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Digitex CEO Knowingly Flouted Anti-Money Laundering Laws, Feds Allege

Last Updated February 14, 2024 2:50 PM
Teuta Franjkovic
Last Updated February 14, 2024 2:50 PM

Key Takeaways

  • Criminal charges against Digitex CEO signal regulators’ intent to hold individuals accountable in the crypto sector.
  • CEO case highlights parallel risks for exchanges: violating registration rules and failing to implement AML protections.
  • The growing list of CEOs facing prosecution underscores how failure to heed regulations can damage companies.

The regulatory net has tightened around Digitex crypto futures exchange founder Adam Colin Todd.

Already battling civil charges from the CFTC for illegally operating a derivatives platform, Todd now faces criminal allegations  from the U.S. Attorney’s Office.

Digitex CEO Now Faces Criminal Charges for Willful AML Violations

Florida prosecutors contend Todd “willfully” neglected to implement basic anti-money laundering (AML) and know-your-customer (KYC) safeguards as required by the Bank Secrecy Act .

If convicted, Todd could face significant jail time, underscoring the potential personal consequences for executives who flout investor protection measures. The Digitex case could become a cautionary tale for crypto exchanges as regulators look to clamp down on illicit activity within the sector.

In July 2023, a federal court mandated Todd to pay nearly $16 million  to settle charges alleging he attempted to manipulate the price of Digitex’s native token, DGTX, through non-economic trading strategies aimed at artificially inflating its value.

The Commodity Futures Trading Commission (CFTC) brought these accusations , highlighting that Todd and the Digitex platforms had failed to register with the CFTC as futures commission merchants. Despite these legal issues, Todd continues to work as a developer for Digitex Games, which employs the DGTX token in its operations.

SEC Charges Contradict Digitex CEO Todd’s Previous Stance on Regulation

The SEC’s recent charges against Digitex and its CEO Todd, for failing to implement AML rules and offering unregistered securities, starkly contrast Todd’s earlier comments to CCN. In that interview, Todd emphasized that legitimate blockchain companies welcome clear regulatory guidelines, noting that securities issues have mainly been a concern in the United States.

Todd highlighted Switzerland, Germany, and Malta’s approaches to cryptocurrency regulation, stating that these countries have adapted or created laws reflecting a deep understanding of blockchain technologies.

Todd also mentioned that Digitex, based in Seychelles, complies with all local legislation and planned to launch futures contracts for BTC/USD, ETH/USD, and LTC/USD, suggesting a commitment to legal compliance that the SEC’s allegations now challenge.

Legal Scrutiny Over Unregistered Futures and AML Violations

The recent indictment  on Tuesday revealed that from January 2018 to April 2022, Todd engaged in the sale of unregistered futures contracts to customers of Digitex Futures, in clear violation of the Bank Secrecy Act due to the absence of Anti-Money Laundering (AML) protocols. This case echoes the previous legal challenges faced by BitMEX CEO Arthur Hayes, who was charged with deliberately ignoring AML regulations.

The charges  against Todd include his explicit refusal to enforce know-your-customer (KYC) policies at Digitex Futures, a decision prosecutors argue made the platform ripe for illicit activities such as money laundering and sanctions evasion.

Following his initial court appearance, Todd could face up to five years in federal prison if found guilty. The final sentence will be determined by a federal district court judge, with consideration given to the U.S. Sentencing Guidelines.

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