The SEC shuts down 1Broker, are other exchanges next?

in crypto •  18 days ago

The SEC shuts down cryptocurrency exchange 1Broker, are other exchanges next?

In a surprising move, or not surprising if you have been following the latest SEC activities, cryptocurrency exchange 1Broker was shut down by the SEC, CFTC, and the FBI a few days ago.

Now that is pretty much the who's who of 3 letter enforcement agencies!

All they need now is the IRS and it will be the grand slam of 3 letter regulators.

Though, this is not the kind of grand slam you want to be involved with...

Why the shut down?

1Broker was shuttered for a whole host of violations.

Depending on which of the 3 regulators you talk to you will get a different reason.

The SEC said that the exchange was selling unregistered securities, violating securities laws.

From the SEC's statement:

"The SEC alleges that a Special Agent with the Federal Bureau of Investigation, acting in an undercover capacity, 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."

(Source: https://www.coindesk.com/sec-cftc-charge-bitcoin-futures-firm-1broker-with-securities-law-violations/)

The CFTC says that 1Broker was not complying with KYC and AML laws. Allowing for money laundering to take place using the exchange.

The FBI said that along with not complying with AML and KYC laws, the broker did not properly register with the SEC and other US entities before selling products to US based citizens.

Take your pick, the big 3 of regulation all came down hard on these guys.

More about it can be read here:

https://www.coindesk.com/sec-cftc-charge-bitcoin-futures-firm-1broker-with-securities-law-violations/

Will this be the first of many?

Sadly, I think this will be the first of many cryptocurrency exchanges being shut down over the next 12 months.

My only hope is that it is not any of the big ones:

(Source: https://bitcoinexchangeguide.com/sec-shuts-down-1broker-as-crypto-community-says-binance-and-bitmex-are-next/)

Any exchange that is making a market in coins that the SEC considers securities need to be properly registered, which many are not currently.

Also, any exchange that does business with US citizens will need to comply with KYC and AML laws if they wish to remain operating.

Most are, but some are not.

I fear that if a couple of the big ones get shut down it could have a very negative effect on cryptocurrency prices...

I hope I am wrong though and I hope the shut downs never come.

What do you think?

Stay informed my friends.

Image Source:

https://bitcoinexchangeguide.com/bitcoin-futures-firm-1broker-charged-with-securities-law-violations-by-sec-and-cftc/

Follow me: @jrcornel

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How bad would be that all exchanges that allow margin trading get shut down?... No more people shorting BTC sounds good to me LOL... Anyway, not sure if this is bad at all, this means that all the other exchanges are perfectly legal and that there is a regulation in cryptocurrencies that will bring more serious institutions to the market...

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I highly doubt it. I think they chose the low hanging fruit first. 1Broker was blatantly breaking all kinds of laws. Next they likely target the next level of low fruit hangers. There is a possibility that some well known exchanges are on their list...

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Yup, true that. I think some of these top exchanges aren't at the top of their blacklist yet, and some might even have good connections to the SEC to ward off/delay any form of intimidation of seizure. But in all, a truly decentralized exchange would set things right.

However, all of this is more reason why you might be interested in Digitex. Apart from the fact that traders money are held on decentralized wallets, Digitex will also be a bitcoin futures exchange that is commission free. No more transaction fees of any kind because the exchange has only one token: the DGTX, and they plan to mint a small amount of this token every 2 years to take care of management and fees for everyone. What do you think? Bitmex killer, maybe?

I wrote about it here. Of course, there is a bit of bias because i am invested in this project in a minimum capacity, but the facts and figures don't lie. Check it out.

As long as any of those are not a large part of the liquidity of certain coins, it should not impact the market too much... However, this news reinforces two important things we should all know: (1) do not leave your assets on an exchange and (2) the development of decentralized exchanges are an important next step for the cryptocurrencies to progress.

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If these exchanges are forced to liquidate in order to pay fines and penalties it could have a significant impact on coins, especially smaller ones with not a lot of volume.

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Hey @newageinv, good to run into you again.

I agree, decentralized exchanges should be the next thing if we're talking about the true security of traders' funds. This is more reason why you might be interested in Digitex. Apart from the fact that traders money are held on decentralized wallets, Digitex will also be a bitcoin futures exchange that is commission free. No more transaction fees of any kind. I wrote about it here. Of course, there is a bit of bias because i am invested in this project in a minimum capacity, but the facts and figures don't lie. Check it out.

I fear you are correct @jcornel 😩👎😩

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Hopefully none of the major ones are forced to shut down. I would think they would just force them from doing business in the US?!

Probably. Too bad.

Posted using Partiko Android

While its a negative now, it may be in the interests of the long term survival of this asset class that there is some measure of compliance. Almost certainly as we move towards ETFs there is going to be more interest.

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Agreed. The big question is whether the exchanges will be shut down and forced to liquidate in order to pay fines and penalties, or just shut down to US users.

As long as an exchange is a company that pays taxes to government I don't believe SEC will head to other exchanges to shut them down with no reason.
Besides a law applied in US will not affect Korea, Japan or China. A lot of countries are into blockchain and It will be silly in the normal term to shut down exchanges.
Wich means crypto will keep growing.

The best is not making it in th US or simply trade via decentralized exchanges.

Posted using Partiko Android

Well, that's just great. I had a few hundred in BTC in there to try 1Broker out and now I can't get it. Good to know I'm being protected by a company/organization from a foreign country by them stealing my money and telling me it's for my own safety. This really SECs... I mean sucks.

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I would think that at some point customers will be able to withdraw their funds, though that is just me speculating.

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That's what 1Broker is saying - The money is safe and will be released as soon as possible.

There isn't much stopping the SEC or somebody else from actually seizing it though, I'd imagine. I don't mind if I lost it because 1Broker was a scam site and I made a mistake by giving my money to a scammer. That would be on me and my own choices. But when a third party can come in and take my money because of rules they wrote themselves, that's absolutely ridiculous and isn't protecting anyone.

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Yea, it likely depends on how severe the fines and penalties are. Though I would bet that the SEC lets customers withdraw their funds. They are all about protecting investors, otherwise they get sued. If there was a lot of money laundering going on through that exchange, that might be something else entirely and might impact whether customers can get their funds out...

Fair enough on not complying with KYC/AML but how can the SEC expect exchanges to register them when the SEC has not clearly stated their position on cryptocurrencies with regards to being securities..... or are they hinting that anything other than ETH and BTC are securities???

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I am not sure either. It sounded like the SEC was going to give a free pass to coins that may have been securities technically when they initially launched but are not much more decentralized. Though like you mentioned, no one is really sure.

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1Broker was selling stocks like Apple and Microsoft for bitcoin, along with commodities like oil. They weren't shut down for exchanging crypto for crypto.

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Correct, they were the lowest of the low hanging fruit. The question is where do regulators go next?

I'm not surprised the USA regulators are targeting exchanges they don't like.

Now, here comes the big question: what happens to the markets when Bitfinex and Tether get attacked?

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Since Bitfinex doesn't accept US users (that I know of), it shouldn't have an issue from the SEC and CFTC at least.

Hello @jrcornel, maybe that time will come and wait for the big thing. regards