The U.S. derivatives markets regulator Commodity Futures Trading Commission (CFTC) has charged three decentralized finance (DeFi) protocols, Opyn, Inc., ZeroEx (0x), Inc., and Deridex, Inc. with offering illegal derivatives trading.
Blockchain-based Protocols as Unlawful Trading Platforms
According to an official statement released on Thursday, these allegations stem from the utilization of blockchain-based protocols and smart contracts by the three firms to function as trading platforms, a practice that the CFTC deems unlawful.
In response, the CFTC has issued cease-and-desist orders to Opyn, ZeroEx, and Deridex while imposing financial penalties. Opyn faces a penalty of $250,000, ZeroEx $200,000, and Deridex $100,000. All three companies have chosen to accept these terms as part of a settlement to resolve the charges.
“Somewhere along the way, DeFi operators got the idea that unlawful transactions become lawful when facilitated by smart contracts. They do not.” – CFTC Director of Enforcement Ian McGinley
The CFTC’s familiarity with ZeroEx could be attributed to its employment of Jason Somensatto, who joined the agency’s financial technology research division in 2021 after his tenure at 0x Labs. He currently serves as the Head of Policy in North America for Chainalysis.
Illegal Offerings of Leveraged and Margined Retail Commodity Transactions
The allegations against all three companies center on their illegal offerings of leveraged and margined retail commodity transactions using digital assets, according to the CFTC. Opyn, primarily associated with the oSQTH token, faces additional charges related to failing to properly register as a swap execution facility, designated contract market, and futures commission merchant. The company also neglected to establish a customer identification program in compliance with Bank Secrecy Act requirements. Deridex, based in North Carolina, faces similar additional violations.
“Both 0x and Matcha continue to operate with no problem.” – Announcement from an account linked to the 0x app Matcha
Despite these allegations, Opyn, ZeroEx, and Deridex are said to have cooperated fully in the CFTC’s investigation, leading to reduced financial penalties as part of the settlement.
One CFTC commissioner expressed dissent regarding the enforcement actions. Commissioner Summer Mersinger raised concerns about the lack of evidence of customer funds misappropriation or victimization by the DeFi protocols targeted by the CFTC’s enforcement actions. She called for greater engagement with the public rather than punitive measures in cases like these.
