SEC Charges Bitcoin-Funded Securities Dealer and CEO
Litigation Release No. 24330 / November 1, 2018
Securities and Exchange Commission v. 1Pool Ltd. a.k.a. 1Broker and Patrick Brunner, No. 1:18-cv-02244-TNM (D.D.C.)
The Securities and Exchange Commission filed charges against an international securities dealer and its Austria-based CEO for allegedly violating the federal securities laws in connection with security-based swaps funded with bitcoins.
According to the SEC's complaint, 1pool Ltd. a/k/a 1Broker, registered in the Republic of the Marshall Islands, and its CEO Patrick Brunner solicited investors from the United States and around the world to buy and sell security-based swaps. Investors could open accounts by simply providing an email address and a user name - no additional information was required - and could only fund their account using bitcoins. 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. The SEC also alleges that Brunner and 1Broker failed to transact its security-based swaps on a registered national exchange, and failed to properly register as a dealer.
The SEC's complaint, filed in U.S. District Court for the District of Columbia, charges 1Broker and Brunner with violating registration provisions of the federal securities laws, including Section 5(e) of the Securities Act of 1933, and Sections 6(l) and 15(a)(1) of the Securities Exchange Act of 1934, and seeks permanent injunctions, disgorgement plus interest, and penalties. In a parallel action, the Commodity Futures Trading Commission (CFTC) announced charges against 1Broker arising from similar conduct.
The SEC's investigation was conducted by David Hirsch and Morgan Ward Doran, and supervised by Scott Mascianica and Eric R. Werner of the SEC's Fort Worth Regional Office. The SEC's litigation will be led by Chris Davis and supervised by B. David Fraser. The SEC appreciates the assistance of the U.S. Attorney's Office for the District of Columbia, Department of Justice, Federal Bureau of Investigation, and the CFTC.
Note: This litigation release was amended on November 21, 2019, to clarify the SEC's charges.