CFTC settles charges against Falcon Labs, Ltd. for illegal trading

On Monday, the Commodity Futures Trading Commission (CFTC) announced it had simultaneously filed and settled charges against Falcon Labs, Ltd., for failing to register with the CFTC as a futures commission merchant (FCM) .

Falcon Labs, organized under the laws of the Seychelles, was ordered to cease and desist from acting as an unregistered FCM by providing U.S. persons access to digital asset derivatives trading platforms. The order requires Falcon Labs to pay $1.1 million in disgorgement and nearly $590,000 in civil penalties. The reduced civil monetary penalty reflects Falcon Labs cooperation with CFTC’s Division of Enforcement. The

“The CFTC’s enforcement program has made clear it will not tolerate digital asset exchanges that fail to register with the CFTC or comply with the agency’s rules that maintain integrity in the derivatives markets,” said Director of Enforcement Ian McGinley. “And now the CFTC is taking the fight one step further by, for the first time, charging an intermediary that inappropriately facilitated access to those exchanges. Today’s action highlights that the CFTC will not hesitate to charge any entities—exchanges or intermediaries—who are providing customers access to digital asset products and services that require registration but have failed to appropriately register.”

The order said between October 2021 and March 2023, Falcon Labs solicited or accepted order for digital asset derivatives from U.S. customers, functioning as an intermediary facilitating customer trading on various digital asset exchanges. Falcon Labs provided its customers with direct access to exchanges by creating a main account in its own name and then creating associated sub-accounts. The exchanges did not generally require, nor did Falcon Labs provide, customer-identifying information for the sub-account holders.

CFTC found that Falcon Labs collected approximately $1,179,000 from customers entering in digital asset derivative transactions intermediated by Falcon Labs. The entity voluntarily improved its controls for identifying the location of its customers after CFTC filed its complaint against Changpeng Zhao, Binance Holdings Limited, Binance Holdings (IE) Limited, Binance (Services) Holdings Limited, and Samuel Lim.

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