CFTC fines crypto firm $250K for illegal crypto trading

CFTC’s penalty against bZeroX, its founders and successor firm Ooki DAO relate to illegal offering of off-exchange crypto trading and for breaching the Bank Secrecy Act.
Ooki DAO operated renamed bZeroX protocol.
Regulator says actions are aimed at protecting US retail investors amid crypto’s rapidly growing market.

The Commodity Futures Trading Commission (CFTC) imposed a $250,000 fine on crypto lending platform bZeroX and issued it a cease-and-desist order against it for illegal operations that violated the Commodity Exchange Act, CFTC regulations and the Bank Secrecy Act.

The penalty and orders were also filed and settled against bZeroX founders Tom Bean and Kyle Kistner, the agency said in a press release.

“These actions are part of the CFTC’s broader efforts to protect US customers in a rapidly evolving decentralised finance environment,” Gretchen Lowe, the acting Director of Enforcement at CFTC said.

bZeroX violated registration rules 

According to the regulator, the crypto firm operated without the requisite registrations and illegally offered digital assets-related leveraged and margined commodity transactions. As such, the platform had offered services that can only be undertaken by a properly registered futures commission merchant (FCM).

“Margined, leveraged, or financed digital asset trading offered to retail U.S. customers must occur on properly registered and regulated exchanges in accordance with all applicable laws and regulations.  These requirements apply equally to entities with more traditional business structures as well as to DAOs,” Lowe added.

CFTC also accused bZeroX of violating the Bank Secrecy Act by not adopting and implementing a KYC programme as required of FCMs.

The complaints were also levelled against Ooki DAO, the decentralised autonomous organisation that succeeded bZeroX.

ICYMI: The CFTC imposed a $250,000 penalty against bZeroX, LLC and its founders and charged its successor Ooki DAO for offering illegal, off-exchange digital-asset trading, registration violations, and failing to comply with the Bank Secrecy Act. https://t.co/dG7IeKKJtn

— CFTC (@CFTC) September 23, 2022

According to CFTC, the orders related to the development, deployment and marketing of the blockchain-based software bZx Protocol – from around 1 June, 2019 to 23 August, 2021 and when it changed to Ooki DAO.

The regulator thus said it had filed a civil enforcement action against Ooki DAO, seeking a trading ban, disgorgement, monetary penalties and injunctions against it.