CFTC cracks down on Falcon Labs
NAIROBI (Coinchapter.com) - This week, the U.S. Commodity Futures Trading Commission (CFTC) struck a blow against Falcon Labs, Ltd. The CFTC ordered action against Seychelles-based Falcon Labs for failing to register as a Futures Commission Merchant (FCM). This is the CFTC’s first action against an unregistered intermediary that provided U.S. customers with access to a digital asset exchange, in violation of CFTC regulations.


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Order to cease and desist and pay for violation
Notably, the CFTC’s order requires Falcon Labs to cease operating as an unregistered FCM. Previous operations allowed Americans to access a digital asset derivatives trading platform. In addition, the company must pay $1,179,008 in violation fees and $589,504 in civil penalties, totaling more than $1.7 million. The reduced civil penalty reflects Falcon Labs’ close cooperation with the CFTC’s enforcement division.
CFTC Enforcement Director Ian McGinley stressed that the agency is committed to holding exchanges and intermediaries accountable for violations of registration requirements.
Falcon Labs’ breach and subsequent collaboration
According to the order, from October 2021 to March 2023, Falcon Labs solicited and accepted digital asset derivatives orders from U.S. customers. The company acted as an intermediary. This facilitated transactions for customers on various digital asset exchanges, including institutional customers located in the United States.
Falcon Labs’ cooperation with the CFTC’s enforcement division has taken the form of increased transparency and identifying information. Specifically, the company voluntarily improved its controls for identifying customer locations following the CFTC’s lawsuit against Binance and its former CEO Changpeng Zhao.
The CFTC’s crackdown on Falcon Labs serves as a warning to other digital asset intermediaries operating illegally. The regulator aims to encourage such entities to report their activities to the agency. This highlights the possibility that penalties can be reduced at the cost of cooperation and rectification.
The bottom line is that the digital asset space continues to evolve. Of course, the CFTC remains steadfast in its commitment to ensuring compliance and maintaining market integrity. This enforcement action serves as a reminder to all participants, whether exchanges or intermediaries, that they must comply with the agency’s registration requirements and regulations.