The U.S. Commodity Futures Trading Commission has claimed it has jurisdiction over a cryptocurrency called My Big Coin and has asked a federal judge to grant it authority to proceed with the lawsuit which claims the cryptocurrency has been operating a $6 million fraud.
CFTC claims My Big Coin Pay, based in Nevada, misappropriated $6 million from 28 clients by selecting a name that sounds like bitcoin and also claiming the cryptocurrency was backed by gold. CFTC sued My Bit Coin Pay Inc. and entrepreneur Randall Crater in January. The suit is seen by some as an indicator of the CFTC’s authority over cryptocurrencies.
The CFTC claimed that the defendants falsely indicated the cryptocurrency was actively traded on several currency exchanges. The CFTC also claimed Crater and an associate, Mark Gillespie, collected funds from investors and redirected the funds to personal bank accounts, using the funds for personal expenses.
CFTC argued that defendants’ claims about My Big Coin were a fraud, which included false claims about its usage, trade status and value.
Judge Questions Both Sides
U.S. Judge Rya Zobel in Boston Zobel posed questions to both sides about the workings of cryptocurrencies. Zobel did not rule on Cater’s request to dismiss the case, but said she would try to arrive at a decision quickly.
Zobel questioned a CFTC lawyer about the extent the regulator has jurisdiction to pursue a lawsuit against the operators of what it contends was a virtual currency fraud scheme.
CFTC attorney Jonah McCarthy claimed the virtual currency falls under the agency’s definition of a commodity and compared it to gold and other precious metals.
Katherine Cooper, a lawyer for Crater, said My Big Coin is not a commodity because it does not have future contracts trading on it. Cooper told the judge the agency has gone “way beyond the remit of their authority.”
An Unresolved Issue
Jurisdiction over cryptocurrencies in the U.S. remains an unresolved issue. In a separate case, U.S. District Judge Jack Weinstein in Brooklyn in March the CFTC can regulate virtual currencies as a commodity.
Weinstein’s ruling applied to bitcoin, a cryptocurrency on which futures contracts are traded, Crater’s attorneys argued.
Featured image from Shutterstock.