Commodity Futures Trading Commission (CFTC) chair Rostin Behnam says cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) can be categorized as a security or a commodity for regulation purposes. In a new interview on CNBC’s Squawk Box, Behnam says that digital assets that are deemed as commodities should be regulated by the CFTC, and those considered […]
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The crypto hawk Biden appointee will sponsor a panel of 36 financial industry executives, thought leaders and other prominent figures.
United States Commodity Futures Trading Commission (CFTC) commissioner Kristin N. Johnson was named the sponsor of the agency’s Market Risk Advisory Committee (MRAC) on Tuesday. She replaced CFTC chair Rostin Behnam in that role.
Johnson was nominated to be a CFTC commissioner by U.S. President Joe Biden in September 2021, concurrent to the nominations of commissioner Christy Goldsmith Romero and acting chairman Behnam as the permanent chair. Johnson was sworn in on March 30. She moved into the position after spending over a decade as a law professor. Johnson is the author of academic papers in which she has advocated for stricter controls over cryptocurrency. Johnson said in a statement:
“Having spent my career in risk management oversight, I appreciate the MRAC’s significant and critical role in advising the Commission on risk management in our markets including the emerging decentralized market structures in digital asset or cryptocurrency markets that may not rely on intermediation.”
Sponsorships were allotted among the five CFTC commissioners Tuesday for five out of the six CFTC committees, with the exception being the CFTC-SEC Joint Advisory Committee. The MRAC is made up of 36 industry leaders in derivatives and other financial markets as well as academics and regulators. It includes members of the Federal Reserve Banks of New York and Chicago, HSBC chief operating officer Chris Dickens, Goldman Sachs managing director Amy Hong, BlackRock managing director Eileen Kiely and members of the Futures Industry Association.
Johnson will give the keynote address “exploring an appropriate regulatory framework for [..] the burgeoning decentralized digital asset market” at the FIA's International Derivatives Expo in London on June 8.
Founded in 2014, BitMEX is one of the world’s oldest crypto trading platforms, but it has never offered spot crypto trading till now.
Global crypto derivatives exchange BitMEX is expanding its platform beyond just derivatives by finally launching a spot crypto trading platform.
BitMEX officially announced on May 17 that its spot crypto exchange, the BitMEX Spot Exchange, is now live, allowing retail and institutional investors to buy, sell and trade cryptocurrencies like Bitcoin (BTC) and Ether (ETH).
At launch, the exchange supports seven pairs of cryptocurrencies, including BTC, ETH, Chainlink (LINK), Uniswap (UNI), Polygon (MATIC), Axie Infinity (AXS) and ApeCoin (APE), all trading against the Tether stablecoin (USDT).
The launch of the BitMEX Spot Exchange comes as the company plans to become one of the top ten largest spot exchanges in the world. The company decided to build its own spot exchange last year in response to the increasing crypto trading demand from its current user base, according to the announcement.
“Today, BitMEX is one step closer to providing our users with a full crypto ecosystem to buy, sell, and trade their favourite digital assets. We will not rest as we aim to deliver more features, more trading pairs, and more ways for our clients to take part in the crypto revolution,” BitMEX CEO Alexander Höpner said.
Founded in 2014, BitMEX is one of the world’s largest and oldest crypto trading companies, starting providing its services about six years after Bitcoin was launched. Unlike spot exchanges, BitMEX has been mainly focusing derivatives, allowing users to buy and sell contracts like futures, options and perpetuals on a wide range of crypto assets.
At the time of writing, BitMEX is one of the top 30 biggest derivatives crypto trading platforms, with daily trading volume amounting to $841 million, according to data from CoinMarketCap. BitMEX was ranked one of the biggest derivatives platforms by open interest alongside Binance as of 2020.
BitMEX has faced some legal issues recently, with founders Arthur Hayes and Hong Konger Benjamin Delo pleading guilty to violating the Bank Secrecy Act in February 2022. The court eventually ordered a total of $30 million civil monetary penalties from the three co-founders of BitMEX crypto derivatives exchange in March.
