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Crypto Exchange Digitex And CEO Ordered To Pay $16 Million In CFTC Case

The United States Commodity Futures Trading Commission (CFTC) has won a default judgment against Adam Todd, CEO of Digitex Futures, and four companies he controlled, with the court ordering Todd to pay roughly $16 million in disgorgement and penalties. 

The CFTC had filed charges against Todd and his companies in September 2022 for alleged price manipulation and failure to register.

Digitex CEO Face Penalties For Alleged Price Manipulation

According to the CFTC, Todd and his companies operated a crypto exchange under the name “Digitex Futures,” and attempted to manipulate the price of the Digitex Futures native token DGTX. 

They allegedly did this by “pumping” the token’s price through the use of a computerized bot, which Todd designed to be “always buying more than it was selling.” The CFTC also alleged that Todd repeatedly attempted to increase the price of DGTX by filling large over-the-counter orders to purchase DGTX on third-party exchanges rather than out of the Digitex Futures “treasury.”

In addition to the price manipulation allegations, the CFTC also charged Todd and his companies with illegally offering futures transactions on a platform other than a designated contract market, failing to register with the CFTC, and failing to implement a customer information program, know your customer policies, and anti-money laundering procedures.

Moreover, the CFTC’s complaint alleged that Todd knew the participation of US customers in the Digitex Futures exchange subjected the firm to US regulation, but the exchange allegedly sought participation from US customers through web-based solicitations.

The CFTC charged Todd with attempted manipulation of the Digitex Futures Exchange’s native token, DGTX, which was a digital asset and a medium of exchange, and therefore a commodity in interstate commerce.

The court order bans Todd and his companies from trading in any CFTC-regulated markets or registering with the CFTC. Todd has been ordered to pay $3,912,220 in disgorgement and a $11,736,660 civil monetary penalty. The order resolves the CFTC’s enforcement action against Todd and Digitex Futures.

The CFTC’s Ian McGinley, Director of Enforcement Division, said:

This case demonstrates that regardless of the technology used, the CFTC will aggressively use its well-established authority to ensure entities are lawfully registered and to address the manipulation of commodities in interstate commerce.

Furthermore, the CFTC expressed its appreciation to the Australian Securities and Investments Commission, Central Bank of Ireland, Cyprus Securities and Exchange Commission, Gibraltar Financial Services Commission, Seychelles Financial Services Authority, and St. Vincent & the Grenadines Financial Services Authority for their assistance in the matter.

Overall, the CFTC’s case against Todd and his companies highlights the importance of complying with regulations governing digital asset exchanges, including registration with the CFTC and implementing customer protection measures. 

The CFTC’s enforcement action against Todd and Digitex Futures serves as a reminder that the agency will take action to ensure that entities engaged in trading crypto assets comply with applicable laws and regulations.

Digitex
BTC’s downtrend on the 1-day chart after failing to consolidate above $31,000. Source: BTCUSDT on TradingView.com

Featured image from Unsplash, chart from TradingView.com 

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