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The Securities and Exchange Commission (SEC) has slapped a Switzerland-based security dealer with a cease-and-desist order after it found out that the firm sold unregistered swaps for bitcoin to U.S. investors. The SEC also notes that the company – XBT Corp. also known as First Global Credit (FGC) – failed to transact its swaps on a registered national exchange.
In the filing, the SEC explained that First Global Credit accepted futures orders from 24 U.S. investors dating back from March 2016 to July 2018 using Bitcoin as collateral. Since the company wasn’t a registered futures commission merchant (FCM) during this time, the SEC deems FGC’s previous transaction as illegal.
“Although Respondent used different terminology to describe its investments—including bitcoin Asset Linked Notes (bALNs) – FGC’s investments always involved the exchange of the difference in value of an underlying asset from the time at which the accountholder established a position to the time the accountholder terminated the position. As a result, Respondent’s accountholders participated in price movements of an underlying asset without owning it. When the underlying asset is a security, this type of arrangement meets the definition of a ‘security-based swap,’ the regulatory body explained.
SEC lowers FGC’s fine
David Peavler, Regional Director of the SEC's Fort Worth Regional Office, reiterated that sellers of security-based swaps must adhere to the restrictions imposed on these transactions. Companies cannot bypass these restrictions by simply changing terminologies or using digital currencies instead of traditional fiat.
Following the order, FGC submitted an Offer of Settlement, which was accepted by the agency. The security dealer will be fined a total of $131, 952. These charges encompass a disgorgement settlement of $31, 687 and civil penalties worth $100,000. The remaining $265 is for prejudgment interest.
The SEC also decided to reduce the FGC’s penalty due to the dealer cooperating with the investigation.
Regulatory bodies have been cracking down on crypto businesses since they started entering the mainstream market and FGC is merely the newest entity to be slap by such charges.
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