Related: The Brazilian Stock Exchange will launch Bitcoin and Ethereum futures
The firm also reportedly laid off about 75 employees — or a quarter of the company’s staff — in April, following a failed acquisition of the German bank Bankhaus von der Heyd.
BitMEX did not immediately respond to Cointelegraph’s request for comment. This article will be updated pending new information.
Keaghan Ames worked at Credit Suisse for more than two years as vice president and head of U.S. regulatory policy, which included advising executives on digital assets regulation.
In a Friday announcement, Pham said Keaghan Ames will be her counselor and senior policy adviser at the CFTC starting May 23. Ames worked at Credit Suisse for more than two years as vice president and head of U.S. regulatory policy, which included advising executives on digital assets regulation. He will be joining the CFTC from the Institute of International Bankers, where he has been the director of government affairs since July 2021.
Sworn in as a commissioner in April, Pham is one of five heads serving at the CFTC under chair Rostin Behnam — all of whom were appointed by United States President Joe Biden. Pham is the latest commissioner to join the CFTC following the confirmation of Christy Goldsmith Romero, Summer Mersinger and Kristin Johnson.
NEWS: CFTC Commissioner Pham Announces Additional Staff Appointments. https://t.co/iaRdxlhyjw
— CFTC (@CFTC) May 13, 2022
During Ames’ time at Credit Suisse, the firm’s digital asset arm tested end-to-end fund transactions using blockchain technology, later piloting a settlement system between itself, Paxos and Instinet. In February, the company was the victim of a massive data leak concerning its account holders, reportedly including sanctioned individuals and heads of state.
Related: CFTC commissioner appoints crypto-experienced CME Group director as chief counsel
Together with the Federal Reserve, Securities and Exchange Commission, Department of the Treasury, and Financial Crimes Enforcement Network, the CFTC handles policy around digital asset regulation and enforcement in the United States. Cointelegraph reported in March that the government agency was seeking a $365 million budget for the next fiscal year based, in part, on the risks around digital asset custodians.
Cointelegraph reached out to Keaghan Ames, but did not receive a response at the time of publication.
Caroline Pham, currently serving as a commissioner at the United States Commodity Futures Trading Commission, or CFTC, has announced a former head of U.S. regulatory policy at investment banking firm Credit Suisse Securities will be joining her staff.
Jeremy Spence aka “Coin Signals” scammed around $5 million from 170 investors who were unaware their crypto was used to fund a Ponzi scheme.
A crypto trader who defrauded over 170 people was sentenced to 42 months in prison on May 11 for operating a series of cryptocurrency funds claiming to make big returns but in reality were losing money and instead operated as a Ponzi scheme.
The DOJ said that 25 year old Jeremy Spence had solicited millions through false representations, “including that Spence’s crypto trading had been extremely profitable when, in fact, Spence’s trading had been consistently unprofitable.”
Spence, who operated the social media channels for a crypto investment scheme called “Coin Signals” was handed the decision by United Stated District Judge Lewis Kaplan for the U.S. District Court for the Southern District of New York. Spence was also sentenced to three years of supervised release and ordered to pay back his victims an amount of over $2.8 million.
Spence was arrested in January 2021 by the Federal Bureau of Investigation (FBI) and seperate civil charges were brought forward by the Commodity Futures Trading Commission (CFTC).
Spence pleaded guilty to commodities fraud in November 2021 for soliciting over $5 million from unwitting crypto investors by creating various cryptocurrency funds from November 2017 until April 2019 which he falsely claimed were making returns but in reality were making losses.
One example provided by the DOJ said Spence posted a message to an online chat group claiming one of the funds made a 148% return that month.
According to Law360 U.S. District Judge Lewis Kaplan who presided over the case said:
"The thing I was struck by was the stupidity of the people you gulled into investing with you, there are real-life consequences to these shenanigans and they are serious."
