SEC Closes 1Broker and Seizes Website

The SEC has stepped in to shut down cryptocurrency platform 1Broker.

Some were caught off guard today in an expected seizure of a crypto platform called 1Broker. The American Securities and Exchange Commissions has begun taking notes in the crypto space and fishing out scams, and they seem to have closed down one of their first.

According to their official release, the regulatory body decided to be heavy-handed on 1Broker becauses it was “allegedly violating the federal securities laws in connection with security-based swaps funded with Bitcoins.”  One of the individuals associated with the company, Patrick Brunner, was allowing American investors to purchase and sell security-based swaps “without meeting the discretionary investment thresholds required by the federal securities law.”

However, the SEC went further in their condemnation — they also believed that many of these swaps were fraudulent. Not only that, they also did not have the legal permission or documents to trade these kind of swaps not only in the United States, but across borders either.

The Director of the SEC’s Fort Worth Regional Office Director, Shamoil Shipchandler, was clear in his condemnation and was one who handled the case:

“The SEC protects U.S. investors across a variety of platforms, regardless of the type of currency used in their transactions. International companies that transact with U.S. investors cannot circumvent compliance with the federal securities laws by using cryptocurrency”

What this effectively meant is that all cryptocurrency-related dealings which were done with American investors, regardless of where those exchanges and firms are based, are subject to American laws. This precedent is one that has been on the books for some time, but this is among the first time it has been formally applied to cryptocurrencies. The SEC and the CFTC is seeking legal and financial penalties to be placed on 1Broker. As of now, the website has been seized.

Since 1Broker was an exchange, the seizure has brought concerns that other exchanges might also be forced to close their doors. There’s always that risk, it seems. However, 1Broker has opened its doors again with its domain now based in the Marshall Islands. But this seems tenuous at best, and their activity is being closely monitored.

Overall, this seizure has had no effect on the crypto markets, but we will see if the SEC’s involvement within crypto will continue to escalate in the coming months. Many have brushed aside the news as minor, but there are admittedly concerns that other, larger exchanges could have a similar fate since they are trading what could be considered crypto-related securities.