The United States Commodity Futures Trading Commission (CFTC) revealed that it had taken action against cryptocurrency brokerage firm Falcon Labs, reaching both a settlement and filing charges that resulted in approximately $1.8 million in disgorgement and penalties.

According to an announcement made on May 13, Falcon Labs, a subsidiary of FalconX, was found to have neglected to register as a futures commission merchant while also "inappropriately facilitating access to digital asset exchanges." As part of the settlement, FalconX agreed to discontinue its services for residents of the United States and pay around $1.2 million in disgorgement along with $600,000 in civil monetary penalties.

Ian McGinley, the Director of Enforcement at the CFTC, emphasized the agency's commitment to upholding integrity in derivatives markets, stating, "The CFTC’s enforcement program has made clear it will not tolerate digital asset exchanges that fail to register with the CFTC or comply with the agency’s rules." He further highlighted the CFTC's proactive stance by charging FalconX, an intermediary that allegedly facilitated access to these exchanges without proper registration.

The settlement outlined that FalconX had been involved in processing orders for digital asset derivatives for U.S. users between October 2021 and March 2023 through its 'Edge' product. Notably, the brokerage firm undertook voluntary improvements to its practices following a lawsuit involving Binance and its former CEO, Changpeng Zhao, which concluded in November 203 with a settlement of $4.3 billion.

Acknowledging FalconX's cooperation and efforts to rectify the situation, the CFTC noted that the firm received a reduced penalty. However, FalconX neither admitted nor denied any of the regulator's findings or conclusions outlined in the order. Despite attempts to seek comment from FalconX, responses were not received by the time of publication.

CFTC Chair Rostin Behnam had previously indicated on May 6 that crypto firms operating in the United States could anticipate "another cycle of enforcement actions" within the next two years. This move came after the commodities regulator filed 47 enforcement actions against crypto firms in 2023, indicating a proactive approach to enforcing regulations within the industry.