The Commodity Futures Trading Commission (CFTC) has reached a settlement with Falcon Labs, Ltd., a Seychelles-based entity, for operating as an unregistered futures commission merchant (FCM) and facilitating access to digital asset exchanges without proper registration.

Under the terms of the settlement, Falcon Labs must cease acting as an unregistered FCM, particularly in providing US individuals access to digital asset derivatives trading platforms. Additionally, Falcon Labs has been ordered to pay $1,179,008 in disgorgement and a civil monetary penalty of $589,504.

Ian McGinley, the CFTC’s Director of Enforcement, emphasized the agency’s commitment to upholding integrity in derivatives markets, especially in the digital asset space. He highlighted the CFTC’s determination to hold accountable any entities that provide access to digital asset products and services without appropriate registration.

As an intermediary, Falcon Labs facilitated customer trading on various digital asset exchanges, including institutional customers within the US. The company provided direct access to exchanges by creating main accounts in its name and establishing associated sub-accounts, often without requiring or providing customer-identifying information.

The settlement reflects Falcon Labs’ extensive cooperation with the CFTC’s Division of Enforcement throughout the investigative process. Notably, Falcon Labs took voluntary steps to enhance its customer identification controls following the CFTC’s complaint against entities associated with Binance, which revealed similar practices involving sub-accounts for U.S.-located customers trading digital asset derivatives.

This settlement adds to the CFTC’s track record of holding digital asset intermediaries accountable for operating unlawfully. Last year, a US district judge ruled in favor of the CFTC in its litigation against Ooki DAO, establishing that decentralized autonomous organizations (DAOs) can be held liable for violating the law.

The CFTC hopes that by recognizing Falcon Labs’ cooperation and remediation with a lower penalty, it will encourage other digital asset intermediaries operating illegally to come forward and report their activities to the agency.