Highlights
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If a crypto trading platform fails to identify U.S. customers and screen, monitor, and report participants and transactions pursuant to CFTC and FinCEN rules, individuals can be personally liable
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Crypto co-founders personally liable for failure to register digital asset derivatives platform and failure to comply with necessary requirements
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Millions in civil penalties have been assessed to such individuals for violation of the Commodity Exchange Act and operating unregistered futures commissions
The Commodity Futures Trading Commission (CFTC) recently announced that the U.S. District Court for the Southern District of New York entered consent orders against three co-founders of a cryptocurrency derivatives trading platform for $30 million in personal civil monetary penalties. This is not the first time the platform has been cited.
The court’s move highlights how important regulatory compliance is for fintech company founders – and emphasizes how they are personally responsible for ensuring that U.S. operations are undertaken with careful consideration of regulatory regimes and compliance requirements. These responsibilities include implementing procedures to identify U.S. persons using financial services, products, and platforms.
The $30 million in civil penalties to be paid by the three co-founders result from the platform conducting significant aspects of the business from the U.S. and accepting orders and funds from U.S. customers to trade cryptocurrencies and derivatives through unregistered entities and without complying with applicable customer identification, screening, regulatory compliance, and consumer protection requirements.
The personal liability flowing to the three co-founders stems from platform violations of the Commodity Exchange Act (CEA)by operating as a Futures Commission Merchant (FCM) without CFTC registration and failing to implement a Customer Information Program (CIP) and Know Your Customer…
