The Commodity Futures Trading Commission affirmed its ability to regulate cryptocurrencies as commodities, after an alleged scammer gave up a legal fight against the agency on Thursday.
The commodities regulator charged Patrick McDonnell - doing business as CabbageTech and Coin Drop - with fraud and misappropriation of funds earlier this year. According to court documents, McDonnell allegedly marketed himself as a trading expert, accepted customers' bitcoin and litecoin, then absconded with the funds without providing them with trading advice.
On Thursday, McDonnell sent a letter to U.S. District Court chief magistrate Roanne Manne of the Eastern District of New York saying he does not have the resources or the ability to continue fighting the charges brought against him.
In his letter, he wrote:
"I do not wish to put my burdens on the court and respectfully decline to answer Plaintiff complaint. I understand that the case will be placed into default and am not admitting guilt in any way. My personal finances are 100 percent exhausted which in turn will leave my family destitute if I miss anymore days/time from work."
In his note Wednesday, the defendant called the allegations against him "fictitious" and "crafted lies."
The case could set a legal precedent for the treatment of cryptocurrencies. A U.S. District Court judge ruled in March that the CFTC could proceed with the suit, affirming the regulator's stance - first articulated in 2015 - that cryptocurrencies are commodities. Under U.S. law, any good can in principle be treated as a commodity, except for onions.
U.S. federal law treats cryptocurrencies in different ways depending on the context. The Internal Revenue Service (IRS) treats them as property for tax-collecting purposes. The Securities and Exchange Commission (SEC) has said that certain tokens marketed through ICOs qualify as securities. The Financial Crimes Enforcement Network (FinCEN) treats businesses that handle cryptocurrencies as money transmitters, meaning they must comply with know-your-customer and anti-money laundering (KYC/AML) rules.
Read the full letter below:
CFTC image via Shutterstock.