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Bitfinex Fined US$75,000 for Illegal Off-Exchange Transactions

Avatar Joseph Young 4 years ago

Bitfinex, one of the world’s largest Bitcoin and cryptocurrency exchanges, has been fined by the U.S. Commodity Futures Trading Commision (CFTC) for offering illegal off-exchange financed retail commodity transactions in Bitcoin and also failing to register as a Futures Commission Merchant (FCM).

The company is required by the Order to pay a US$75,000 civil monetary penalty in total, for other alleged illegal operations such as controlling Bitcoin in deposit wallets they own, instead of sending Bitcoin directly to the users.

“The Order also finds that Bitfinex did not actually deliver those bitcoins to the traders who purchased them. Instead, Bitfinex held the bitcoins in deposit wallets that it owned and controlled, the Order states,” reads the press release from the U.S. CFTC.

The CFTC further emphasized that the transactions which involved Bitfinex storing Bitcoin for their users in the Bitcoin wallet they control fell under the jurisdiction of the CFTC, according to a document drafted by the CEA. An important part of the CEA’s document states that companies and exchanges like Bitfinex are required to conduct transactions on a specific contract market or derivatives transaction execution facility.

“The Order finds that by offering to enter into, executing, and/or confirming the execution of off-exchange financed retail commodity transactions, Bitfinex violated Section 4(a) of the CEA, which requires such transactions to be conducted on a designated contract market or derivatives transaction execution facility,” said the CFTC.

Amid the settlement of the US$75,000 order, Bitfinex is collaborating with the Division of Enforcement to change their business practices and alter their operations to remain compliant with the CEA.

It is highly likely that Bitfinex will begin changing certain protocols of their Bitcoin and cryptocurrency exchange over the next few months. One certain alteration to their business practices will be a direct transfer of Bitcoin from the exchange to a user, without withholding transactions or storing Bitcoin in a company account.

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