The Commodity Futures Trading Commission (CFTC) has filed a complaint against Adam Todd and four companies he controlled – Digitex LLC, Digitex Limited, Digitex Software Limited, and Blockster Holdings Limited Corporation. Filed in the U.S. District Court for the Southern District of Florida, the CFTC alleges that the defendants offered future transactions regarding the Digitex Futures native token while attempting to manipulate its price.
The CFTC complaint alleges that from around May 2020 through May 2022, Todd and Digitex Futures operated a digital asset derivatives exchange and allegedly sought participation from US customers.
According to the CFTC, Digitex Futures required users to deposit DGTX into their accounts to margin their trading on the futures exchange. Additionally, the CFTC alleges that throughout the summer of 2020, when the exchange was readying for its “launch,” Todd attempted to “pump” the price of DGTX as reported by third-party exchanges.
The alleged pumping was facilitated by a “bot” according to the CFTC. The bot was designed to be “always buying more than it was selling.”
“The CFTC’s action against Adam Todd and Digitex Futures underscores the primacy of the CEA’s core registration provisions that are designed to ensure the structural integrity of our nation’s derivatives markets,” stated Acting Director of Enforcement Gretchen Lowe. “Further, the CFTC will vigorously investigate potential manipulative trading activity to ensure confidence in markets remains strong.”
CFTC Commissioner Kristin N. Johnson issued a statement on the enforcement action, stating that:
“Soliciting and accepting customer orders for these contracts without first registering with the Commission caused Digitex Futures to run afoul of the requirement to register with the CFTC as an FCM, and to comply with the Bank Secrecy Act (BSA) by implementing know-your-client (KYC) procedures and a customer information program (CIP). KYC procedures and a CIP are key requirements of the BSA that allow an FCM to identify those transacting through the broker—a vital element in preserving the integrity of our financial system. By allowing customers to open accounts with only anonymous email addresses and passwords and without requiring any additional identity verification, Digitex Futures undermined necessary efforts to detect and prevent money laundering and other conduct that may violate the BSA.”
Johnson lauded the efforts of the Division of Enforcement in regard to the case.
The CFTC is seeking full restitution, disgorgement of ill-gotten gains, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA), as charged.
The complaint may be viewed here.