The U.S. Commodity Futures Trading Commission (CFTC) has accused the decentralized autonomous organization bZeroX and its founders of not registering and failing to comply with the customer identification procedure.
Representatives of the CFTC assure that the founders of bZeroX, Tom Bean and Kyle Kistner, illegally offered borrowed funds to clients and made marginal retail transactions with digital assets. The CFTC says that only registered futures brokers (FCM) can engage in this activity. In addition, bZeroX management did not comply with customer identification rules and the Bank Secrecy Law.
The agency requires the defendants to pay a $250,000 administrative fine and stop further violations of the Commodity Exchange Act (CEA) and CFTC requirements. According to the department’s indictment, Bean and Kistner knowingly committed violations and acted in bad faith.
The lawsuit alleges that between June 1, 2019 and August 23, 2021, the defendants used the bZx blockchain-based software protocol, which was used to conduct margin retail trading. The protocol allowed users to deposit a margin to open positions with leverage. Transactions were conducted decentralized, without intermediaries.
On August 23, 2021, bZeroX transferred control of the protocol to the bZx DAO organization, which was later renamed Ooki DAO. Now she uses the Ooki protocol (formerly the bZx protocol), continuing to break the law in the same way as bZeroX. By handing over control, the founders of bZeroX promised community members that their operations would be protected from law enforcement action. And yet, the regulator filed a lawsuit in the Northern District of California against Ooki DAO, accusing it of similar violations. The regulator requires Ooki DAO to return user funds, pay an administrative fine, ban trading and registration, and an injunction against further violations of the CEA.
In August, the CFTC charged two investment firms SR Private Equity and NBD Eidetic Capital with a lack of transparency and a $12 million bitcoin fraud. funds have reported on the risks associated with investing in digital assets.