Bitcoin exchange Bitfinex was fined tens of thousands of dollars by CFTC for violating commodity exchange laws

Bitfinex , a Bitcoin exchange headquartered in Hong Kong, was investigated by the U.S. Commodity Futures Trading Commission (CFTC) for suspected violations of commodity trading laws. The two parties have recently reached a settlement.

Bitfinex reportedly paid the money because it provided illegal over-the-counter retail commodity trading and was not a registered futures commission merchant. Bitfinex neither admitted nor denied the CFTC’s findings, the agency said today.

According to the CFTC’s order released today, the problem mainly lies in the way Bitfinex controls its margin trading funds. The CFTC said that because Bitfinex did not deliver the actual commodities to customers (including the private keys of the Bitcoins, which remained under the control of the exchange), this violated the Commodity Exchange Act.

According to the order, Bitfinex will pay a $75,000 civil penalty and change its internal policies to avoid further violations of the Commodity Exchange Act.

The CFTC said in a statement:

“The Commission found that from April 2013 to February 2016, Bitfinex allowed users to borrow funds from other users and to trade on leverage and margin. Furthermore, Bitfinex did not actually transfer the bitcoins to traders. Instead, Bitfinex held the bitcoins in wallets controlled by it.”

According to the definition of the National Futures Association, a futures commission merchant is an entity that is authorized to sell this type of financial product or accept related funds. According to the Commodity Futures Trading Commission, Bitfinex did not register as a futures commission merchant before providing such services.

A few months ago, there were rumors that the U.S. Commodity Futures Trading Commission was investigating Bitfinex.

According to the CFTC’s order, this was the first time Bitfinex had contacted the CFTC during this period, and the agency also stated that the company had been actively cooperating with the CFTC.

Bitfinex, the largest bitcoin exchange by dollar volume according to data from Bitcoinity, did not immediately respond to a request for comment. In a statement on its website, the exchange briefly outlined the settlement and said it had resolved the CFTC investigation.

In September, the U.S. Commodity Futures Trading Commission announced that it would classify Bitcoin and digital currencies as commodities under the Commodity Exchange Act and bring them under its jurisdiction.