC/CIP) procedures.  When an FCM or an IB fails to either have or appropriately implement BSA and AML procedures that FCM or IB has violated CFTC Regulations, and will be held accountable for the violation.

The Task Force, in coordination with other criminal and regulatory authorities as appropriate, focuses on identifying, investigating, and charging instances in which FCMs and IBs fail to comply with their BSA responsibilities by failing to detect and report suspicious conduct, or by failing to develop or implement KYC/CIP procedures and doing business with those engaged in illicit activity.

You can report suspicious activities or information, including potential violations of BSA and AML requirements, to the CFTC Division of Enforcement via a Toll-Free Hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online.

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