U.S Federal Judge backs up CFTC by recognizing virtual currencies as commodities

Recently, US District Judge Rya Zobel stated that the CFTC could work towards charging My Big Coin Pay Inc. with the fraud allegations, according to Reuters. Furthermore, it was stated that virtual currencies come under the distinction of a commodity and the US derivatives regulator had the complete authority to investigate the case. CFTC is an independent agency of the US government which focuses on regulating futures and option markets.

According to the post, US District Court had permitted the Commodity Futures Trading Commision [CFTC] to investigate cases related to virtual currency frauds. The report stated that CFTC had recently accused Coin Pay Inc. and its owner Randall Carter with commodity fraud and misappropriation of assets. Reportedly, Randall had committed a fraud of $6 million on the individuals who allegedly wanted to buy My Big Coin [MBC]. Founded in 2013, MBC is a blockchain powered cryptocurrency where buyers and sellers can process transactions.

A report by CFTC stated that Carter had embezzled $6 million from 28 customers under the false pretention that MBC was similar to Bitcoin and the virtual currency was backed by gold. The defendant’s lawyer proposed to dismiss the case by stating that the MBC token was neither a tangible asset nor was it a service on which the futures contract were being traded. Thus the CFTC had no authority over virtual currencies.

On the contrary, the federal judge Rya Zobel in Boston stated that My Big Coin was falling under the definition of a commodity under the Commodity Exchange Act. She added that the law does not define commodities in a specific way rather it is defined in broader categories. Furthermore, Bitcoin futures are currently traded on U.S. exchanges and since both MBC and BTC could broadly be described as virtual currencies. The CFTC had the authority to scrutinize the defendants. Zobel further added:

“That is sufficient, especially at the pleading stage, for plaintiff to allege that My Big Coin is a ‘commodity’ under the Act”

According to Zobel, the CFTC’s allegations was accepted for the purpose of determining that it had the authority to scrutinize the defendants. But a formal examination of the case before the judge and jury was still pending and the result of the ruling permitted the case to move forward.

Randall’s lawyer Katherine Cooper stated that they were very disappointed with the ruling and further challenged the CFTC to prove the allegations related to MBC and BTC’s similarity and weather CFTC had the jurisdiction in the case.

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