The CFTC, or the United States Commodity Futures Trading Commission, recently announced that it had taken legal action and reached a settlement with Falcon Labs, a cryptocurrency brokerage firm. The firm, owned by FalconX, was found to have violated regulations by not registering as a futures commission merchant and by facilitating access to digital asset exchanges without proper authorization. As part of the settlement, FalconX has agreed to stop offering services to U.S. residents and pay a total of $1.8 million in disgorgement and penalties.
Enforcement Director Ian McGinley emphasized that the CFTC will not tolerate digital asset exchanges that fail to comply with regulations and maintain integrity in the derivatives markets. This marks the first time that the CFTC has charged an intermediary for inappropriately facilitating access to these exchanges.
The settlement alleges that FalconX facilitated orders for digital asset derivatives for U.S. users between October 2021 and March 2023 through its “Edge” product. The CFTC noted that the brokerage firm has made improvements to its practices after facing legal action from Binance and its former CEO Changpeng Zhao. In that case, the CFTC and other U.S. authorities reached a settlement of $4.3 billion in November 203.
FalconX received a lower penalty due to its substantial cooperation and remediation efforts, as acknowledged by the regulator. It is important to note that the firm did not admit or deny any of the regulator’s findings or conclusions.
CFTC Chair Rostin Behnam has previously stated that crypto firms operating in the U.S. can expect more enforcement actions within the next two years. In 2023 alone, the commodities regulator filed 47 enforcement actions against crypto firms.
As enforcement agencies in the U.S. intensify their efforts to combat crypto-related crime, it is clear that stricter regulations and compliance standards are being enforced in the cryptocurrency industry.