FalconX was hit with a $1.7 million fine for regulatory violations
The Commodity Futures Trading Commission (CFTC) has fined crypto trading firm FalconX a total of $1.7 million.
The CFTC said the penalty was related to the failure of the Seychelles-based brokerage platform to register as a Futures Commission Merchant (FCM).
In a press release, the Commodity Futures Trading Commission (CFTC) announced that the filing and termination of Falcon Labs is the first step against an unregistered crypto derivatives exchange provider.
In its filing, the CFTC alleged that FalconX illegally offered its crypto derivatives products to US customers between October 2021 and March 2023.
Acting as an intermediary, the platform bypasses KYC requirements and creates accounts and sub-accounts for customers in the US. Falcon Labs improved its customer identification procedures after the CFTC filed its complaint against Binance and its former CEO, Changpeng Zhao.
CFTC fines FalconX, cease and desist orders
Following this development, a cease-and-desist order was issued against Falcon Labs, prohibiting the supply of unregistered crypto-derived products to US persons.
As for penalties arising from the violations, FalconX will pay $1,179,008 in disgorgement and another $589,504 in civil fines. FalconX has reportedly collected $1,179,008 in net payouts.
According to the CFTC, the regulator imposed a reduced civil monetary penalty on the crypto company due to its “substantial cooperation” with the watchdog's enforcement division.
Ian McGinley, Director of the CFTC's Division of Enforcement, said: “Today's action shows that the CFTC will not hesitate to charge any entities—exchanges or intermediaries—that are offering digital asset products and services to their clients that require registration.
As well as prior efforts to improve customer identification, Falcon has cooperated with the Commission in its decision to seek a reduced civil fine against the CFTC.
In December 2023, the U.S. District Court for the Northern District of Illinois upheld the settlement Binance and Zhao agreed to with the CFTC.
According to reports, the former head of Binance was ordered to pay $150 million and the exchange $2.7 billion.
Binance reached a $4.3 billion settlement with US regulators in November.
