The U.S. Commodity Futures Trading Commission ( CFTC ) ordered Bitfinex , a Hong Kong-based bitcoin exchange, to pay $75,000 for offering illegal, off-exchange, financed retail commodity transactions in cryptocurrencies, and for failing to register as a futures commission merchant (FCM) as required by law, according to a CFTC press release .
The order requires the exchange to cease and desist from future violations of the Commodity Exchange Act (CEA). CFTC Cites Dodd-Frank Act
From April 2013 to at least February 2016, the CFTC found Bitfinex allowed users to borrow funds from one another to trade bitcoins on a margined, leveraged or financed basis. The commission further found the exchange did not deliver the bitcoins to the traders who bought them. Instead, it held the bitcoins in wallets that it owned.
The order noted that under the Dodd-Frank Act, financed commodity transactions must be conducted on an exchange unless the entity offering the transactions can establish that actual delivery of the bitcoins results within 28 days.
The CFTC cited a federal court ruling recognizing that “actual delivery” requires a transfer of “possession and control” of the commodity and providing “real and immediate possession to the buyer or the buyer’s agent.” Further Violations Cited
By offering to enter into, execute, and/or confirm the execution of off-exchange, financed, retail commodity transactions, Bitfinex violated the requirement that such transactions must be conducted on a derivatives transaction execution facility or designated contract market.
Because the transactions did not result in actual delivery of bitcoins, Bitfinex could not rely on an exception to the CFTC’s jurisdiction over such transactions permitted under the law.
CFTC further found Bitfinex accepted orders and received funds in connection with retail commodity transactions without being registered as an FCM, as required by law. FCMs include all persons engaged in soliciting or accepting orders […]
