An SEC suit filed in New York claims that a bitcoin exchange that uses blockchain technology to track transactions has broken the law by engaging in an unfair and deceptive trade practice.
In the suit filed Tuesday in the U.S. District Court for the Southern District of New York, the SEC alleges that Bitstamp Inc., a bitcoin trading platform, used “blockchain technology” to track trades by investors and then sold the information to an unnamed third party.
The SEC said Bitstamps trades “do not reflect the true value of the funds or the value of any property that was held by the Trust.”
The SEC also said Bitsts trade “is not a speculative investment.”
The SEC said that Bitsts practices violated the Fairness Doctrine, a law that prohibits unfair business practices that are motivated by speculative gains.
The agency said it would seek an injunction against Bitstams conduct.
Bitstamp was founded in February 2018 and was acquired by Coinbase in December of that year.
According to the SEC, Bitstamping’s trading platform provides a tool for investors to track and manage the value and movements of digital currencies.
The suit says Bitstamped did not provide an “effective mechanism” to manage funds held by investors.
Instead, the suit says, Bitsts platform allows investors to use the platform to send funds to a third party “to track the value, movement, and transaction of digital currency, or any other asset or instrument.”
The lawsuit alleges that investors who send funds via Bitstabs trading platform “are subject to the same risks and limitations that other investors face when trading in securities.”
The suit seeks a declaration that BitStamp violated the Act because Bitstaps platform is a “trade-in-service” that allows investors “to trade in securities with other investors” without having to use an intermediary.
The lawsuit also seeks a declaratory judgment that Bit Stamps conduct was “a substantial factor” in creating the “excessive profits” of Bitstaves business model.
The SEC did not immediately respond to a request for comment.
The U.K.-based firm, which is owned by the Dutch investment company Royal Dutch Shell, said in a statement on Tuesday that it was “aware of the allegations and is cooperating with the SEC.”