Crypto derivatives firm LedgerX has accused the US Commodity Futures Trading Commission (CFTC) of unlawfully obstructing the approval of its amended Derivatives Clearing Organization (DCO) registration.
According to two letters obtained by Coindesk, LedgerX claims that CFTC chairman J. Christopher Giancarlo has a personal bias against the company and its CEO Paul Chou.
“We have strong reason to believe that this unreasonable delay that is in clear violation of the Commodity Exchange Act is related to the Chairman’s animus towards a blog post written by our CEO,” the first letter revealed by Coindesk claims.
In late June, major media houses, including Finance Magnates, reported that LedgerX obtained a designated contract market (DCM) license from the CFTC to become the first to offer physically-delivered Bitcoin futures in the US. However, only days later Coindesk reported that the regulator put the approval on hold, denying the company from beating its competitors, including ICE’s Bakkt.
“[Giancarlo] told him that he was going to make sure our DCO order was revoked within two weeks, due to a blog post written by myself the previous year implying that preferential treatment was being given to larger companies so he could ‘cement his legacy.’ This refers to the ICE / Bakkt approval, which was running into issues that were frustrating the chairman,” the letter added.
Giving an edge to the competitors
The company was also asked to obtain insurance and conduct an SOC 1 Type 2 audit, the letter detailed. It also claimed that the regulatory staffers tried to interfere in the audit process.
“[The] previous chairman wanted to revoke LX license bc Bakkt efforts not moving along. Having no legitimate reason to revoke our license, staff resorted to contacting our independent auditors to tamper with audit to give commission reason to revoke license. Staff admitted & apologized,” the first letter stated.
No clear timeline for approval
Dated July 11, 2019, the second letter stated that the DCO amendment application had been with the regulator for more than 250 days (now over 300 days), while it was required to either deny or approve the application within 180 days to.
In addition to the licensing issues, the company also alleged that the CFTC’s swap data repository requirements force LedgerX to report to the Intercontinental Exchange’s ICE Trade Vault, a direct competitor of the company.
“We filed a formal complaint regarding this anti-competitive aspect which was not answered at all. A division head later admitted, in person, to our COO that I was correct in stating that certain entities were being preferentially treated by the Chariman’s office,” one of the letters stated.
