Defendants of a cryptocurrency services company accused of fraud by the CFTC reject the agency’s claim that cryptocurrencies are commodities.
In January, the CFTC charged My Big Coin Pay Inc, Randall Crater, Mark Gillespie and other associates with fraud and embezzlement, alleging that they had cheated over $ 6 million from their customers through the sale of My Big Coins.
The CFTC then sent a notice of “additional legal power” to the defendants in March, after a judge in another case upheld the Commission’s definition of cryptocurrency as a convenience.
On Tuesday, the defendants, with the exception of Gillespie, retaliated in an appeal against the CFTC’s motion for a preliminary injunction against them. They argue that under the Commodity Exchange Act (CEA) and other regulations, cryptocurrencies are only commodities when futures contracts are treated, such as for Bitcoin, for example.
“While the cryptocurrencies on which the futures are traded are undoubtedly subject to the CEA and CFTC regulations,” there are no futures on My Big Coin, it is not a product as defined in the CEA and CFTC regulations ”
He explains further:
“As a virtual currency, without physical or tangible existence, My Big Coin (and other virtual currencies) is not a” good “or an” article. “Instead, virtual currencies represent a set of “Services, rights and interests.” But, in current CEA language, intangible “services, rights and interests” are included in the CEA’s definition of “convenience” only if there are futures contracts traded on the market. it’s Bitcoin. ”
Defendants’ lawyers further argue that the CFTC’s January complementary legal opinion misconstrued the decision of the aforementioned judge and that the judge recognized the “future condition” in his decision.
In another notable development, recent filings show that Crater hired a former senior counsel in the CFTC’s Anti-Fraud Division, Katherine Cooper.
In March, Cooper wrote a blog for the Blockchain Law Center, considering the judge’s assertion of the CFTC’s definition of cryptocurrency as a commodity, and made a similar argument to the defendants’ filing.
It assumed that the potentially contradictory definition of a good by the court could be the result of the reasoning that “if a virtual currency has a negotiated futures contract, then all other virtual currencies are” goods … in which contracts for future delivery are currently or in the future. ”
She closed her position with a now timely conclusion:
“It remains to be seen then how a court would decide if it had the benefit of a sound critical analysis of the proposed CFTC theory on behalf of an accused.”