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The Commodities Futures Trading Commission has filed a suit against Adam Todd, the founder of crypto futures exchange Digitex. According to court documents, the commission alleges that Digitex has been operating as an illegal trading platform.
Digitex in Violation of Commodity Exchange Act
The CFTC filed its complaint on Friday, September 30 in the Southern District of Florida. In their complaint, the agency noted that Todd and Digitex by extension are in violation of the Commodity Exchange Act (CEA). This is federal legislation in the United States that regulates the trading of commodity futures in the markets.
However, the filing claims that Digitex has never registered under the regulatory watchdog in any form.
Part of the commission’s charges was that the exchange also did not have proper know-your-customer (KYC) procedures and a customer information program (CIP). Both measures, imposed by the Bank Secrecy Act are supposed to help ward off money laundering. Failure to comply could result in up to 5 years of jail time.
Additionally, the CFTC pointed out that Digitex has distributed its services through various entities. These reportedly include Digitex LLC, Digitex Software Limited, Digitex Limited, and Blockster Holdings Limited Corp. Digitex founder Todd is facing charges alleging that he attempted to influence the value of the company’s native coin, DGTX. According to reports, he attempted to drive up the token’s price via these third-party services.
Hence, the Commission is looking to impose punitive damages as well as sanctions against Todd and Digitex. Shortly after news of the suit went public, DGTX saw its price fall 12% according to CoinGecko data.
CFTC Sues Company Behind bZx Protocol
Interestingly, the Digitex lawsuit is the CFTC’s latest issue with a crypto-focused entity. Over the past few months, in the wake of the Terra crash regulatory scrutiny in the crypto industry has been heightened. South Korean prosecutors are still on the hunt for TFL co-founder Do-Kwon who is reportedly in hiding.
A few days ago the CFTC took action against financial company bZeroX with a fine for violating the Commodity Exchange Act. Founders Tom Bean and Kyle Kistner received a fine for reportedly providing leveraged and margin trading of digital assets. The CFTC also slammed bZeroX successor Ooki DAO with a lawsuit for similar violations.
Interestingly, the agency’s Chairman Rostin Behnam claims most of its recent regulation has been prompted by the crypto community. Behmann also recently shared his thoughts on how CFTC regulation could aid BTC.
According to him, the king crypto could see its value double under CFTC regulation. He explained that the majority of institutional investors have not adopted Bitcoin due to the token’s lack of proper regulation.