Following the announcement by the Commodity Futures Trading Commission (CFTC) that it had undertaken two enforcement actions against Bitcoin / virtual currency related fraud, the Securities and Exchange Commission (SEC) and CFTC issued a joint statement from SEC co-enforcement Directors Stephanie Avakian and Steven Peikin and CFTC Enforcement Director James McDonald;
“When market participants engage in fraud under the guise of offering digital instruments – whether characterized as virtual currencies, coins, tokens, or the like – the SEC and the CFTC will look beyond form, examine the substance of the activity and prosecute violations of the federal securities and commodities laws. The Divisions of Enforcement for the SEC and CFTC will continue to address violations and bring actions to stop and prevent fraud in the offer and sale of digital instruments.”
The two enforcement acts by the CFTC, one against a UK registered company The Entrepreneurs Headquarters Limited, and the second against CabbageTech, DBA Coin Drop Markets, based in the US, are further signs that securities regulators will not tolerate cryptocurrency related scams or the selling of unregistered securities.
The CFTC has recently created a Division of Enforcement Virtual Currency Task Force. The SEC has created a similar specialized unit. Meanwhile, state securities regulators have stepped up their enforcement activities with recent actions coming from Texas and Massachusetts officials.
Most all legitimate cryptocurrency advocates welcome the focus by the Feds as it will help to flush out bad actors while compelling the digital currency sector to further professionalize.
In 2017, it was reported that approximately $4.9 billion was raised via ICOs or tokens. Simultaneously, trading in Bitcoin and other digital currencies has rocketed with the advent of Futures contracts and growing interest from institutional investors.