Release Number 8605-22
CFTC Charges Digital Asset Derivatives Platform and Miami Resident with Facilitating Unlawful Futures Transactions, Failing to Register, and Attempted Manipulation of Native Token
October 03, 2022
Washington, D.C. — The Commodity Futures Trading Commission today announced it filed a complaint in the U.S. District Court for the Southern District of Florida against Florida resident Adam Todd and four companies he controlled – Digitex LLC, Digitex Limited, Digitex Software Limited, and Blockster Holdings Limited Corporation. The complaint alleges that Todd and his companies operated a digital asset exchange under the trade name “Digitex Futures.” Todd and Digitex Futures are charged with illegally offering futures transactions on a platform other than a designated contract market and also with attempting to manipulate the price of the Digitex Futures native token.
In its continuing litigation, the CFTC seeks full restitution, disgorgement of ill-gotten gains, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA), as charged.
“The CFTC’s action against Adam Todd and Digitex Futures underscores the primacy of the CEA’s core registration provisions that are designed to ensure the structural integrity of our nation’s derivatives markets.” said Acting Director of Enforcement Gretchen Lowe. “Further, the CFTC will vigorously investigate potential manipulative trading activity to ensure confidence in markets remains strong.”
The complaint alleges that from approximately May 2020 through May 2022, Todd and Digitex Futures operated a digital asset derivatives exchange from an office in Florida. The Digitex Futures exchange allegedly sought participation from U.S. customers through web-based solicitations, despite the fact Todd knew such participation subjected Digitex Futures to U.S. regulation.
In addition to the alleged registration and regulatory violations, the complaint states Todd attempted to manipulate the price of DGTX, the exchange’s “native currency,” between approximately May 2020 and August 2020. Digitex Futures required users to deposit DGTX into their accounts to margin their trading on the futures exchange. According to the complaint, throughout the summer of 2020—the time when the exchange was readying for “launch”—Todd repeatedly attempted to, in his words, “pump” the price of DGTX as reported by third-party exchanges.
Todd allegedly accomplished his “pumping” activity by, among other things, deploying a “bot” on third-party exchanges he designed to be “always buying more than it was selling” and by filling large over-the-counter orders to purchase DGTX on third-party exchanges rather than out of the Digitex Futures “treasury.” The complaint alleges Todd took these steps intending to increase the price of DGTX, as reported by third-party exchanges, even though he acknowledged this practice would result in trading losses because Todd knew the higher DGTX price would benefit the vast amounts of DGTX held by the Digitex “treasury.”
The CFTC appreciates the assistance of the Australian Securities and Investments Commission, Central Bank of Ireland, Cyprus Securities and Exchange Commission, Gibraltar Financial Services Commission, Seychelles Financial Services Authority, and St. Vincent & the Grenadines Financial Services Authority.
The Division of Enforcement staff responsible for this matter are Ansley Schrimpf, Joseph Patrick, Joseph Platt, Allison Passman, Scott Williamson, and Robert Howell. Former Division of Enforcement staff member Daniel Burstein also assisted with this matter.
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Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382), file a tip or complaint online, or contact the CFTC Whistleblower Office. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the CFTC Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA.