The notice issued by the CFTC reads: “The order requires the respondents to pay a $250,000 civil monetary penalty and to cease and desist from further violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged."
The CFTC imposed a $250k penalty against bZeroX and its founders Tom Bean and Kyle Kistner over the platform’s illegal operations.
According to the press release, the CFTC accused bZeroX of operating as an unregistered FCM. It alleged that the protocol's founders illegally offered leveraged and margin trading services for digital assets.
The order claimed that the DeFi lending protocol also failed to adopt a customer identification program as part of the Bank Secrecy Act.
Gretchen Lowe, the Acting Director and Chief Counsel of CFTC, said,
"These actions are part of the CFTC’s broader efforts to protect U.S. customers in a rapidly evolving decentralized finance environment."
The Commission also accused the Ooki DAO, the successor to bZeroX which operates on the same protocol, of violating the CEA. As a result, the CFTC filed a civil enforcement action against the DAO.
Commissioner Summer K. Mersinger disagreed with CFTC’s actions. In a dissenting statement, she claimed CFTC’s approach involved regulation by enforcement. According to her,
“The Commission should not be shrouding its views on these policy issues in obscurity—to be revealed only through enforcement actions. Nor should it be delegating its policymaking responsibility to federal judges hearing those enforcement actions.”