Seeking to make a profit investors would transfer crypto to Spence to invest but as his trades weren’t making gains he created fake account balances to hide the losses. Spence started operating a Ponzi scheme using funds from new investors to pay earlier investors, with estimates that around $2 million worth of cryptocurrencies were distributed in this manner.
Related: Making crypto conventional by improving crypto crime investigations worldwide
In a statement to the court Spence told Judge Kaplan that he is “mortified” by his own behavior, apologizing to his investors and claimed was unqualified to trade the amount he was sent adding he “entered a world that [he] was completely unprepared for”.
Cointelegraph requested comment from Spence's legal representatives but did not receive a response within the time given.
Rostin Behnam and Gary Gensler make their positions clear in keynote addresses at the annual meeting of the ISDA with Sam Bankman-Fried in attendance.
The annual meeting of the International Swaps and Derivatives Association (ISDA) began Wednesday in Madrid. United States Securities and Exchange Commission (SEC) chairman Gary Gensler and U.S. Commodity Futures Trading Commission (CFTC) chairman Rostin Behnam were both featured as keynote speakers at the event, with Behnam speaking at the morning session, and Gensler in the afternoon.
Behnam spoke at length about “a request for an amended order of registration as a derivatives clearing organization (DCO) by an entity seeking to offer non-intermediated clearing of margined products to retail participants,” which was transparently a reference to FTX US’s request.
“As other registered entities have expressed interest in exploring similar models, and given the potential impact on clearing members and FCMs [futures commission merchants]” […] it is paramount to be transparent and provide an opportunity to hear from the public,” Behnam said, plugging the CFTC roundtable on the subject coming up later this month.
FTX CEO Sam Bankman-Fried may have been listening as Behnam spoke, as Bankman-Fried was present at the conference and participated in a fireside chat a few hours later.
Behnam went on to recall his February Senate testimony and say that:
“I will continue advocating for and supporting legislative authority for the CFTC to develop a regulatory framework for the cash digital asset commodity market.”
Currently, the CFTC only regulates derivatives markets, although it has exerted enforcement authority over cash markets, such as the fine it imposed on Coinbase for improper reporting of exchange volume and “self-trading” in 2021.
Related story: Bipartisan bill to give CFTC authority over exchanges and stablecoins
Gensler spoke about “the intersection of crypto assets with derivatives” in his significantly shorter speech. He said:
“If platforms — whether in the decentralized or centralized finance space — offer security-based swaps, they are implicated by the securities laws and must work within our securities regime.”
Gensler stressed the need for the ISDA “to recognize that if the underlying asset is a security, the derivative must comply with securities regulations” as it develops legal standards for crypto derivatives.
The founders of Bitmex have been ordered to pay $30 million “for illegally operating a cryptocurrency derivatives trading platform and anti-money laundering violations.” Arthur Hayes, Benjamin Delo, and Samuel Reed must pay $10 million each. Bitmex’s Founders Fined $30 Million The Commodity Futures Trading Commission (CFTC) announced Thursday that the U.S. District Court for the […]
During his time at the CME Group, Bruce Fekrat regulated crypto reference rates and helped in the development of financial products, including BTC and ETH derivatives.
Kristin Johnson, one of five commissioners currently serving at the United States Commodity Futures Trading Commission, or CFTC, has announced that a CME Group executive director with experience in crypto will be joining her staff.
In a Thursday announcement, Johnson said Bruce Fekrat will be her chief counsel at the CFTC starting on June 1. Fekrat worked as an executive director and associate general counsel at the CME Group for more than eight years, where he was lead regulatory counsel for issues including digital assets. During his time at the derivatives marketplace, he regulated cryptocurrency reference rates and helped in the development of financial products including Bitcoin (BTC) and Ether (ETH) derivatives.
