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The Commodity Futures Trading Commission (CFTC) slapped Seychelles-based crypto prime brokerage Falcon Labs with $1.77M in fines and a cease and desist order for inappropriately facilitating access to digital asset exchanges.
What’s the scoop?
- Unregistered Intermediary: From October 2021 until at least March 27, 2023, the CFTC alleges that Falcon solicited and accepted digital asset derivatives orders from customers located in the United States.
- Sub-Account Usage: Falcon is alleged to have established sub-accounts and conducted derivatives transactions for the benefit of U.S. users on exchanges that they were prohibited to access, like Binance.
- No Admission of Guilt: Falcon does not admit to or deny the CFTC’s findings, but has been ordered to pay requisite penalties and will voluntarily implement improved controls to withhold their services from U.S. nationals and other restricted users.
Bankless Take:
While Falcon Labs chose to settle with the CFTC, meaning this case will neither go to trial nor establish binding legal precedent, the suit provides further evidence that the U.S. regulatory system will continue to force crypto compliance with existing (and arguably antiquated) legal provisions as it attempts to gain jurisdiction over the industry through enforcement action.
CFTC following SEC in building a body of widely applicable crypto precedent. Today CFTC fined Falcon Labs for failing to register as a broker w/r/t offering customers access to subaccounts in its name at crypto derivatives exchanges so they could trade directly via the exchanges.
— Mike Selig (@MikeSeligEsq) May 13, 2024
