## Facts

- Federal commodities regulator sued corporate entities operating the BitMEX crypto-derivatives platform and certain individual principals.
- The platform offered leveraged virtual-currency derivative products, including perpetual swaps that functioned like futures, and permitted trading by U.S.-based users.
- The regulator alleged the platform offered swaps, futures, and retail commodity transactions and acted as counterparty while not registered with the regulator as a designated contract market (DCM) or swap execution facility (SEF).
- The regulator also alleged failures in compliance controls, including inadequate customer identification processes and an inadequate anti-money-laundering (AML) program, and a failure to supervise under applicable regulations.
- The action sought permanent injunctive relief, equitable relief, and civil monetary penalties for violations of specified provisions of the Commodity Exchange Act (CEA) and implementing regulations.
- The court entered a consent order in 2021 imposing relief against the corporate defendants; later consent orders resolved the claims against the individuals without a trial on the merits.

## Issues

1. Whether operating a crypto-derivatives platform that offers swaps, futures, or retail commodity transactions to U.S. persons without registering as a DCM or SEF violates the CEA and related regulations.
2. Whether inadequate AML/KYC controls and deficient supervisory systems for commodity interest activities violate the CEA and CFTC Regulations, including supervision and AML program requirements.
3. Whether permanent injunctive relief, monetary penalties, and compliance undertakings are appropriate equitable remedies under the CEA based on the alleged past violations.

## Decision

- The court entered a consent order of permanent injunction and related relief against the BitMEX corporate entities.
- The consent order enjoined future violations of the cited CEA provisions and CFTC regulations and imposed a substantial civil monetary penalty.
- The order required compliance undertakings focused on customer identification, AML controls, and related monitoring and reporting obligations.
- Separate later consent orders enjoined the individual defendants from future violations, imposed individual civil monetary penalties, and included additional restrictions (including limits tied to regulated-entity roles and related conditions).

## Legal Principles

- Virtual-currency derivatives characterized as swaps, futures, or retail commodity transactions are subject to the CEA’s market-structure and compliance regime when offered to U.S. persons.
- Operating a trading venue for such commodity interest products that solicits or accepts orders from U.S. users may require registration as a DCM or SEF; operating without required registration can support injunctive and monetary relief.
- CFTC Regulation 166.3 imposes a duty to diligently supervise commodity interest activities; deficient supervisory systems can constitute a regulatory violation.
- AML/KYC failures—such as inadequate customer identification and AML programs—can support findings of violations and justify compliance-focused injunctive terms.
- Under CEA § 6c, a court may enter permanent injunctive relief and related equitable remedies (including penalties) through consent resolution based on stipulated findings and agreed relief.

## Conclusion

The court resolved the enforcement action through consent orders imposing permanent injunctive relief, substantial penalties, and compliance obligations, reflecting the application of the CEA and CFTC regulations to crypto-derivatives trading offered to U.S. persons and to AML/KYC and supervision failures in operating such a platform.


Commodity Futures Trading Comm’n v. HDR Glob. Trading Ltd., No. 1:20-cv-08132 (S.D.N.Y. 2021)