By Brad Rosen, J.D.
The CFTC has brought 19 enforcement actions against various virtual currency market participants, including traders, issuers, exchanges, and service providers from January 2015 through June 2020. In a report titled Trends in CFTC Virtual Currency Enforcement Actions, Cornerstone Research, an economic and financial consulting firm, provides various metrics about the agency’s enforcement activities. The Cornerstone report of CFTC’s enforcement actions includes a detailed analysis of the legal theories asserted by the Commission in its cryptocurrency related litigation, as well as a review of venue and case durations.
Legal theories and allegations. The report noted that the majority of legal actions brought by the CFTC involved charges of fraudulent schemes, with 14 out of the 19 of those matters alleging the misleading of investors in the trading of commodities, commodity futures contracts or options. Moreover, eight of those actions involved a commodity trader allegedly failing to register with the CFTC, while four of those matters involved allegations of illegal off-exchange commodity transactions. The highest number of those enforcement actions were brought in 2018 by the then newly formed CFTC DOE’s Virtual Currency Task Force.
Venue. Of the 19 actions brought between 2015 and the second quarter 2020, 14 were litigated in U.S. district courts. The other five were resolved within the CFTC as orders and simultaneous settlements. Of the 14 actions litigated in federal court, most occurred in the state of New York, with four filed in the Southern District of New York, and three brought in the Eastern District of New York. These 14 matters were presided over by 13 different judges. Only the Honorable Sandra J. Feuerstein presided over two matters.
Case duration. As of June 30, 2020, six of the 14 actions litigated in U.S. courts had reached a resolution. The average time from the date of the complaint filing to the case resolution was 292 days. The eight actions, for which no resolution has been reached, have been pending for an average of 279 days as of June 30, 2020.
Recent activity. During the second quarter 2020, the CFTC brought two new enforcement actions involving cryptocurrencies, CFTC v. Fingerhut, and CFTC v. Fintech Investment Group Inc. Both of these matters involve allegations of fraud.