The US Commodity Futures Trading Commission (CFTC) has reached a settlement with cryptocurrency brokerage firm Falcon Labs, a subsidiary of FalconX, for a combined total of approximately $1.8 million. The charges were filed due to the company’s failure to register as a futures commission merchant and its improper facilitation of access to digital asset exchanges. Without admitting or denying the regulator’s findings, the firm has agreed to pay around $1.2 million in disgorgement and $600,000 in civil penalties, and also to discontinue offering its services to US residents.
The charges against Falcon Labs primarily centered on its product, ‘Edge’, which the CFTC stated had been used to facilitate digital asset derivative orders for US users from October 2021 to March 2023. The CFTC commended the brokerage firm for voluntarily improving its practices following a lawsuit involving global cryptocurrency exchange Binance and its ex-CEO Changpeng Zhao which resulted in a settlement worth $4.3 billion back in November 203.
During the proceedings, the CFTC identified FalconX’s “substantial cooperation and remediation” and subsequently lowered the penalty. The firm’s efforts to reform its practices after the lawsuit were seen as a positive move in line with the CFTC’s emphasis on maintaining integrity in the derivatives markets. Note however, that FalconX did not give any immediate response to the settlement due to time constraints.
In a related narrative, Rostin Behnam, the Chairperson of CFTC, recently announced on May 6 that cryptocurrency firms operating within the US should prepare for “another cycle of enforcement actions” within the next couple of years. This followed 47 enforcement actions already filed by the commodities regulator against crypto firms in 2023.