The United States Commodity Futures Trading Commission (CFTC) won the default judgment v. Adam Todd, CEO of Digitex Futures, and four companies he controlled, the court ordered Todd to pay nearly $16 million in annulment and penalties.
The CFTC filed charges against Todd and his companies in September 2022 for price manipulation and failure to register.
Digitex CEO faces sanctions over alleged price gouging
According to the CFTC, Todd and his company operated a cryptocurrency exchange under the name “Digitex Futures” and attempted to manipulate the price of the Digitex Futures DGTX token.
They allegedly did this by “pumping” the price of the token through the use of a computerized bot, which Todd designed to “always buy more than it sells”. The CFTC also alleged that Todd tried repeatedly to increase DGCX’s price by filling large OTC buy orders to buy DGCX on third-party exchanges rather than the “treasury” of Digitex Futures.
In addition to allegations of price manipulation, 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 customer information program, know your customer policies and anti-money laundering procedures.
Furthermore, the CFTC complaint alleged that Todd learned that participation by US clients in the Digitex Futures exchange subjected the company to US regulation, but that the exchange allegedly sought participation from US clients through online orders.
The CFTC accused Todd of attempting to manipulate the Digitex Futures Exchange’s native token, DGTX, which was both a digital asset and a medium of exchange, and thus a commodity in interstate commerce.
The court order prohibits Todd and his companies from trading in any CFTC-regulated markets or from registering with the CFTC. Todd was ordered to pay $3,912,220 in a monetary fine and an $11,736,660 civil penalty. The order resolves CFTC enforcement action against Todd and Digitex Futures.
CFTC’s Ian McGinley, director of enforcement, said:
This case demonstrates that regardless of the technology used, the CFTC will vigorously use its well-established authority to ensure that entities are legally registered and to address commodity manipulation in interstate commerce.
Furthermore, the CFTC appreciated the Australian Securities and Investments Commission, Central Bank of Ireland, Cyprus Securities and Exchange Commission, Gibraltar Financial Services Commission, Seychelles Financial Services Authority and Saint Vincent and the Grenadines Financial Services Authority for their assistance in Article .
Overall, the CFTC v. Todd and Company case highlights the importance of complying with regulations governing digital asset exchanges, including registering with the CFTC and implementing customer protection measures.
The CFTC’s enforcement action against Todd and Digitex Futures is a reminder that the agency will take action to ensure that entities involved in trading crypto assets comply with applicable laws and regulations.
Featured image from Unsplash, chart from TradingView.com