Nominated by U.S. President Joe Biden in September 2021, Johnson was sworn in within days of both Christy Goldsmith Romero and Summer Mersinger filling the other vacant commissioner seats at the CFTC in March 2022 — the government agency normally has five commissioners in its panel. In addition to Fekrat, Johnson announced Lillian Cardona and Natasha Robinson Coates will join her staff as interim senior counsels.
NEWS: @CFTCjohnson Announces Initial Staff Appointments. https://t.co/eZhdbPMclo
— CFTC (@CFTC) May 5, 2022
Though former commissioner Dawn Stump previously told Cointelegraph that the CFTC “does not regulate crypto assets even if they are commodities," having staff with experience in cryptocurrencies could potentially influence digital asset regulation in the United States.
At present, the Securities and Exchange Commission, Federal Reserve, Treasury Department, CFTC and Financial Crimes Enforcement Network handle issues dealing with digital assets in the United States, including regulation and enforcement. However, each agency often has different jurisdictional claims, resulting in a regulatory patchwork approach many industry leaders have criticized.
Related: Bringing crypto market 'into the light' doesn’t address enforcement: CFTC chair
During Fekrat's tenure at the CME Group, the derivatives marketplace launched Bitcoin futures contracts in December 2017 amid the bull run and later went on to introduce micro Bitcoin futures in May 2021 and micro Ether futures in December 2021. In March, the group announced it would launch options trading for its micro Bitcoin and Ether futures products, subject to regulatory review.
Cointelegraph reached out to Bruce Fekrat, but did not receive a response at the time of publication.
The SEC, CFTC and DOJ have seven cases either resolved or ongoing this year, with the litigation against husband-wife duo Ilya Lichtenstein and Heather Morgan being the most high profile.
A new crypto litigation tracker from commercial law firm Morrison Cohen LLP shows details of more than 300 active and settled court cases since 2013.
Morrison Cohen is a New York-based firm that caters to large financial institutions, entrepreneurs and early-growth stage companies, and specializes in capital markets, business litigation, real estate and bankruptcy to name a few. The company also has a cryptocurrency litigation team.
The Morrison Cohen Cryptocurrency Litigation Tracker was published on May. 3, and contains any case development related to the U.S. Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), the Department of Justice (DOJ) and class action/private litigation.
The firm stated that it will regularly update the tracker “ to include the key rulings in these litigations,” and it also contains a host of “articles, webinars, and podcasts” and regulatory crypto announcements from various government agencies.
According to the tracker — which is essentially a lengthy pdf document — there have been roughly 17 crypto cases that were either brought before the court or resolved in 2022 so far.
The SEC, CFTC and DOJ combined account for seven of those, with some high profile cases being the SEC v. the Barksdale siblings, who allegedly conducted a fraudulent initial coin offering (ICO) worth $124 million, and the SEC v. digital asset platform BlockFi, who agreed to pay a $100 million penalty for failing to register its crypto lending product.
The most notable of all however, is the ongoing DOJ v.Ilya Lichtenstein and Heather Morgan case. The husband-wife duo are charged with an alleged conspiracy to launder funds relating to the 119,756 Bitcoin (BTC) Bitfinex hack in 2016. DOJ special agents were able to seize 94,000 BTC around the time of arrests in February.
There may also be plenty more in the works this year, considering the SEC announced this week that it will be upping the headcount of its enforcement-focused “Crypto Assets & Cyber Unit” to 50 dedicated positions.
Today we announced that we’re bolstering the unit responsible for protecting investors in crypto markets & from cyber-related threats. The newly renamed Crypto Assets & Cyber Unit in the Division of Enforcement will grow to 50 dedicated positions.
— U.S. Securities and Exchange Commission (@SECGov) May 3, 2022
Related: Has New York State gone astray in its pursuit of crypto fraud?
The majority of action has been over in the class action/private arena however, with SafeMoon attracting the most attention after the team was slapped with a class-action lawsuit over an alleged pump and dump scheme.
