Regulation
FalconX fined $1.7 million for regulatory violations
- The Commodity Futures Trading Commission (CFTC) has fined crypto trading company FalconX a total of $1.7 million.
- The CFTC said the penalty is related to the Seychelles-based brokerage platform’s failure to register as a futures commission merchant (FCM).
In a Press releaseThe Commodity Futures Trading Commission (CFTC) notes that the filing and settlement of charges against Falcon Labs marks the first such action against a cryptographic derivatives exchange provider.
The CFTC alleged in its filing that FalconX illegally offered its crypto derivatives products to U.S. customers between October 2021 and March 2023.
Acting as an intermediary, the platform created accounts and sub-accounts for customers in the United States, bypassing KYC requirements. It’s only after the CFTC filed his complaint against Binance and former CEO Changpeng Zhao that Falcon Labs improved its customer identification processes.
CFTC Fines FalconX and Issues Cease and Desist Order
Following this development, a cease and desist order against Falcon Labs was put in place, which prohibits its offering of unregistered crypto derivatives products to U.S. persons.
In terms of penalties arising from the violations, FalconX will pay $1,179,008 in restitution and an additional $589,504 in civil penalties. FalconX reportedly collected $1,179,008 in net fees.
According to the CFTC, the regulator imposed a reduced civil monetary penalty against the crypto company due to its “substantial cooperation” with the watchdog’s Enforcement Division.
“Today’s action shows that the CFTC will not hesitate to charge any entity (exchange or intermediary) that provides customers with access to digital asset products and services that requires registration but does not have failed to register properly,” said Ian McGinley, director of the CFTC’s enforcement division.
In addition to proactive efforts to improve customer identification, Falcon has cooperated with the Commission – a factor in the CFTC’s decision to seek a reduction in the civil monetary penalty.
In December 2023, the U.S. District Court for the Northern District of Illinois approved the settlement Binance and Zhao agreed to with the CFTC.
As reported, the former head of Binance was ordered to pay $150 million and the exchange $2.7 billion.
Binance reached a historic $4.3 billion deal with US regulators in November.