CFTC Takes Action Against Falcon Labs in Crackdown
NAIROBI (Coinchapter.com) – Falcon Labs, Ltd., a Seychelles-based entity, faced a crackdown this week by the United States Commodity Futures Trading Commission (CFTC) for its failure to register as a futures commission merchant (FCM). This is the first time the CFTC has taken action against an unregistered intermediary that facilitated access to digital asset exchanges for U.S. customers, which is a violation of CFTC rules.
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Cease and Desist Order and Penalties Imposed
The CFTC’s order mandates that Falcon Labs immediately stop operating as an unregistered FCM. The company had previously facilitated U.S. individuals’ access to digital asset derivatives trading platforms. In addition, Falcon Labs is required to pay $1,179,008 in disgorgement and a civil monetary penalty of $589,504, totaling over $1.7 million. The reduced civil penalty reflects Falcon Labs’ significant cooperation with the CFTC’s Division of Enforcement.
Ian McGinley, the CFTC’s Director of Enforcement, highlighted the agency’s dedication to holding both exchanges and intermediaries accountable for disregarding registration requirements.
Falcon Labs’ Violation and Cooperation
According to the order, Falcon Labs solicited and accepted orders for digital asset derivatives from U.S. customers between October 2021 and March 2023. The company acted as an intermediary, facilitating customer trading on various digital asset exchanges, including institutional clients in the U.S.
Falcon Labs demonstrated cooperation with the CFTC’s Division of Enforcement by increasing transparency and providing identifying information voluntarily. Specifically, the company enhanced its controls for determining the location of its customers after the CFTC filed a complaint against Binance and its former CEO, Changpeng Zhao.
The CFTC’s crackdown on Falcon Labs serves as a warning to other digital asset intermediaries operating unlawfully. The regulator aims to encourage such entities to step forward and report their activities to the agency. This emphasizes the potential for reduced penalties in exchange for cooperation and remedial actions.
Overall, the digital asset landscape is continuously evolving. The CFTC remains steadfast in its commitment to ensuring regulatory compliance and upholding market integrity. This enforcement action serves as a reminder that all participants, including exchanges and intermediaries, must adhere to the agency’s registration requirements and rules.