According to the charges, XBT solicited or accepted futures orders from 24 U.S. customers between March 2016 and July 2017, accepting bitcoin for margin trades. The company did not register as an FCM during this time.
U.S. regulators filed charges against XBT Corp. Thursday, alleging the company failed to register as a futures commission merchant (FCM).
In simultaneous press releases, the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) alleged that XBT, otherwise known as First Global Credit, sold security-based swaps for bitcoin without registering on a national exchange.
XBT had overall at least 90 investors, who conducted more than 18,000 security-based swaps between 2014 and 2019, conducting more than $100 million in transactions “based on U.S.-listed securities”, according to a legal filing. Of that, $43.8 million in trades were made by U.S. residents.
The company will pay more than $130,000 in fees and disgorgement as part of the settlement, with the SEC taking custody of the funds over the next year. The CFTC’s press release states that the agency “recognizes that FGC’s civil monetary penalty in this matter was substantially reduced in light of FGC’s cooperation and remediation.”
XBT rolled First Credit out in October 2014, offering “contract for difference” (CFD) derivatives products allowing customers to deposit bitcoin in turn for purchasing credits representing shares in companies such as Apple.
The U.S. FBI and Swiss Financial Market Supervisory Authority (FINMA) participated in the investigation, according to the releases.
XBT did not immediately respond to a request for comment.
Security Token Platform Receives Transfer Agent License From SEC
Harbor, the digital platform for alternative assets, has received a transfer agent license from the United States Securities and Exchange Commission (SEC).
On Oct. 31, Harbor CEO Joshua Stein told the Block that his blockchain-enabled platform is “now the first blockchain company to receive both a transfer agent license and a broker-dealer license.”
Transfer agent license will compliment broker-deal license
The transfer agent license will enable Harbor to maintain financial records of security token ownership, track account balances and pay out dividends while attracting blockchain companies that are looking to conduct Reg A+ offerings. The SEC requires companies to engage with transfer agents for Reg A+ offerings.
Regulation A+ is an initial public offering alternative geared towards startups in need of early funding. Regulation A+ funding was introduced in 2012 via the “Jumpstart Our Business Startups Act.”
Stein added that both the transfer agent license and the broker-deal license will compliment each other, as they will enable the company to facilitate the full life cycle of security token issuance as well as regulated trading. Stein said:
“Think of the entire life cycle of this, there is… selling the investors into the investment, maintaining the investment while they are in, and controlling how they are traded. The broker-dealer is mostly involved in gaining the investors into the investment. The transfer agent maintains the records while they are in and pays out dividends, and the transfer agent controls when they pay out.”
Stein recently said that securities regulations “do not work” in regard to utility tokens in decentralized apps, adding that current securities laws are only appropriate for traditional securities, and that “they are not a good fit” for the ICO industry.
First-ever U.S. SEC-approved token offering
The blockchain-based startup Blockstack was the first-ever digital token offering to receive the go-ahead from the SEC to run a $23 million investment round under Regulation A+. Founders of Blockstack Muneeb Ali and Ryan Shea reportedly spent 10 months and approximately $2 million to get the green light from the SEC for a Reg A+ offering.