US Securities and Exchange Commission - VALIC

SEC Charges International Security-Based Swaps Dealer That Targeted U.S. Investors

SEC - security-based swapsWashington D.C., Oct. 31, 2019 — The Securities and Exchange Commission today charged XBT Corp. SARL d/b/a First Global Credit, a Switzerland-based securities dealer, for offering and selling unregistered security-based swaps to U.S. investors using bitcoins and for failing to transact its swaps on a registered national exchange.

According to the SEC’s order, First Global Credit used a variety of marketing methods to target and solicit U.S. individuals to deposit and use bitcoins to buy and sell a variety of investment products. Although First Global Credit used different terminology to describe the investments it offered, including “bitcoin Asset Linked Notes,” investors were able to participate in the price movements of securities, including those listed on U.S. securities exchanges, without owning them. These types of instruments are considered security-based swaps under the U.S. federal securities laws. First Global Credit offered these swaps to U.S. investors without complying with the registration and exchange requirements governing security-based swaps, which were enacted as part of the Dodd-Frank Act.

“Federal securities laws impose specific requirements for offering and selling security-based swaps to retail investors in the U.S.,” said David Peavler, Regional Director of the SEC’s Fort Worth Regional Office. “These obligations cannot be avoided merely by describing the swap transaction by a different name or funding it with digital currencies.”

The SEC’s order finds that First Global Credit failed to register these security-based swap transactions and transacted with investors who did not meet the discretionary investment thresholds required by the federal securities laws. It also finds that First Global Credit failed to transact its security-based swaps on a registered national exchange, and failed to properly register as a security-based swaps dealer. Without admitting or denying the findings in the SEC’s order, First Global Credit consented to a cease-and-desist order and agreed to pay disgorgement of $31,687 and a penalty of $100,000. The SEC’s order notes First Global Credit’s remedial actions, including its repayment of trading losses incurred by U.S. investors. In a parallel action, the Commodity Futures Trading Commission (CFTC) announced a settlement with First Global Credit arising from similar conduct.

The SEC’s investigation was conducted by David Hirsch and Morgan Ward Doran, with litigation support from Jennifer Reece, and supervised by Scott Mascianica and Eric Werner of the SEC’s Fort Worth Regional Office.  The SEC appreciates the assistance of the CFTC, the Federal Bureau of Investigation, and the U.S. Attorney’s Office for the Southern District of Texas.