Articles Tagged with CEA

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The CFTC’s recent enforcement against Bitfinex’s financed trading activities demonstrates the Commission’s increasing interest in virtual currency and digital assets.

The U.S. Commodity Futures Trading Commission (CFTC) is further expanding its oversight of virtual currency exchanges and digital assets in general. On June 2, 2016, Bitfinex (a Hong Kong-based bitcoin and cryptocurrency exchange) settled with the CFTC following an investigation into its trading activities. The CFTC charged that the exchange offered illegal off-exchange financed retail commodity transactions, and that Bitfinex had failed to register as a Futures Commission Merchant (FCM) as required by law. As a result, Bitfinex will pay $75,000 in civil penalties.

This action is more evidence of the CFTC’s interest in not only bitcoins, but any digital asset that can be considered a commodity. Transactions in decentralized digital tokens (such as Ether, DAO Tokens, Safecoins, Factoids, and Bitcrystals) are becoming more common, and so is regulatory interest.

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The U.S. Commodity Futures Trading Commission (CFTC) announced that on December 16, 2014, the U.S. District Court for the Northern District of Illinois entered a Consent Order for permanent injunction against AlphaMetrix, LLC (AlphaMetrix), a Chicago-based Commodity Pool Operator (CPO) and Commodity Trading Advisor (CTA), and its parent company AlphaMetrix Group, LLC (AlphaMetrix Group). The Order requires AlphaMetrix to pay restitution of $2.8 million and a civil monetary penalty of $2.8 million and requires AlphaMetrix Group to pay disgorgement of $2.8 million. The Order also prohibits AlphaMetrix from further violating anti-fraud provisions of the Commodity Exchange Act (CEA), as charged.

The Order stems from CFTC charges that AlphaMetrix failed to pay at least $2.8 million in rebates owed to some of its commodity pool participants by investing the rebate funds in the pools and instead transferred the funds to its parent company, which had no entitlement to the funds. Nevertheless, AlphaMetrix sent these pool participants account statements that included the rebate funds as if they had been reinvested in the pools, even though they were not (see CFTC Press Release 6767-13, November 6, 2013).

A civil action filed by the court-appointed receiver remains pending in the U.S. District Court for the Northern District of Illinois. In that action, the receiver seeks to recover funds from former officers of AlphaMetrix and AlphaMetrix Group.

The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets.