US Commodities Regulator CFTC Slaps Crypto Firm With $250,000 Fine, Issues Cease-and-Desist Order

The Commodities Futures Trading Commission (CTFC) is hitting a crypto firm with a $250,000 fine and a cease-and-desist order.

According to a new press release, the commodities regulator is reprimanding crypto lending platform bZeroX and its founders Tom Bean and Kyle Kistner for allegedly illegally offering leveraged and margined positions.

The CTFC also says that the company and its founders were also caught “engaging in activities only registered futures commission merchants (FCM) can perform” and “failing to adopt a customer identification program as part of a Bank Secrecy Act compliance program, as required of FCMs.”

The CTFC also simultaneously filed a federal civil enforcement action against Ooki DAO, the decentralized autonomous organization that succeeded bZeroX, for violating the same laws.

“The order finds, and the complaint alleges, from approximately June 1, 2019, to approximately August 23, 2021, the respondents designed, deployed, marketed, and made solicitations concerning a blockchain-based software protocol that accepted orders for and facilitated margined and leveraged retail commodity transactions (functioning similarly to a trading platform)…

These transactions were unlawful because they were required to take place on a designated contract market, but did not…

As the order finds and as alleged in the complaint, on approximately August 23, 2021, bZeroX transferred control of the bZx Protocol to the bZx DAO, which subsequently renamed itself and is currently doing business as the Ooki DAO.”

According to the CTFC, bZeroX’s founders thought they could evade regulations by transferring control over to the Ooki DAO and even went as far as to tout to their customers as such.

As stated by Gretchen Lowe, Acting Director of Enforcement for the CTFC in the press release,

“These actions are part of the CFTC’s broader efforts to protect US customers in a rapidly evolving decentralized finance environment. Margined, leveraged, or financed digital asset trading offered to retail US 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 [decentralized autonomous organizations].”

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Featured Image: Shutterstock/Robert Kneschke/Natalia Siiatovskaia