Stay up-to-date with the latest developments in securities law through access to both news and all statutes and regulations. Find relevant corporate filings through a searchable EDGAR database. And...
By Lydia Beyoud
The nation’s commodities swaps and derivatives regulator is appealing a federal judge’s decision that could change the way it brings enforcement actions and seeks to regulate the virtual currency market.
The Commodity Futures Trading Commission wants a panel of judges to hear a case it brought against Monex, a precious metals dealer. The agency asked the court to satisfy a few procedural steps in a May 25 notice of its plan to appeal.
The judge who heard the case has indicated the court will proceed with the request. Judge James Selna helped fast-track the process by filing a precertification for appeal on May 15.
Selna reasoned the speed was warranted since his May 1 opinion dismissing the CFTC’s complaint “involves a controlling question of law as to which there is substantial ground for difference of opinion, and that an immediate appeal from the order may materially advance the ultimate termination of the litigation.”
The agency filed a complaint against Monex in September 2017, alleging it committed fraud through off-exchange leveraged gold transactions, resulting in approximately 12,000 accounts collectively losing more than $290 million during a near six-year period. The CFTC also said the company failed to deliver control of gold to purchasers within 28 days of a leveraged transaction, a violation of the Commodity Exchange Act.
But the CFTC now finds itself in the hot seat, fending off a challenge to its broader regulatory authority thanks to a May 1 decision in the U.S. District Court for the Central District of California.
The court determined the legislative history behind the 2010 Dodd-Frank Act only allowed the CFTC to bring enforcement cases involving both fraud and market manipulation, rather than when only one is present. Selna also said the CFTC’s 28-day rule made no sense if it requires a dealer to hand over control of a commodity that hasn’t been fully paid for by the buyer.
That reasoning has important implications for the CFTC’s work in determining when virtual currency trading platforms must register with the commission and abide by stricter regulatory oversight for futures products.
Generally, dealers that can deliver or turn over control of a commodity to a buyer within 28 days of a “spot market” transaction don’t have to register as a commodities dealers. If the 28-day rule were applied to the virtual currencies market, it could increase the number of cryptocurrency trading platforms and dealers required to register and be subject to greater CFTC oversight for leveraged or margined cryptocurrency transactions.
The CFTC is still finalizing guidance on interpretation of the “actual delivery” rule for the virtual currency context.
The case is Commodity Futures Trading Commission v. Monex Credit Co. , C.D. Cal., No. 8:17-cv-01868-JVS-DFM, notice filed 5/25/18 .
To contact the reporter on this story: Lydia Beyoud in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Michael Ferullo at email@example.com
Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)