Below is a summary of some of the significant legal and regulatory actions that occurred over the past week. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest.
U.S. Developments
CFTC. The U.S. Commodity Futures Trading Commission (CFTC) has settled charges against TeraExchange LLC, a bitcoin swap execution facility. The charges stem from a non-deliverable forward contract based on the relative value of the U.S. Dollar and Bitcoin (the Bitcoin swap) executed on TeraExchange, which is provisionally registered as a SEF. The transaction took place under the active guidance of TeraExchange, without any associated trading fees or collateral requirements, which constituted wash trading and prearranged trading in violation of the Commodity Exchange Act. The CFTC has ordered TeraExchange to refrain from further violations of the Commodity Exchange Act. No monetary penalty was levied against the company, despite a dissent from one commissioner arguing that a fine should be imposed.
The full CFTC order: CFTC Docket No. 15-33
Securities Fraud. A Texas man pleaded guilty in defrauding people out of $4.5 million in what is said to be a first-of-its-kind Ponzi scheme involving investments in virtual currency. Bitcoin Ponzi scheme perpetrator Trendon Shavers, founder of Bitcoin Savings and Trust, raised at least 764,000 bitcoins by promising investors a return of as much as 3,641 percent. Instead, he used bitcoins from new investors to cover payments owed to earlier clients, while also paying for his own gambling and spa treatments. At the peak of his scheme in 2011 and 2012, Shavers held about 7% of all bitcoins in circulation. Shavers faced as long as 20 years in prison on the securities fraud charge. He’s scheduled to be sentenced by U.S. District Judge Lewis Kaplan on February 3, 2016. As a result of the plea deal, Shavers will now serve anywhere from 33 months to 41 months and pay a $5 million fine.
International Developments
Australia. Approximately 17 bitcoin companies in the country received letters from two of Australia’s biggest banks – Westpac Banking Corporation and Commonwealth Bank of Australia – notifying them that their bank accounts would be closed without further explanation. 13 of these companies, a report by the Australian Financial Review says, have already had their accounts closed. In an additional report, Australia’s Competition and Consumer Commission (ACCC) is considering investigating the actions of Australia banks for shutting down the accounts of bitcoin businesses, prompted by Queensland Nationals Senator Matthew Canavan – who reportedly urged the ACCC to check whether the banks actions had resulted in anti-competitive behavior.
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