A federal judge has postponed any decision on a crypto fraud case brought by the Commodity Futures Trading Commission (CFTC) against alleged scammer Patrick McDonnell.
Judge Jack Weinstein of the Eastern District of New York wrote in a court order Thursday that the CFTC must file "proposed findings of fact, conclusions of law, and [a] post-trial brief" by July 27.
In particular, Weinstein wants the commission's lawyers to support how they calculated damages and civil monetary penalties. Once that is filed, McDonnell will have two weeks to respond. A hearing on the matter will occur on Aug. 23.
McDonnell is accused of defrauding investors of $457,393 through a crypto trading advisory service called Coin Drop Markets and the affiliated CabbageTech Corp, according to charges filed by the CFTC in January.
During the course of the hearing, multiple witnesses claimed that they had sent McDonnell thousands of dollars in both fiat and crypto, but did not see any promised returns.
The case has already resulted in one landmark ruling that cryptocurrencies are commodities, and therefore may fall under the jurisdiction of the CFTC. However, in his preliminary injunction, Weinstein raised questions about the agency's jurisdiction over the case, which the agency sought to answer during this week's hearing.
And, despite the charges, McDonnell's defense focused more on whether the CFTC has the jurisdiction to regulate his business than on refuting its arguments. Indeed, on Monday he argued that the statute being cited was not created for "just straight fraud. It was created for fraud with market manipulation, specifically."
He told CoinDesk that he did not want to be distracted by the charges, preferring to look at the jurisdictional question.
The ruling has already been cited in another case earlier this year, when lawyers for Maksim Zaslavskiy claimed that the U.S. government can't claim cryptocurrencies are commodities and securities at the same time. They pointed to Weinstein's ruling as evidence that a cryptocurrency is a commodity, not a security.
Zaslavisky is being sued for securities law violations by the U.S. Securities and Exchange Commission. His case will proceed to a jury trial early next year, when the court will decide whether or not his companies – RECoin and DRCW – were selling unregistered securities.
New York courthouse image by Shutterstock
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.