Home / Crypto Currency / Federal Judge Wavers As CFTC Seeks Injunction in Crypto Fraud Case

Federal Judge Wavers As CFTC Seeks Injunction in Crypto Fraud Case

The Commodity Futures Trading Commission (CFTC) is wrapping up its case against CabbageTech owner and accused crypto-fraudster Patrick McDonnell – but the hearings in New York this week have been anything but simple.

The U.S. regulator is seeking a permanent injunction against McDonnell, who allegedly defrauded investors out of nearly $500,000, according to a lawsuit the CFTC filed in January.

The case has already seen notable developments on the regulatory front, including a ruling from March that backed the agency's argument that cryptocurrencies are a form of commodity.

While a ruling on the permanent injunction was anticipated on Wednesday in New York, U.S. District Judge Jack Weinstein for the Eastern District of New York pushed closing arguments to Thursday – largely due to the continued absence of McDonnell, who appeared in court Monday but did not on either subsequent day.

Indeed, Weinstein expressed concern about the case's conclusion, stating that the proceedings were "in effect…a criminal case" at multiple points during the first three days.

At the heart of the issue is the burden of proof. Civil suits must be proven by a "preponderance of evidence" but not "beyond a reasonable doubt." A preponderance is a lighter burden of proof than would be seen in a criminal case, he noted.

Weinstein further noted that McDonnell could object to the case against him based on the burden of proof. He also added that because McDonnell is defending himself, he might be forced to give up his Fifth Amendment rights during testimony.

As Weinstein explained on Wednesday:

"I continue to be concerned about a very basic [issue] … the right of the defendant to have a jury. He's faced with the Fifth Amendment problem because [he is representing himself]. It is disturbing that a crime – and it is a crime, what's been [discussed] – is proved by a preponderance [of evidence] and not a reasonable doubt."

Plaintiff absence

McDonnell hasn't been present since he lost a bid to have the suit dismissed on jurisdictional grounds.

And rather than having him testify, the CFTC showed clips of a video deposition recorded last month in connection with the case.

According to Weinstein, the way the hearing played out actually opens the door to a new motion to dismiss, through which he could claim that the evidence put forward against him is insufficient for a criminal proceeding.

This is something that the judge mentioned before during the proceedings.

On Monday, Weinstein told McDonnell to "make a motion that the burden of proof is beyond a reasonable doubt because of the nature of the charges and the fact that this evidence will be used against you should you be prosecuted for a crime based on these facts alleged and that the evidence that you are forced to give in order to defend yourself will be denied."

While he then denied the motion, he told McDonnell that "you may have it for purposes of appeal."

Closing arguments

Weinstein indicated on Wednesday that he wants to give McDonnell yet another chance to argue in his own defense.

"I'm concerned about the actions of the defendant but I didn't want to hold him in contempt," he said.

He told the lawyers representing the CFTC to ensure McDonnell knows he is welcome to appear in court on Thursday to make a closing argument as well as the possible motion to dismiss.

It is unclear at this point whether McDonnell will do so.

In a letter to the court on Wednesday, he wrote that "my life is being lived hand-to-pocket sir with [this] case leaving me financially destitute with all debtors extended beyond extension."

"For the sake of pure minute-to-minute survival, I must continue to be removed from proceeding but will give it very serious consideration if current financial conditions change," he wrote.

Image Credit: Mark Van Scyoc / Shutterstock.com

The leader in blockchain news, 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.

Read more

Check Also

What is the COINiD Cold Storage Solution?

Cryptocurrency users all over the world are always looking for ways to keep their funds safe and secure. That is a pretty big challenge, especially when buying a hardware wallet is not an option. COINiD, a new software-based cold storage solution, may offer a viable alternative in this department moving forward. The COINiD Concept Explained For those who are unfamiliar with COINiD, it is a software solution providing cryptocurrency cold storage solutions to Android and iOS users. This wallet solution is completely open sourced first and foremost, which means anyone can review the code to determine whether or not this solution is worth exploring. How Does it Work? What most people are interested in is how the COINiD solution works and what it has to offer. It is designed to support cryptocurrencies, with support for Bitcoin available at this time. Other currencies may be added moving forward, as the site makes mention of Litecoin, Ethereum, Monero, Dash, and a few others. The functionality provided by COINiD includes full control over private keys, offline address validation, SegWit support, biometric authentication, and so forth. The biometric authentication supports fingerprint scanning on Android and FaceID scans for iOS devices. There is still more functionality waiting to be added moving forward, although the current set of features is rather compelling as well. The COINiD solution exists of two different applications to provide additional security. The COINiD Vault stores private key information in a completely offline manner and signs transactions. The COINiD Wallet is a regular wallet solution to spend and receive funds. It also communicates with COINiD Vault for transaction signing. As such, users can benefit from additional security and give one of their old Android or iOS devices a second lease on life. Is it a Viable Solution? For those cryptocurrency users who do not feel comfortable using anything other than mobile devices to keep their holdings safe, this option is worth exploring. Most people rely on hardware wallets, as they are more secure in general. However, the COINiD concept certainly has plenty of merit, assuming one has a spare device to “sacrifice” for this specific purpose. Having multiple options to store cryptocurrency is never a bad idea, though. The post What is the COINiD Cold Storage Solution? appeared first on NullTX.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Disclaimer: Trading in bitcoins or other digital currencies carries a high level of risk and can result in the total loss of the invested capital. theonlinetech.org does not provide investment advice, but only reflects its own opinion. Please ensure that if you trade or invest in bitcoins or other digital currencies (for example, investing in cloud mining services) you fully understand the risks involved! Please also note that some external links are affiliate links.