A US court has ordered digital asset derivatives platform Digitex CEO Adam Todd to pay more than $15 million in disgorgement and civil monetary penalty for the multiple violations of the commodity exchange act.
In a press release on Wednesday, July 12, the Commodity Futures Trading Commission (CFTC) said that Adam Todd operated an unregistered digital asset derivatives exchange, Digitex Futures, and used his other four companies to manipulate the price of the exchange’s native token DGTX.
Federal Court Orders Digital Asset Derivatives Platform and Florida Resident to Pay More than $15 Million for Multiple Violations of the Commodity Exchange Act. Learn more: https://t.co/AprX50QcGf
— CFTC (@CFTC) July 12, 2023
The CFTC Complaint VS Digitex
The CFTC filed a complaint against Adam Todd in the US District Court for the Southern District of Florida in October 2022. According to the complaint, from May 2020 to May 2022, Todd and the four companies he controlled operated an unregistered exchange under the trade name “Digitex Futures” from an office in Florida. These companies are Digitex LLC, Digitex Limited, Digitex Software Limited, and Blockster Holdings Limited Corporation.
The derivatives exchange sought US customers’ participation but without any CFTC registration. Moreover, the exchange failed to implement a customer information program, know-your-customer (KYC) policies, and anti-money laundering procedures.
In addition to the alleged registration and regulatory violations, the most pressed-upon problem at Digitex was the attempted manipulation of native DGTX token prices during the pre-launch days of the exchange.
Digitex touted itself as a commission-free futures trading exchange that required users to deposit DGTX into their accounts to margin their trading on the futures exchange. Per the complaint, it offered trades with leverage of up to 100 to 1.
Between May and August 2020, Aam Todd engaged himself in various activities to “pump” the price of DGTX. According to CFTC:
“Todd allegedly accomplished his “pumping” activity by, among other things, deploying a “bot” on third-party exchanges he designed to be “always buying more than it was selling” and by filling large over-the-counter orders to purchase DGTX on third-party exchanges rather than out of the Digitex Futures treasury.”
The US Court for the Southern District of Florida has ordered the defendant Adam Todd to pay $3,912,220 in disgorgement and a $11,736,660 civil monetary penalty. The court order also bars “Todd and his companies from trading in any CFTC-regulated markets or registering with the CFTC.”
Along with the US SEC, the CFTC has also been very active in its enforcement actions on crypto sectors. The commodities regulator is currently involved in many lawsuits against crypto firms and their executives. The most notable is the lawsuit against Binance and its CEO CZ, over the willful evasion of federal law and the operation of an illegal digital asset derivatives exchange.
