The Commodity Futures Trading Commission (CFTC) has charged three decentralized finance (DeFi) operations – Opyn, Inc., ZeroEx (0x), Inc. and Deridex, Inc. – with offering illegal derivatives trading, according to a Thursday statement from the agency.
The three firms face a number of accusations based on their use of blockchain-based protocols and smart contracts to function as trading platforms, according to the CFTC. The U.S. derivatives regulator is ordering Opyn, ZeroEx, and Deridex to cease those violations and pay penalties of $250,000, $200,000, and $100,000, respectively. The companies agreed to these terms to settle the charges.
“Somewhere along the way, DeFi operators got the idea that unlawful transactions become lawful when facilitated by smart contracts,” said CFTC Director of Enforcement Ian McGinley. “They do not.”
But the CFTC may have been especially familiar with 0x, because it hired an acting director of LabCFTC from 0x Labs. Jason Somensatto took over the agency’s financial technology research division in 2021. He’s now head of policy in North America for Chainalysis.
All three companies are accused of illegally offering leveraged and margined retail commodity transactions using digital assets, the CFTC said.
Opyn, a DeFi marketplace associated with the token oSQTH, is a California-based company that the CFTC also accused of failing to properly register as a swap execution facility, a designated contract market and a futures commission merchant, and also failing to set up a customer identification program to meet Bank Secrecy Act requirements. Deridex, a North Carolina company, was also accused of those additional violations.
Those companies and ZeroEx, known for its 0x protocol, were all said by the CFTC to have cooperated in the investigation, getting a reduced financial penalty as a result.
Representatives of Opyn and 0x didn’t immediately respond to requests for comment, and CoinDesk couldn’t locate a representative for Deridex. An account associated with 0x app Matcha posted Thursday on X, formerly known as Twitter, that “both 0x and Matcha continue to operate with no problem.”
One CFTC commissioner dissented in the enforcement vote.
“The Commission’s Orders in these cases give no indication that customer funds have been misappropriated or that any market participants have been victimized by the DeFi protocols on which the Commission has unleashed its enforcement powers,” said Commissioner Summer Mersinger in a statement. “I am concerned that the Commission in these cases is taking another step down the path of bringing enforcement actions when we should be engaging with the public.”
UPDATE (Sept. 7, 2023, 23:43 UTC): Adds attempts to reach companies for comment, and CFTC’s past hiring of 0x Labs lawyer.
UPDATE (Sept. 7, 2023, 24:03 UTC): Adds comment from Matcha.