The U.S. Securities and Exchange Commission’s Fort Worth office filed a first-of-its-kind lawsuit Thursday charging an Austrian man and his online brokerage service with operating an internet-based securities operation that allowed people to anonymously buy and sell securities using cryptocurrency.
In an 11-page complaint filed in federal court in Washington, D.C., the SEC claims that 1Pool Ltd. and its CEO, Patrick Brunner, illegally solicited U.S. investors through its online service requiring that they only need an email address and bitcoin to make the trades.
Because no identification was required, SEC officials said 1Pool and its sister service, 1Broker, could be used for criminal activity, including money laundering and insider trading.
As the SEC was filing its complaint, FBI officials seized control of 1Pool’s website. The Commodities Future Trading Commission also filed its only complaint against 1Pool and Brunner for allegedly engaging in unlawful retail commodities transactions and failing to properly register as a Futures Commission Merchant.
“The SEC protects U.S. investors across a variety of platforms, regardless of the type of currency used in their transactions,” SEC Regional Director Shamoil Shipchandler told The Texas Lawbook in a written statement. “International companies that transact with U.S. investors cannot circumvent compliance with the federal securities laws by using cryptocurrency.”
The SEC’s complaint alleges that an undercover FBI Agent “successfully purchased several security-based swaps on 1Broker’s platform from the U.S. despite not meeting the discretionary investment thresholds required by the federal securities laws.”
The SEC’s investigation is being lead by staff attorney David Hirsch of the Fort Worth Regional Office. Hirsch, who joined the SEC in 2015 after being a lawyer in the litigation section of McDermott, Will & Emery. has become of the SEC’s leading authorities on cyber-related issues and is a member of the SEC’s Dark Web Working Group.
Other SEC officials involved in the investigation and prosecution of the case are Morgan Ward Doran, Scott Mascianica, Eric R. Werner and Chris Davis.