The Commodity Futures Trading Commission (CFTC), the regulatory body overseeing derivatives markets in the U.S., has taken legal action against three decentralized finance (DeFi) entities: Opyn, Inc., ZeroEx (0x), Inc., and Deridex, Inc. The charge is centered on the unauthorized provision of derivatives trading.
A statement published on Thursday by the CFTC states that the alleged infractions arise from the trio’s use of blockchain protocols and smart contracts, enabling them to operate as trading platforms, which, according to the CFTC, is in violation of regulations.
In light of these accusations, the CFTC has handed down cease-and-desist mandates to Opyn, ZeroEx, and Deridex, accompanied by financial sanctions.
The breakdown of fines sees Opyn being penalized $250,000, ZeroEx $200,000, and Deridex $100,000. All three entities have agreed to these stipulations, viewing it as a means to amicably settle the allegations.
CFTC Accuses DeFi Protocols of Offering Leveraged and Margined Retail Trading
Ian McGinley, the Director of Enforcement at the CFTC, made clear the agency’s position on DeFi endeavors, remarking, “There seems to be a misconception among DeFi operators that utilizing smart contracts somehow legitimizes illegal transactions. This is simply not the case.”
An interesting connection to note between the CFTC and ZeroEx is Jason Somensatto. After his time at 0x Labs, Somensatto transitioned in 2021 to the CFTC’s financial technology research division. He presently occupies the role of Head of Policy for North America at Chainalysis.
The CFTC claims that the central issues with all three firms revolve around their unauthorized provision of leveraged and margined commodity transactions for retail customers using digital assets.
Opyn, notably linked with the oSQTH token, is further accused of not registering appropriately as a swap execution facility, designated contract market, and futures commission merchant. Additionally, the company failed to set up a customer identification protocol in line with the stipulations of the Bank Secrecy Act. Deridex, operating out of North Carolina, is also alleged to have committed similar additional infractions.
Opyn, ZeroEx, Deridex Cooperate with CFTC to Settle Charges
In the midst of these accusations, Opyn, ZeroEx, and Deridex have been reported to have actively collaborated with the CFTC throughout their investigation. This proactive engagement contributed to a reduction in their financial penalties as a component of the reached settlement.
A statement affiliated with the 0x application, Matcha, mentioned on Thursday that “0x and Matcha are both up and running without any disruptions.”
However, the CFTC’s enforcement actions have not been without dissent from within its ranks. Commissioner Summer Mersinger expressed reservations about these measures. She highlighted a perceived absence of concrete evidence pointing to any misappropriation of client funds or direct harm inflicted by the DeFi platforms in the CFTC’s spotlight.
Mersinger advocates for more public dialogue and understanding, suggesting a more educational and collaborative approach over stringent punitive actions in such instances.
