On March 30, the CFTC announced that SDNY entered a consent order resolving the agency’s enforcement action against the operator of a digital asset exchange that allegedly permitted U.S.-based users to trade commodity derivatives without registering as a foreign board of trade. The CFTC’s complaint, originally filed in March 2024, alleged that the exchange operator had never registered with the CFTC in any capacity and had violated the Commodity Exchange Act (CEA) and CFTC regulations by permitting approximately 1.54 million U.S.-based users to access its electronic trading and order matching system from at least July 2019 through June 2023. According to the order, during that period, the exchange listed commodity derivative products, including quarterly delivery futures referencing various digital assets that qualify as commodities under the CEA, purportedly generating approximately $110 million in trading fees from U.S.-based users.
Under the consent order, the operator is permanently enjoined from permitting direct access to U.S. participants without a valid CFTC registration and must pay a $500,000 civil monetary penalty within 30 days. The CFTC did not seek disgorgement, citing the operator’s cooperation in the agency’s investigation and related proceedings, including a parallel criminal action in SDNY in which the operator was subject to a forfeiture order. The operator also agreed to cooperate fully with the CFTC in any current or future matter arising from the action and represented that it had taken remedial measures to enhance its compliance program, including identifying and offboarding U.S. registered users. The consent order resolved only the unregistered foreign board of trade charge (Count I). The remaining counts, alleging the operator (i) acted as an unregistered futures commission merchant in violation of Section 4d of the CEA; (ii) operated a facility for the trading of swaps without registering as a designated contract market or swap execution facility; (iii) failed to diligently supervise its activities; and (iv) failed to implement an effective customer identification program and BSA/AML procedures, were dismissed with prejudice.
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