Digital Currency Exchange Bitfinex to Pay 75k Fine to CFTC

Hong Kong-based digital currency exchange Bitfinex (BFXNA Inc.) will be paying a $75,000 fine to the United States Commodity Futures Trading Commission (CFTC). According to the order, Bitfinex fully cooperated with CFTC investigators and submitted the 75k Offer of Settlement, which the CFTC has accepted.

The order states that Bitfinex contacted the CFTC in September of last year to seek guidance on how it could structure its business to not be in violation of any US laws.

“During the course of the investigation conducted by the Division of Enforcement, Bitfinex consistently responded to requests for information fully and quickly, both in writing and via oral presentations.”

The CFTC complaint alleges that Bitfinex was not registered with the CFTC and that its margin trading facilities were not compliant with several statutes in the U.S. Commodity Exchange Act. More specifically, margin traders on Bitfinex did not have access to the digital currencies that they “borrowed” to trade on the exchange, and that Bitfinex was holding the private keys to the borrowed funds:

The summary of the complaint reads:

“During the Relevant Period, Bitfinex did not actually deliver bitcoins purchases on a leveraged, margined, or financed basis to the traders who purchased them within the meaning of Section 2(c)(2)(D)(ii)(III)(aa) of the Act. Instead, Bitfinex held the purchased bitcoins in bitcoin deposit wallets that it owned and controlled. Therefore, Bitfinex enraged in illegal, off-exchange commodity transactions and failed to register as a futures commission merchant, in violation of Sections 4(a) and 4d of the Act, 7 U.S.C.”

The exchange released a statement saying that “significant changes to the way in which U.S. customers engage in financed trading on Bitfinex” were made, and that Bitfniex will continue to serve US traders.

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