The U.S. Commodity Futures Trading Commission (CFTC) sent a clear message to decentralized finance (DeFi) platforms on Thursday, announcing that it has settled allegations against Opyn, ZeroEx, and Deridex.
Both Deridex and Opyn faced charges for neglecting to register as either a swap execution facility or a designated contract market, in addition to failing to establish a customer identification program pursuant to the Bank Secrecy Act compliance procedures. Furthermore, these companies, along with ZeroEx, were accused of unlawfully facilitating leveraged and margined retail transactions involving digital assets, as detailed in a CFTC statement.
As a result of the settlement, the aforementioned platforms are required to pay civil penalties amounting to $250,000, $200,000, and $100,000 for Opyn, ZeroEx, and Deridex respectively. Additionally, they have been instructed to refrain from violating the Commodity Exchange Act and CFTC regulations in the future.
CFTC’s Director of Enforcement, Ian McGinley, remarked, “Somewhere along the way, DeFi operators got the idea that unlawful transactions become lawful when facilitated by smart contracts,”… “They do not. The DeFi space may be novel, complex, and evolving, but the Division of Enforcement will continue to evolve with it and aggressively pursue those who operate unregistered platforms that allow U.S. persons to trade digital asset derivatives.”
A Peek into the Accused Companies
According to the CFTC, Opyn, a California-based firm registered in Delaware, created a blockchain-facilitated digital asset protocol. This protocol allowed trading in a derivative token known as oSQTH, the value of which fluctuated based on an index monitoring the price movements of ether squared relative to the USDC stablecoin. The CFTC noted that the oSQTH tokens classify as swaps and leveraged or margined retail commodity transactions, which legally can only be offered to retail users via a registered exchange, complying with both the CEA and CFTC rules. The regulator stated, “Opyn unlawfully operated a facility for the trading or processing of swaps without registering as a SEF.”
Deridex, another company implicated in the charges, is based in North Carolina and also registered in Delaware. It developed a blockchain-driven digital asset trading protocol that facilitated trading in “perpetual contracts”. These were characterized as leveraged derivative positions enabling one or more payment exchanges based on the relative value of STABL2 and another virtual currency.
Conversely, ZeroEx, a Delaware-registered company stationed in California, created a blockchain-supported digital asset protocol along with a front-end application named Matcha. This setup allowed users to conduct digital asset trades using multiple blockchains. In response to the settlement, Matcha acknowledged its collaboration with the CFTC to address queries concerning tokens that represented less than 0.1% of the platform’s trading volume since its inception. They expressed gratitude towards the CFTC for highlighting these tokens and affirmed their commitment to establishing additional procedures following fruitful discussions with the regulatory body.
