The Commodity Futures Trading Commission (CFTC) filed suit against Adam Todd, Digitex, LLC, Digitex Limited, Digitex Software Limited, and Digitex Futures last Friday in the Southern District of Florida. The complaint for injunctive and equitable relief alleges that beginning in late 2017, defendant Todd “owned, built, and operated an illegal digital asset derivatives trading platform through a common enterprise of corporate entities,” which included the other defendants, who are collectively referred to as Digitex. The complaint claims that Todd and Digitex’s misconduct violated the Commodity Exchange Act (CEA) and other commission regulations.
The web-based exchange platform “accepted customer funds as margin and matched customer orders for digital asset derivatives such as bitcoin futures contracts and ether futures contracts.” Users of Digitex were also able to trade with leverage of up to 100 to 1.
Due to the nature of their operations, defendants Todd and Digitex were required by CFTC requirements to register as either a designated contract market or a foreign board of trade. They were also required to register as a futures commission merchant and comply with provisions of the Bank Secrecy Act (BSA). Despite all of these requirements, the defendants remain unregistered with the Commission and have yet to comply with the necessary provisions of the BSA.
Digitex allowed trading activity on its website only using a native currency called DGTX tokens. The complaint contends that defendant Todd engaged in further violations when he “attempted to manipulate the price of DGTX by engaging in non-economic trading activity.”
The complaint cites violations for the attempted manipulation of the price DGTX, fraud and manipulation by deceptive device or contrivance, execution of futures transactions on an unregistered board of trade, failure to register as a futures commission merchant, failure to implement customer information program, and failure to implement know your customer and anti-money laundering procedures.
The plaintiff is seeking favorable judgment on each count, a permanent injunction preventing further violations, restitution, civil monetary penalties, litigation fees, a trial by jury, and more.