CFTC Accuses Digitex of Shopping ‘Illegal’ Crypto Derivatives
The CFTC is seeking monetary penalties, to be determined by the court, and complete repayment of funds to all customers and investors impacted by the alleged violations
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key takeaways
- CFTC’s latest filing shows regulation by enforcement may be a trend here to stay
- Digitex’s founder is also alleged to have been involved in a ‘pump and dump’ scheme for the exchange’s native token
As industry participants closely monitor how US cryptocurrency regulation is shaping up, the CFTC has yet another digital assets derivatives shop on its enforcement radar.
The watchdog on Friday filed a complaint against Adam Todd, founder of futures and derivatives trading platform Digitex.
According to the complaint, filed in the Southern District of Florida, Todd “owned, built, and operated an illegal digital asset derivatives trading platform.”
Todd also “attempted to manipulate the price of DGTX,” the exchange’s native token, by trying to “pump” its price on third-party exchanges, the CFTC alleges. DGTX, now trading at a fraction of a cent, is down about 8% in the past hour, per Coinbase.
The CFTC is seeking monetary penalties, to be determined by a judge — plus complete repayment of funds to all customers and investors impacted by the alleged violations. The regulator also hopes a judge will rule that the exchange must shut down.
“Unless restrained and enjoined by this Court, Defendants are likely to continue to engage in the acts and practices alleged in this complaint and similar acts and practices, as more fully described below,” the complaint said.
Digitex’s website appeared to be down Friday following the filing. The exchange did not immediately respond to a request for comment.
The filing comes shortly after the CFTC settled its charges against Ooki DAO predecessor bZeroX. According to the regulator, bZeroX, as well as founders Tom Bean and Kyle Kistner, have been ordered to pay $250,000 for their roles in deploying, marketing and soliciting customers to undertake transactions that did not occur on a designated market contract.
Ooki DAO now faces similar charges, the CFTC said, as the DAO is allegedly operating the same software as bZeroX. The regulator is seeking restitution, disgorgement, civil monetary penalties, trading and registration bans as well as injunctions against further violations.
The enforcement actions come amid an uncertain regulatory environment for cryptocurrencies, made increasingly murky by the continued jurisdictional battle between regulators.
Earlier this month, SEC Chair Gary Gensler said the CFTC can have authority over bitcoin and other unspecified “non-security tokens.” Gensler’s team can take the rest of the industry, he suggested, but the decision ultimately rests with Congress.
“The two agencies work very collaboratively,” Valerie Szczepanik, director of the Strategic Hub for Innovation and Financial Technology (FinHub) office at the SEC, said during a panel discussion at the Digital Asset Summit in New York earlier in September. “From my perspective, the agencies really want to get it right. It’s all about investor protection and market integrity and our two agencies want to cover the landscape so those goals are achieved.”
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