A federal judge has ruled that MBC is the latest cryptocurrency to be classified as a commodity. In a recent case against My Big Coin Pay Inc, the company issuing the currency, U.S. District Judge Rya Zobel has decided that the prosecuting party – the Commodity Futures Trading Commission (CFTC) – can proceed with its case against the cryptocurrency venture as its digital asset does not fall into the “securities” category.
A Little History
My Big Coin was founded in December of 2013. Allegedly based in Wyoming, the company offers its own digital wallet to store cryptocurrencies and a digital exchange to trade them. My Big Coin began selling its own currency – MBC – through an initial coin offering (ICO) and made approximately $6 million from 28 separate investors by promising one percent interest for investors that kept their wallets open.
The CFTC claims that the ICO has all the same behavior and qualities of a Ponzi scheme. They allege that the company is based in Las Vegas, not Wyoming, and that owners Randall Crater of New York and Mark Gillespie of Michigan used customer funds to purchase expensive items for themselves. They also state both money from new investors was used to pay back older ones.
Honesty Is the Best Policy
In addition, the CFTC believes the money was raised through several false claims, such as that MBC was backed by gold and traded across several different exchanges, and that My Big Coin had recently partnered with MasterCard. Charges were filed back in January of 2018. The company’s accounts were frozen, and executives were blocked from accessing them. They were also prohibited from disposing of any financial records.
Via court documents, Judge Zobel believes that MBC classifies as a commodity because it is a cryptocurrency like bitcoin:
“The amended complaint alleges that My Big Coin is a virtual currency, and it is undisputed that there is futures trading in virtual currencies (specifically involving bitcoin). That is sufficient, especially at the pleading stage, for plaintiff to allege that My Big Coin is a ‘commodity’ under the [Commodity Exchange] Act.”
The Defendant Is Continuing to Argue
Defending lawyer for My Big Coin Katherine Cooper expressed her disappointment in the decision and continues to argue that the CFTC holds no precedence. In the court documents, she argues that “contracts for future delivery” are indisputably not “dealt in” My Big Coin. Thus, the currency cannot be classified as a commodity under the ECA:
“My Big Coin does not have future contracts or derivatives trading to it; t is not a commodity. Now that we are moving past the motion to dismiss phase of the case, we look forward to challenging the CFTC’s ability to prove many of the factual allegations in the complaint. Among those factual allegations are those which speak to the relatedness of bitcoin and My Big Coin, and therefore the CFTC’s jurisdiction.”
The Trouble Isn’t Quite Over
Defining crypto-tokens has not always been an easy feat for U.S. lawmakers, and the lack of clear regulation continues to haunt several leading cryptocurrencies. Ethereum, for example, initially began as a pre-sale token, and was the subject of hot debate for several months. Many believed the Securities and Exchange Commission (SEC) would declare Ethereum a security given its ICO-related background, though in a shock move, the organization deemed Ethereum “too decentralized” to be classified as such.
Ripple, on the other hand, hasn’t been so lucky. CEO Brad Garlinghouse has consistently asked with leading U.S. exchanges like Coinbase to list XRP, the organization’s cryptocurrency, though he’s usually walked away disappointed. Coinbase and other exchanges are in no rush to list XRP given the possibility that it will be labeled a security in the future. Roughly 60 percent of XRP is still owned by Ripple, which suggests a centralized atmosphere for the currency.
In addition, the company is facing a class-action lawsuit from investors claiming XRP has not followed appropriate securities protocols.