CFTC Fines Bitcoin Exchange Bitfinex $75,000 Over Trading Violations

Hong Kong-based bitcoin exchange Bitfinex has settled with the CFTC following an investigation into its financed trading activities.

AccessTimeIconJun 2, 2016 at 7:55 p.m. UTC
Updated Sep 11, 2021 at 12:18 p.m. UTC
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Hong Kong-based bitcoin exchange Bitfinex has settled with the US Commodity Futures Trading Commission (CFTC) following an investigation into its financed trading activities.

Bitfinex settled charges that it offered illegal off-exchange financed retail commodities trading, as well as failed to register as a futures commission merchant. Bitfinex did not admit or deny the CFTC findings, the agency said today.

According to an order published today by the CFTC, the issues arose owing to how Bitfinex held functional control over funds tied to leveraged or margin trading on the platform. The CFTC said that because no actual commodities were delivered by Bitfinex to its customers – the private keys tied to the applicable bitcoins remained under the exchange’s control – it was in violation of the Commodity Exchange Act.

Bitfinex will pay $75,000 in civil penalties, according to the order, and has moved to change its internal policies and avoid further violations of the Commodity Exchange Act.

The CFTC said a statement:

“The Order finds that from April 2013 to at least February 2016, Bitfinex permitted users to borrow funds from other users on the platform in order to trade bitcoins on a leveraged, margined, or financed basis. The Order also finds that Bitfinex did not actually deliver those bitcoins to the traders who purchased them. Instead, Bitfinex held the bitcoins in deposit wallets that it owned and controlled, the Order states.”

A futures commission merchant, according to the National Futures Association, is an entity that is authorized to sell or accept money for these kinds of financial products. According to the CFTC, Bitfinex did not register before offering this type of service.

The settlement comes months after rumors circulated that the CFTC was investigating Bitfinex.

In September, an anonymous tipster posted on social media about the then-rumored investigation, sharing a link to an email attributed to CFTC trial attorney Michael Frisch. Frisch’s name appears among the CFTC staffers listed on the agency’s press release regarding the settlement.

It was around this time that the exchange first contacted the CFTC, according to the order. The agency went on to say that the company was proactive in its cooperation.

Bitfinex, which according to data from Bitcoinity is the largest bitcoin exchange by US dollar trade volume, did not immediately respond to a request for comment. In a statement posted to its website, the exchange outlined the settlement and said that it had moved to address what the CFTC was investigating.

"In response to these constructive discussions with the CFTC’s Division of Enforcement, BFXNA has made significant changes to the way in which US customers engage in financed trading on Bitfinex. Bitfinex remains committed to continually improving its customers’ experience while complying with applicable laws and regulatory requirements," the company wrote.

, the CFTC moved to assert its jurisdiction over bitcoin and digital currencies, classifying them as commodities under the Commodity Exchange Act.

The full settlement order can be found below:

This report has been updated.

Images via Shutterstock, CFTC


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