The U.S. Commodity Futures Trading Commission (CFTC) has announced settlements with multiple DeFi firms in a press release dated Sept. 7, as it and its securities market counterpart, the Securities and Exchange Commission (SEC), show no signs of a slowdown in their activities. ongoing enforcement action against actors in the cryptocurrency space.
Ian McGinley, director of enforcement for the CFTC, wrote:
“Somewhere along the way, DeFi operators got the idea that illegitimate transactions become legal when facilitated by smart contracts… They don’t.”
The CFTC primarily focused on ZeroEx Inc., best known for creating the 0x protocol. The agency said ZeroEx also offered a frontend called Matcha, which traded third-party tokens that offered leveraged exposure to BTC, ETH and other assets. The CFTC said these leveraged tokens are commodities and can only be offered on registered exchanges.
0x was once seen as a promising foundation for Ethereum-based decentralized exchanges before current leaders like Uniswap dominated the area.
While long-term trading volumes are no longer available, market rankings give an indication of 0x’s former popularity. In 2018, 0x’s ZRX token was often among the top 30 largest tokens by market capitalization. Today, ZRX is among the 700 largest cryptocurrencies, and Uniswap’s UNI token is the 24th largest cryptocurrency. As such, the CFTC’s latest move is significant as it targets one of DeFi’s former top contenders.
The CFTC additionally targeted Opyn, a decentralized Ethereum and stablecoin investment platform. The CFTC said Opyn’s oSQTH tokens are commodities and can only be offered on registered exchanges. The value of the oSQTH token is determined by a quadratic ETH-to-USDC index managed by the company,
Finally, the CFTC targeted Deridex, a defunct trading platform built on Algorand. The CFTC said Deridex’s perpetual contracts, which are based on the relative value of the STABL2 token and another asset, qualify as a commodity.
Each platform faced multiple charges
In addition to these specific violations, the CFTC has charged Deridex and Opyn with various failures to register, as well as failure to comply with customer identification programs in accordance with the Bank Secrecy Act. ZeroEx is not said to be facing these charges.
In addition, the agency has accused all three platforms of illegally offering leveraged and margin commodities transactions in digital assets. Every company must stop violating the relevant regulations.
The CFTC has imposed a different fine on each company. Opyn must pay $250,000, ZeroEx must pay $200,000 and Deridex must pay $100,000. The agency said it had made these settlements at the time it filed the suit.
The latest indictments are part of a growing list of crypto-related actions by the CFTC. The agency has completed a fraud case against Mirror Trading International and this week took action against an individual pool operator. The CFTC has also targeted major crypto companies in the recent past, including Binance, FTX, Tether, and BitMEX.