Futures and Derivatives Law Report May 2022 | Volume 42 | Issue 5
violating the BSA , the government refuted the argument that BitMEX did not serve U . S . customers , calling BitMEX ’ s “ purported withdrawal from the U . S . market in or about September 2015 . . . a sham ” and pointing out that the company “ actively sought out U . S . customers by using U . S . -based cryptocurrency ‘ influencers ’ to market to new customers through BitMEX ’ s socalled ‘ Affiliate Program .’ ’’ 78
The Commission will continue to be focused on digital assets for the foreseeable future . It has taken a strong position that many digital assets are commodities and therefore subject at least to the agency ’ s enforcement authority over fraud and manipulation in commodity markets . Further , the development of the digital asset derivatives markets , which are directly subject to the CFTC ’ s jurisdiction , is still in nascent stages . As these digital assets gain further market penetration and recognition from other regulators , their importance in the financial sector will increase . With that increased prominence along with the reports expected to be generated in response to the March Executive Order , the CFTC in coordination with other agencies , such as the SEC and DOJ , will maintain and likely increase its aggressive enforcement program against misconduct in the digital asset markets over the next few years .
C . SWAPS
The CFTC has continued in its mission to ensure market integrity by bringing approximately nine enforcement actions with a special focus on the swaps market and its participants . 79 These cases adhered to themes of past years , emphasizing swap dealer compliance with the swaps regulatory and reporting regime . Swap dealers are under especially increased scrutiny as a registration category because of the view that they have a disproportionate impact on market stability and integrity . Although the Commission brought only nine enforcement actions involving the swaps market in FY 2021 , this should not be interpreted as the CFTC not being active or interested in enforcement investigations concerning swaps .
Trends in enforcement actions involving the swaps market centered specifically on “ regulatory ” enforcement actions , which stem from violations of recordkeeping , reporting , and internal control requirements . The Enforcement Division has investigated and the Commission has fined several swap dealers in the past year for various iterations of reporting failures , including failing to report entire categories of required data , 80 reporting inaccurate data to swap data repositories (“ SDRs ”), 81 and failures associated with daily large-trader reporting requirements . 82 Many of the actions also included a related charge for supervisory failures , which involves not having the proper systems , policies , or procedures in place to comply with obligations , monitor operations , or catch errors . 83 Significantly larger fines were levied on firms found to have a significant number of reporting errors occurring over a long period of time . These cases also demonstrate the implementation of several policy guidance documents issued by the Enforcement Division in the last year that describe the Commission ’ s view on corporate compliance programs and how a company ’ s self-reporting , cooperation , and remediation can factor into the penalties assessed in enforcement cases . 84
In one noteworthy reporting failure case that highlights the significance of the Division ’ s policies regarding reporting , cooperation , and reme-
K 2022 Thomson Reuters 9