SEC Charges Unlicensed Bitcoin-Funded Swap Dealer and CEO

By: Robert W. Wenner and Richard B. Levin

On November 1, the Securities and Exchange Commission filed charges against an international securities dealer and it’s CEO, based in Austria, for allegedly violating the federal securities laws in connection with security-based swaps funded with Bitcoin. The complaint filed in the U.S. District Court for the District of Columbia alleges that 1pool Ltd. a/k/a 1Broker allowed users of the platform to purchased contracts for difference (“CFDs”) in US equities by only creating a username and password and funding their 1Broker account with Bitcoin. CFDs provide holders with the opportunity to participate in price movements of securities and other assets without actually owning the underlying asset. When CFDs are tied to securities such as equities, they are considered to be security-based swaps and may only be traded by an SEC-regulated entity such as a security-based swap dealer.

 This complaint underscores the importance of obtaining proper regulatory approval before entering into the digital asset space. Digital assets can represent a diverse field of financial instruments, which are subject to varying, and at times complex, regulatory frameworks.

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