The class action claims the project recruited numerous celebrities to draw in investors with allegedly misleading information, with musicians such as Nick Carter, Soulja Boy, Lil Yachty and YouTubers Jake Paul and Ben Phillips all said to have promoted the BNB Chain-based token.
A unique case that seems to have mostly flown under the radar is the Halston Thayer v. Matt Furie, Chain/Saw LL, and PegzDAO from March.
The trio — which includes Furie, the original creator of the beloved Pepe the Frog meme — is accused of fraudulent inducement, after allegedly selling a one-of-one NFT that tanked in value following an identical NFT drop that was released for free.
“Plaintiff alleges that defendants fraudulently misrepresented the value of a Pepe the Frog NFT. Plaintiff paid $537,084 for a Pepe the Frog NFT created by Furie and sold through PegzDAO. A few weeks after the sale, PegzDAO released 46 identical NFTs for free, which allegedly reduced the value of Plaintiff’s NFT,“ Morrison Cohen wrote.
The Digital Commodity Exchange Act would give the commodities regulator the authority to determine rules for cryptocurrency developers and exchanges offering spot trading.
A bipartisan group of lawmakers in D.C. introduced an updated bill on April 28 to regulate cryptocurrency developers, dealers, exchanges, and stablecoin providers, bringing them under the regulatory control of the United States Commodity Futures Trading Commission (CFTC).
The Digital Commodity Exchange Act of 2022 (DCEA) was re-introduced to Congress by Republican Representatives Glenn Thompson and Tom Emmer with support from Democrat co-sponsors Darren Soto and Ro Khanna.
The updated version includes a section covering stablecoin providers, who can register as a “fixed-value digital commodity operator.” These operators would be obligated to share how the stablecoin operates, retaining records for the regulator along with providing information on the assets backing the “fixed-value digital commodity” and how they’re secured.
As per the last bill, the DCEA would authorize the CFTC to register and regulate cryptocurrency exchanges that offer spot trading of crypto commodities — those that allow traders to buy cryptocurrencies at the current price.
The DCEA would not affect the Securities and Exchange Commission’s (SEC) regulatory power over digital asset securities offerings, but instead classify cryptocurrencies that are not securities as digital commodities to be brought under regulation by the CFTC.
Crypto exchanges would also be subject to the same rules as other commodity providers for listing new cryptocurrencies on their platforms. Exchanges must demonstrate the crypto is “not readily susceptible to manipulation” through analyzing its mechanics such as its “purpose, functionality, governance structure, distribution, and participation.”
Developers of cryptocurrencies could also voluntarily register with the CFTC and make disclosures required for public trading and listing on an exchange. A summary of the act says registration would ensure accuracy of records and public information about the crypto is standardized and could help facilitate public exchange listings.
Related: Self-regulatory organizations growing alongside new US crypto regulation
Regulatory uncertainty has afflicted cryptocurrency businesses operating in the U.S.,and in a release the co-sponsors of the bill said it would help with easing the prevailing uncertainty of the current rules, with Soto saying:
"Regulatory clarity is critical for digital commodity markets to promote innovation and consumer protection. Innovators are spending up to fifty percent of start-up costs on legal fees because of the current regulatory ambiguity between what is a security and what is a commodity.”
Industry advocacy body the Crypto Council for Innovation called the bill “a step forward” as it creates a “new atmosphere of opportunity without stifling innovation” adding:
“This is one of a few bills introduced that the industry should watch closely.”
In February, CFTC chair Rostin Behnam told lawmakers during a Senate hearing on digital assets that the Commission had a lack of authority to enforce the crypto space due to differing regulations.
Behnam called the crypto space “in essence…an unregulated market” and said more regulatory authority for the CFTC “will only allow us to see what’s going on underneath the hood.”
The bill will need to move forward to a hearing by the Agriculture Committee, if passed by the House, it will be then taken up by the Senate Agriculture Committee for discussion.
