Falcon Labs Fined $1.7M by CFTC for Failing to Register

Falcon Labs is settling with the US Commodity Futures Trading Commission (CFTC) with a $1.7 million fine

The CFTC claimed the crypto prime brokerage firm failed to properly register with the agency and was an "intermediary facilitating its customers’ trading on various digital asset exchanges."

Falcon Labs was accused of trading futures and swaps through sub-accounts on crypto exchanges such as Binance.

The CFTC's order, issued on Monday, was the "first action against an unregistered futures commission merchant (FCM) that inappropriately facilitated access to digital asset exchanges." 

Falcon Labs was ordered to cease its unregistered activities and pay $1,179,008 in disgorgement and a $589,504 civil monetary penalty.

“In recognizing Falcon Labs substantial cooperation and remediation in this order in the form of a lower penalty, the CFTC hopes to encourage other digital asset intermediaries operating illegally to come forward and report their activities to the agency," said the CFTC's Director of Enforcement Ian McGinley in a statement. 

The CFTC charged Binance and Changpeng Zhao in March 2023, alleging that from at least July 2019 the largest crypto exchange "offered and executed commodity derivatives transactions on behalf of US persons" in violation of laws.

Binance settled with the agency in December 2023 with CZ ordered to pay $150 million following his exit from the firm.

In March, the CFTC filed a lawsuit against KuCoin, alleging that Ethereum (ETH) is a commodity and that KuCoin offered illegal, off-exchange margin trading of ETH to US residents.

“For too long, some offshore crypto exchanges have followed a now-familiar playbook by offering derivative products and falsely claiming people in the United States cannot use their platforms, when in reality, anyone in the U.S. with commonly used technology can trade without providing basic customer identifying information,” said McGinley.