WASHINGTON D.C. – The Commodity Futures Trading Commission (CFTC) has levied penalties against three California and North Carolina-based companies operating in the decentralized finance (DeFi) space for multiple violations of the Commodity Exchange Act (CEA) and CFTC regulations. Opyn, Inc., ZeroEx, Inc., and Deridex, Inc. were all issued orders simultaneously, resulting in settled charges announced today.
The CFTC alleges that Deridex and Opyn failed to register as a swap execution facility (SEF) or designated contract market (DCM), and also neglected to register as a futures commission merchant (FCM). Further, both companies are accused of failing to implement a customer identification program as mandated by Bank Secrecy Act compliance for FCMs. ZeroEx, alongside Opyn and Deridex, is charged with illegally offering leveraged and margined retail commodity transactions in digital assets.
According to the CFTC, these companies utilized blockchain-based software and smart contracts to create platforms allowing users to trade digital assets in what they presented as a decentralized environment. The agency asserts that these platforms functioned similarly to traditional trading platforms, but without adhering to regulatory requirements.
As part of the settlements, Opyn will pay a $250,000 civil monetary penalty, ZeroEx will pay $200,000, and Deridex will pay $100,000. All three companies are required to cease and desist from further violations of the CEA and CFTC regulations.
“Somewhere along the way, DeFi operators got the idea that unlawful transactions become lawful when facilitated by smart contracts,” stated Ian McGinley, Director of Enforcement at the CFTC. “They do not. The DeFi space may be novel, complex, and evolving, but the Division of Enforcement will continue to evolve with it and aggressively pursue those who operate unregistered platforms that allow U.S. persons to trade digital asset derivatives.”
The CFTC’s investigation revealed that Opyn developed the Opyn Protocol, offering trading of a digital asset derivative token called oSQTH. This token’s value was tied to Squeeth, an index tracking the price of ether squared relative to USDC. The agency contends oSQTH tokens constitute swaps and leveraged retail commodity transactions, requiring registration under the CEA. Opyn is accused of operating an unregistered trading facility and engaging in FCM activities without proper registration, including soliciting users to deposit assets into smart contracts for leveraged trading. Opyn also allegedly failed to implement required customer identification protocols.
While Opyn reportedly attempted to block U.S. users through IP address restrictions, the CFTC found these measures insufficient to prevent access to the Opyn Protocol by American investors.
Source: CFTC.gov
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