CFTC Files Complaint Against Digitex Over Digital Asset Derivatives Trading Platform

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The Commodity Futures Trading Commission (CFTC) filed suit against Adam Todd, Digitex, LLC, Digitex Limited, Digitex Software Limited and Digitex Futures last Friday in the Southern District of Florida. The injunction and equitable relief complaint alleges that beginning in late 2017, defendant Todd “owned, built and operated an illegal digital asset derivatives trading platform through a joint venture of persons morals”, which included the other defendants, who are collectively referred to as Digitex. The complaint alleges that Todd and Digitex’s misconduct violated the Commodity Exchange Act (CEA) and other commission regulations.

The web-based exchange “accepted client funds as margin and matched client orders for derivatives of digital assets such as bitcoin futures and ether futures”. Digitex users were also able to trade with up to 100 to 1 leverage.

Due to the nature of their operations, defendants Todd and Digitex were required by CFTC requirements to register either as a designated contract market or as a foreign chamber of commerce. They were also required to register as forward brokers and to comply with the provisions of the Bank Secrecy Act (BSA). Despite all these requirements, the defendants are still not registered with the Commission and must still comply with the necessary provisions of the BSA.

Digitex only allowed commercial activity on its website using a native currency called DGTX tokens. The Complaint alleges that Defendant Todd committed further violations when he “attempted to manipulate the price of DGTX by engaging in non-economic business activities.”

The complaint cites violations for attempted manipulation of the DGTX price, fraud and manipulation by a deceptive device or artifice, execution of futures transactions on an unregistered chamber of commerce, failure to register as a futures broker, failure to put implementation of a customer information program, and non-application of know-your-customer and anti-money laundering procedures.

Plaintiff is seeking a favorable judgment on each count, a permanent injunction preventing further violations, restitution, civil monetary penalties, court costs, a jury trial, and more.

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