The founder of crypto exchange Digitex, Adam Todd, has been ordered by a federal court to pay almost $16 million to resolve accusations that he ran an illegal platform and sought to manipulate its native token, DGTX, the U.S. Commodity Futures Trading Commission (CFTC) said in a Wednesday statement.
In concluding what had been the CFTC’s first case that accused a decentralized-finance (DeFi) platform for failing to register as an exchange, a judge in the U.S. District Court for the Southern District of Florida found Todd violated several commodities laws in running the Florida-based Digitex Futures exchange, and the judge ordered he be banned from trading in CFTC-regulated markets. Todd faces a $12 million fine and about $4 million in disgorgement, though it’s unclear whether Todd or the company would have the resources to pay back customers.
“This order resolves yet another action against an individual and digital asset exchange illegally offering futures contracts to U.S. customers,” said Ian McGinley, the CFTC’s enforcement director, in a statement. He noted the court also found that Todd had “attempted to manipulate Digitex’s native utility token, DGTX, by allegedly ‘pumping’ the token’s price through the use of a computerized bot.”
Todd has still been active as a developer of Digitex Games, which utilizes the DGTX token.
“I didn't steal customer funds or mislead investors or run a Ponzi or pretend there was a non-existent product or anything like that,” Todd said in an email to CoinDesk. “I started a cryptocurrency which reached a market cap of $160 million and which then crashed because our product couldn't compete in a saturated market. That's it. And now I have a $16 million fine for my efforts.”
He said his company tried to keep out U.S. customers, and he argued it wasn't ever possible for it to register with the CFTC.
“I've rebranded to Digitex Games, which is a fully non-custodial and decentralized betting and trading platform that will utilize the DGTX token,” he said. “All betting will be done on-chain, and the CFTC will have no perceived or actual jurisdiction over anything the platform does.”
UPDATE (July 12, 2023, 23:07 UTC): Updates with comments from Adam Todd.
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