The Commodity Futures Trading Commission (CFTC) has taken action against Falcon Labs, a crypto brokerage firm based in the Seychelles, for not registering as a futures commission merchant (FCM) in the US.
This marks the first time the CFTC has enforced action against an unregistered futures commission merchant providing unauthorized access to crypto exchanges.
CFTC Crypto Crackdown on Falcon Labs
Under the CFTC order, Falcon Labs must cease acting as an unregistered FCM, particularly by facilitating US individuals’ access to digital asset derivatives trading platforms.
Falcon Labs is also required to pay a disgorgement of $1.7 million and a civil penalty of $589,000 as part of its cooperation with the CFTC’s Division of Enforcement.
The Director of Enforcement at the CFTC, Ian McGinley, stressed the agency’s dedication to market integrity and registration compliance, stating that they will not tolerate exchanges or intermediaries failing to register or comply with rules.
Unregistered Activities in the Crypto Derivatives Market
From October 2021 to at least March 27, 2023, Falcon Labs solicited and accepted orders for digital asset derivatives from US customers and facilitated trading on various digital asset exchanges.
Falcon Labs provided direct exchange access through main accounts and sub-accounts without requiring or providing customer-identifying information to the exchanges.
During this period, Falcon Labs collected around $1.1 million in net fees from customers engaging in crypto-derivative transactions.
After the CFTC’s complaint against Binance entities and Samuel Lim in 2023, Falcon Labs improved controls for identifying customer locations.
Featured image from Shutterstock, chart from TradingView.com
