Crypto prime brokerage firm Falcon Labs settles with CFTC over registration violation

Crypto prime brokerage firm Falcon Labs, Ltd. settled with the U.S. Commodity Futures Trading Commission after the agency said it should have been registered, marking the first case of its kind.

The CFTC issued an order against the Seychelles-based firm and subsequently settled, according to a statement released on Monday. The agency said Falcon Labs was an "intermediary facilitating its customers’ trading on various digital asset exchanges." By doing that, Falcon Labs should have registered with the agency as a futures commission merchant (FCM), the CFTC said.  

The CFTC said Monday's order was the "first action against an unregistered FCM that inappropriately facilitated access to digital asset exchanges." 

Falcon Labs did not admit or deny the CFTC's findings and was ordered to pay over $1.7 million in fines.  

Sub-accounts

Falcon Labs traded futures and swaps through sub-accounts directly on digital asset exchanges, including Binance.com, the CFTC said. The agency charged Binance and its former CEO Changpeng Zhao in March 2023 and later settled. 

After the CFTC charged Binance, Falcon Labs voluntarily changed how it collected customer information and updated its know-your-customer policies, according to the CFTC's order. 

“In recognizing Falcon Labs substantial cooperation and remediation in this order in the form of a lower penalty, the CFTC hopes to encourage other digital asset intermediaries operating illegally to come forward and report their activities to the agency," said the CFTC's Director of Enforcement Ian McGinley in a statement. 

The CFTC-registered swap dealer Falcon X Bravo Inc., continues to trade derivatives with institutional clients in the U.S.

Clarified at 5 p.m. UTC to add details on business in the U.S.