Tech and Science News
Federal judge sides with CFTC on virtual currency oversight
WASHINGTON (Reuters) - A federal judge said on Wednesday that virtual currencies meet the definition of a “commodity” and fall within the jurisdiction of the U.S. derivatives regulator, allowing the agency to pursue fraud allegations against My Big Coin Pay Inc.
FILE PHOTO: Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies are seen on a PC motherboard in this illustration picture, Picture is taken February 13, 2018. REUTERS/Dado Ruvic/Illustration/File Photo
The closely-watched decision by a U.S. district court should allow the Commodity Futures Trading Commission (CFTC) to continue to police virtual currency frauds, regulation of which has fallen between several different agencies.
Amid a crackdown on virtual currency scams, the U.S. regulator in January sued technology entrepreneur Randall Crater and a company he founded, alleging they perpetrated a $6 million fraud on people who wanted to buy My Big Coin, an obscure virtual currency.
In its lawsuit against Crater and Nevada-based My Big Coin Pay Inc, the CFTC said the defendants misappropriated $6 million from 28 customers they lured by naming their virtual currency to sound like bitcoin and further claiming it was backed by gold.
Crater’s lawyers moved to dismiss the case, arguing that the CFTC had no authority over the virtual currency because it is neither a tangible good nor a service on which future contracts are being traded - the agency’s typical enforcement purview.
U.S. District Judge Rya Zobel in Boston said on Wednesday that My Big Coin did meet the Commodity Exchange Act’s definition of a commodity, because the Commodity Exchange Act defines commodities in broad categories rather than specific types or brands.
Since both My Big Coin and bitcoin can both be broadly categorized as virtual currencies, and bitcoin futures currently trade on U.S. exchanges, by extension the CFTC has oversight of other virtual currencies including My Big Coin, Zobel found.
“That is sufficient, especially at the pleading stage, for plaintiff to allege that My Big Coin is a ‘commodity’ under the Act,” she wrote in Wednesday’s decision.
Lawyers were watching the decision closely, since a finding in favor of My Big Coin Inc.’s argument to dismiss could have chilled the CFTC’s ability to police virtual currency frauds.
Zobel accepted the CFTC’s allegations, which have yet to be proven at trial, as true for the purpose of determining if it had jurisdiction. The case may now move forward as a result of the ruling.
A lawyer for Crater did not immediately respond to a request for comment.
Reporting by Michelle Price and Nate Raymond; Editing by Alistair Bell
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