CFTC Imposes Fine on Decentralized Autonomous Organizations (DAO)

United States market regulator, the Commodity Futures Trading Commission (CFTC) has imposed a fine of $250,000 on bZeroX and its founders, Tom Bean and Kyle Kistner through the U.S. District Court for the Northern District of California.

Alongside, they were also issued a cease and desist order from additional violations of the Commodity Exchange Acts (CEA) and the CFTC regulatory framework. 

As per a published statement, they have collectively been charged for ‘illegally offering leveraged and margined retail commodity transactions in digital assets.’ 

Specifically, the blockchain protocol software offered services meant for only firms registered as Future Commissions Merchants (FCM).

Similarly, it failed to conduct adequate Know-Your-Customer (KYC) procedures or any customer verification approach in correlation with the Bank Secrecy Acts compliance program. Equally, CFTC filed a lawsuit against Ooki DAO, the successor to bZeroX,

Ooki DAO is a decentralized autonomous organization that creators of the bZeroX protocol equally founded. It was established as a means to decentralize authority from the original protocol.

It was discovered that Ooki DAO also violated the same laws as bZeroX, therefore, the regulator seeks penalties in the form of disgorgement, financial penalty, restitution as well as trading bans, and registration bans. A ruling against further violation of CEA and CFTC regulations was also made.

CFTC Ensures Crypto Market Regulation

Gretchen Lowe, the Acting Director of CFTC stated the extent to which the regulator will go to ensure compliance with laid down regulations and standards concerning customer protection. Lowe said,

“These actions are part of the CFTC’s broader efforts to protect U.S. customers in a rapidly evolving decentralized finance environment. Margined, leveraged, or financed digital asset trading offered to retail U.S. customers must occur on properly registered and regulated exchanges in accordance with all applicable laws and regulations. These requirements apply equally to entities with more traditional business structures as well as to DAOs.”

The CFTC has been on top of its game as regards the U.S crypto industry ensuring that digital assets firm complies with the regulatory framework and that customers are protected against market risk and exposure to hackers. Initially, there was a tussle of power between the CFTC and the Securities and Exchange Commission. Now, the current CFTC Chairman Rostin Behnam has declared his willingness to control more of the crypto market to the U.S Senate as earlier purported by the former Chairman Christopher Giancarlo.