The Commodity Futures Trading Commission (CFTC) has asked a judge to rule that cryptocurrency My Big Coin is a commodity subject to the agency’s regulation, according to a recent report from Reuters. The agency is currently pursuing legal action against My Big Coin (MBC) and MBC creator Randall Carter for fraud.
MBC has challenged the regulators’ jurisdiction, arguing that My Big Coin cannot be defined as a commodity.
Crater’s attorney, Katherine Cooper said, “Our argument boils down to the fact that because My Big Coin does not have future contracts or other derivatives trading on it, it is not a commodity.”
That argument has been questioned by at least one legal observer who suggested that the defense’s definition of commodity is more narrowly defined than the language found in the Commodity Exchange Act. Attorney Neal Kumar noted that the statutory definition also covers services that could be associated with futures contracts in the future.
The CFTC case alleges that MBC and its creator defrauded more than two dozen customers, using misrepresentations to misappropriate $6 million. The specific allegations accuse the defendants of making false claims about nonexistent exchange listings, the coin’s daily trading price, and an alleged partnership with MasterCard. Customers were also told that My Big Coin was backed by gold.
According to the CFTC, the defendants made payout to customers using funds acquired from other clients. The agency alleges that these activities were consistent with traditional Ponzi schemes. The CFTC announcement of the action detailed the penalties sought by the agency:
“In its continuing litigation, the CFTC seeks civil monetary penalties, restitution, rescission, disgorgement of ill-gotten gains, trading and registration bans, and permanent injunctions against further violations of the federal commodities laws, as charged.”
The U.S. Judge hearing the case, Judge Rya Zobel, reportedly questioned both parties about digital currency, in an apparent effort to learn more about how they work. Reuters reported that she suggested that she will “cheerfully dive into this” and promised quick action on the defense’s motion to dismiss the action.