The US Securities and Exchange Commission leaves securities enforcement up to the CFTC when it comes to cryptocurrency. While the commission is rushing Congress first to write the entire federal crypto policy through the lawsuit, the CFTC is going for more obvious violations.
The Commodity Futures Trading Commission took the lead late last week and filed securities fraud charges against a cryptocurrency business in Florida. It filed the lawsuits in the US District Court for the Middle District of Florida.
CFTC Charges Florida Residents for Crypto Scam
The CFTC charged four individuals in three states and their unregistered entity “Fundsz” with allegations of securities fraud on Friday:
“They were charged with fraudulently soliciting clients to allegedly sell cryptocurrencies and precious metals.”
The commission’s Director of Enforcement, Ian McGinley, said:
“The CFTC continues to crack down on individuals who defrauded customers in the cryptocurrency and precious metals markets.”
But the allegations facing the defendants in this case are actually within the SEC’s purview, according to Howey’s recent Ripple court case.
Commodity Futures Doing the SEC Work
This case is similar to how FTX founder Sam Bankman-Fried got into trouble with the law. It is not that they are the defendants selling Fugazi and claiming it is Rolex. It’s that they sell the Rolex and say it’s a really good Fugazi.
But it’s not so good when people lose their money on something they think is less risky during a 75% drop in the price of Bitcoin.
These are clear allegations of selling unregistered and unregulated securities. This is the kind of thing that the SEC can be effective in enforcing.
McGinley cautions crypto investors looking for online brokerages and crypto exchanges:
“Although the products fraudsters pretend to sell and their methods of attracting victims – in this case through social media – may have changed, the old adage ‘if something that sounds so true, maybe it’ remains as valid as ever.
That advice is just as good for considering a rare baseball card purchase as it is for a high-flying stock purchase.
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