Crypto Exchange Digitex Ordered to Pay $16M Following CFTC Charges

A US court has ordered Adam Todd to pay approximately $15.6 million for operating an unregistered crypto exchange, Digitex Futures. The amount includes $11.7 million in civil monetary penalty and $3.9 million as the return of illicit profit.

Court Slams Trading Ban on Digitex Founder

Judge Roy K. Altman of the US District Court for the Southern District of Florida delivered the judgement on July 5, the Commodity Futures Trading Commission (CFTC) announced today (Wednesday). Judge Altman also banned Todd and four companies he controlled from registering with the CFTC or engaging in any trading activities overseen by the US derivatives regulator.

The CFTC, in September last year, charged Todd and his digital asset derivatives trading firm, alleging that the exchange operated an unauthorized trading platform from a Florida-based office between May 2020 and May 2022. The derivatives watchdog also accused the Digitex Founder of attempting to manipulate the price of the exchange’s native token, DGTX. Further, it considers the token to be a 'commodity’ in interstate commerce.

“According to the complaint, throughout the summer of 2020 — the time when the exchange was readying for ‘launch’ — Todd repeatedly attempted to, in his words, ‘pump’ the price of DGTX as reported by third-party exchange,” the CFTC explained.

Furthermore, the CFTC alleged that Digitex failed to establish a customer information program, know-your-customer policies and anti-money laundering procedures.

“This case demonstrates that regardless of the technology used, the CFTC will aggressively use its well-established authority to ensure entities are lawfully registered and to address the manipulation of commodities in interstate commerce,” noted Ian McGinley, the Director of CFTC’s Division of Enforcement.

Court Orders LBRY to Pay $111K

Meanwhile, yesterday, a district court in New Hampshire ordered LBRY, a blockchain-based file-sharing and payment network, to pay $111,614 in civil penalties for operating without registration. The US Securities and Exchange Commission (SEC) disclosed this in a statement released today.

The securities regulator sued LBRY in March 2021, alleging that the firm was running an unauthorized platform and offering unregistered securities. Initially, the SEC asked the court to slam a penalty of $22 million on LBRY for allegedly pooling $11 million from its unauthorized activities. However, in May, it requested the court to reduce the amount to $111,614 because the firm was “defunct, ceasing operations, and without the funds to pay a larger fine.”

“In November 2022, the court granted summary judgment in favour of the SEC, holding that LBRY offered and sold LBC in violation of Section 5 of the Securities Act of 1933, the registration provisions of the federal securities laws,” the SEC explained in the statement. “The court rejected LBRY's claim that it lacked fair notice of the application of those laws to its offer and sale.”

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