CFTC Sues Digitex For Manipulating the Price of DGTX and Failing to Register
The Commodity Futures Trading Commission filed a complaint against Digitex LLC, and its founder and CEO Adam Todd on Friday, September 30th. The CFTC alleges that Todd failed to properly register his company and manipulated the value of its token, DGTX.
Digitex Sued for Market Manipulation and Failing to Register With CFTC
In today’s filing, the CFTC argues two main points against Digitex and Todd. According to the Commission, the company was operating from July 2020 until at least May 2022 and failed to register with the commission throughout this entire period “in any capacity.”
Through the operation of the Exchange, Digitex Futures became subject to the requirements under Section 4 of the Act, 7 U.S.C. § 6, to register with the Commission as a designated contract market (“DCM”) or foreign board of trade (“FBOT”), as well as the requirement under Section 4d of the Act, 7 U.S.C. § 6d, to register as a futures commission merchant (“FCM”). Digitex Futures and Todd have never been registered with the Commission in any capacity and therefore violated 7 U.S.C. §§ 6 and 6d.
The complaint also alleges that Digitex and Todd attempted to manipulate the value of the firm’s token DGTX. The pump was attempted using various corporate entities and hoped to inflate the value of Todd’s company/
In addition to the registration and regulatory violations described above, between approximately May 1, 2020 and at least August 15, 2020 (the “Attempted Manipulation Period”), Todd attempted to manipulate the price of DGTX by engaging in non-economic trading activity— here, trading that was expected to lose money rather than make money—on third-party digital asset trading platforms with the intent to artificially inflate (or “pump”) the price of DGTX to increase the value of the DGTX tokens held by Todd and Digitex Futures and to benefit Digitex Futures by attempting to legitimize its “native currency.” Todd’s attempted manipulation of DGTX violated Section 6(c)(1), 6(c)(3), and 9(a)(2) of the Act, 7 U.S.C. §§ 9(1), 9(3), and 13(a)(2), and Regulations 180.1(a)(1) and 180.2, 17 C.F.R. §§ 180.1(a)(1), 180.2 (2021).
The CFTC is requesting from the court to bar Todd and any associated entities from orchestrating future trades, order him to pay restitution to affected investors, and disgorge ill-gotten profits. Throughout the day, the value of the DGTX experienced a noticeable drop, and the company’s website is, at the time of writing, no longer available.
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CFTC’s Regulatory Efforts in 2022
Both the CFTC and the Securities and Exchange Commission have been pursuing regulatory action against various crypto firms for years, and have been particularly scrutinized for their efforts in 2022. While the SEC has been taking the majority of the headlines, and the brunt of criticism—particularly in the wake of the Ethereum merge—the CFTC has several notable cases under its belt.
Recently, the Commodity Futures Trading Commission has been requesting greater authority over digital assets. The Agency’s Chairman, Rostin Behnam argued, among other points, that his Commission should be granted a greater role due to experience gained in various cases involving crypto over the past year, taking special note of the Mirror Trading $1.7 billion fraud suit.
While it is still somewhat unclear what the future of crypto regulation will look like, it is clear lawmakers have taken a great interest in the sector. Recently, the White House recently unveiled its very first framework for the development of digital assets. In late September, some attempts to update existing regulations have been made when two Senators proposed an update of a 2015 cybersecurity bill to include crypto companies.
Do you think the CFTC will be allowed to take the lead when it comes to digital assets regulation? Let us know in the comments below.