The US Commodity Futures Trading Commission (CFTC) this week charged 14 crypto exchanges with failing to register as Bitcoin-based futures commission merchants.
The entities violated the Commodity Exchange Act by offering binary options and other “win big or lose it all”-type products derived from the value of Bitcoin, currencies, and other commodities, according to the Commission.
Twelve of the exchanges charged claim to be based in New York. They include:
- Star FX Pro
The CFTC also charged UK-based platforms Climax Capital FX and Jasper, as well as Arkansas’ Digitalexchange24.com.
These companies claim to have been properly regulated but never actually registered as futures commission merchants, the CFTC alleges.
Yesterday, the markets watchdog filed a separate allegation against PrimeFX for making “false and misleading representations regarding trading forex and Bitcoin.”
Operators of PrimeFX stole or misappropriated “virtually all of the Prime FX customers’ funds,” according to the CFTC’s complaint.
Separately on September 28, the CFTC settled charges against Kraken for “illegally offering margined retail commodity transactions in digital assets, including Bitcoin, and failing to register as a futures commission merchant.”
Kraken agreed to pay a $1.25 million fine.
CFTC created to police bucket shops
The Commodity Exchange Act of 1936 created the CFTC to regulate futures trading in the U.S.
This was in response to bucket shops (gambling parlors) and speculators’ extraordinary impact on commodity prices.
Overall, the Act requires companies to register with the CFTC if they act as a futures exchange or futures commission merchant.
However, The Commodity Futures Trading Commission Act of 1974 amended the above Act to transfer the duties of the former Secretary of Agriculture and Commodity Exchange Commission to the CFTC.
The Commission mostly regulates the trading of derivatives (i.e. options, futures, and swaps). Thus, the vision of the CFTC is to set “the global standard for sound derivatives regulation.”
Crypto is a big task for CFTC
Crypto exchanges report over $120 billion in derivatives transactions every day.
Famous crypto actions by the CFTC include a massive charge against crypto derivatives exchange BitMEX, resulting in a $100 million settlement.
Although BitMEX settled, the charges by the CFTC and Department of Justice are ongoing.
Both the CFTC and the US Department of Justice also investigated Tether and Bitfinex.
Indeed, this week’s actions by the CFTC highlight the need for traders to perform due diligence when choosing an exchange.
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