Altcoin News: LedgerX Executives Accuse CFTC of Prejudice

September 30, 2019, by Marko Vidrih on ALTCOIN MAGAZINE

According to LedgerX executives, CFTC chairman Christopher Giancarlo deliberately created obstacles in the process of considering the company’s application for registration of a clearing center for derivatives (DCO).

“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 letter of July 3, 2019, says. It is not known which publication was the culprit for the biased attitude. LedgerX CEO Paul Chou said:

“In January [2019], the Chairman called one of our board members and told him that he was going to make sure our DCO order was revoked within two weeks, due to a blog post written by myself the previous year implying that preferential treatment was being given to larger companies so he could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.”

At the same time, “larger company” means ICE with its Bakkt trading platform. Christopher Giancarlo did not comment on the allegations. CFTC spokesman Michael Short also did not say anything about this, but noted that “the CFTC treats all registered entities equally,” and LedgerX’s business requires “extensive consideration.”

The commission proposed that the company receive insurance and undergo a standardized audit to ensure that it complies with legal and technical provisions. Representatives of LedgerX believe that both requirements are “completely contrived.” The letter said that CFTC employees tried to intervene and fake the results of the audit, and the auditors said that “they had never seen such things before.”

“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 request for insurance could cause problems for the CFTC staff themselves because they would have to require other potential applicants to go through this procedure. In other words, ErisX and Bakkt would also be forced to meet stated standards.

We [LedgerX] had conversations with division level heads that discussed how much of a mess this was and that one of them told me that he felt like ‘a guard in a concentration camp, just following orders from the top.’ These orders were completely divorced from the regulatory framework designed to impartially judge an application’s merit and good standing, and in our view, was based entirely on a personal animus between [Giancarlo] and me because of my blog post.” the latter says.

The same statements are in the letter dated July 11th. It says that a LedgerX application for DCO registration has been considered for 250 days, while federal law provides for a decision period of 180 days. Short argues that the delay is due to “numerous changes in the approach to licensing the company.”

In addition, the letters say that if LedgerX wants to obtain the registration of the trade repository (SDR), it is obliged to report to the division of ICE, which last year began developing the competing trading platform Bakkt.

“Later, we have on voice recording, when ICE staffers thought they had muted their side, that they were instructed to delay support for our SDR reporting so that we could not start trading — something we consider incredibly anticompetitive. 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 [sic] office.”

LedgerX executives said the CFTC litigation entailed “significant costs” and the loss of several employees. Referring to an unnamed journalist, representatives of the company claim that “insiders in power” passed on the information received from them to “large competitors from the private sector”.

If not for gross violations by the chairman of the Commission, LedgerX could well get ahead of Bakkt and launch supplying Bitcoin futures at the end of July, thus becoming the first US-regulated company to introduce such a product. However, the Bakkt platform received this status by presenting the tool on September 23.

Note that in August, LedgerX announced the start of trading in deliverable Bitcoin futures. The company claimed to have licenses to operate as a futures exchange (DCM) and to clear cryptocurrency derivatives (DCO), but the CFTC denied this statement, saying that LedgerX did not actually receive Commission permission to launch this product.

Author: Marko Vidrih