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ARTICLE · 04 OCTOBER 2021

Digital Asset Exchange Settles CFTC Charges For Illegal Off-Exchange Trading

Hogan Lovells Cadwalader
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A company (the "Company") operating a digital asset exchange settled CFTC charges for (i) engaging in illegal off-exchange trading of retail commodity transactions with U.S. customers that were not eligible contract participants ("ECPs"), and (ii) failing to register as a futures commission merchant.

United StatesFinance and Banking
Hogan Lovells Cadwalader
Hogan Lovells Cadwalader
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A company (the "Company") operating a digital asset exchange settled CFTC charges for (i) engaging in illegal off-exchange trading of retail commodity transactions with U.S. customers that were not eligible contract participants ("ECPs"), and (ii) failing to register as a futures commission merchant ("FCM").

According to the CFTC Order, from June 2020 to July 21, 2021, the Company enabled U.S. customers that were not ECPs to engage in retail commodity transactions involving digital assets, including Bitcoin. The Company facilitated the execution of some of these transactions by providing margin extensions to its customers, which were used to "buy or sell digital assets on the exchange on a leveraged basis." The Order notes that the Company acted as the sole margin provider for either one or both sides of such transactions, and maintained custody of all assets "purchased using margin for the duration of a customer's open margined position."

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