CFTC’s Classification of Bitcoin and Ethereum as Commodities in Deutsche Bank Litigation

• CFTC slaps heavy charges on ex-Deutsche Bank executive for misleading investors into investing in his digital assets trading fund.
• As per CFTC, the person defrauded investors to the tune of 1 million dollars while slapping charges of wire fraud.

The U.S. Commodities and Futures Trading Commission (CFTC) has recently turned a lot more active in dealing with regulatory matters associated with digital assets. Last month the CFTC claimed its jurisdiction over some of the top digital assets including Ethereum (ETH).

In a recent development, the CFTC filed a civil enforcement action against a former Deutsche Bank investment banker Rashawn Russell in the US District Court for the Eastern District of New York. The filing alleges that Russell fraudulently solicited retail investors for investing in the crypto trading fund. In the process, Russell has been accused of defrauding retail investors to the tune of 1 million dollars. As a result, the CFTC has slapped charges of wire fraud on Russell.

The press release notes that Russell asked investors to contribute their Bitcoin, Ether, and fiat currencies to invest in his purported proprietary crypto trading fund. He conducted this activity from November 2020 through July 2022.

Furthermore, CFTC alleges that Russell guaranteed profits to investors with minimal risk or no losses. In some of the cases, the banker also promised a 25 percent return on investment.

As a result, the CFTC charged Russell with recklessly making false statements regarding the structure, size, and performance of the fund. Furthermore, Russell faces charges of making false promises to pay withdrawal requests in addition to compensating investors in USDC.

Instead, Russell used investors’ funds for his personal expenses, in making Ponzi-like payments to current investors as well as entities tied to gambling activities.

Holding bad actors accountable

As said, US regulators including the CFTC have been very active in scrutinizing crypto activities in the market. In its recent litigation action against Russell, the commodities regulator has sought disgorgement, restitution, permanent trading and registration bans, and civil monetary policies into a permanent injunction against further violations of the Commodity Exchange Act (CEA) and CFTC regulations. commenting on the matter, CFTC’s Director of Enforcement Ian McGinley said:

As today’s action demonstrates, the CFTC is unrelenting in holding bad actors accountable and protecting retail investors from fraud in the digital asset space.

Interestingly, the US CFTC has also been in direct confrontation with the US SEC over the jurisdictional right of Ethereum. The SEC has been adamant that all crypto staking activities should come under its purview, however, the CFTC said that it has already been trading Ether derivatives on its platform over the past few years and thus it should come under its jurisdiction.

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