FalconX taps regtech Solidus Labs after CFTC’s $1.8m fine

Rick Steves

“Solidus Labs was the ideal partner for us due to their expertise in trade surveillance and deep understanding of crypto. Their crypto-native detection algorithms, designed to rapidly onboard new trading venues, coupled with comprehensive trade and transaction coverage, align with our vision to provide secure, efficient digital asset market access for institutional investors.”

FalconX has partnered with Solidus Labs to bolster its trade surveillance and transaction monitoring capabilities, ensuring robust detection coverage of suspicious activities across FalconX360, its prime brokerage platform.

The institutional digital asset prime broker was recently ordered to pay the CFTC $1.8 million for having acted as an unregistered intermediary facilitating its customers’ trading on various digital asset exchanges. The CFTC detailed that Falcon Labs traded futures and swaps through sub-accounts directly on digital asset exchanges, including Binance.com.

The settlement took place in May and was the first CFTC action against an unregistered FCM that inappropriately facilitated access to digital asset exchanges, according to the regulatory agency.

Following the CFTC’s charges against Binance, Falcon Labs voluntarily adjusted its practices by changing how it collected customer information and updating its know-your-customer (KYC) policies. The stricter KYC measures resulted in FalconX losing half of its Edge customers.

Through its “Edge” product, FalconX functions as a crypto prime broker, providing institutional clients, including some based in the U.S., with access to various crypto exchanges for trading derivatives such as futures and swaps.

FalconX is Crypto’s first CFTC-registered swap dealer

In the follow-up of the settlement, FalconX became Crypto’s first CFTC-registered swap dealer and has tightened its compliance procedures. As part of these efforts, FalconX has selected Solidus Labs for market surveillance due to its crypto-native detection technology uniquely engineered to monitor irregular patterns across multiple venues despite the fragmented nature of the crypto industry, where, oftentimes, market data is limited. This empowers clients like FalconX to adapt to evolving market dynamics and enhance liquidity access by executing on new platforms at scale.

Nicole Vasold, Head of Surveillance at FalconX, said: “Solidus Labs was the ideal partner for us due to their expertise in trade surveillance and deep understanding of crypto. Their crypto-native detection algorithms, designed to rapidly onboard new trading venues, coupled with comprehensive trade and transaction coverage, align with our vision to provide secure, efficient digital asset market access for institutional investors.”

Asaf Meir, Founder and Chief Executive of Solidus Labs, commented:  “As liquidity flows to safety, FalconX stands at the forefront, offering institutional investors access to the deepest digital asset liquidity worldwide. Solidus is proud to empower FalconX and its clients to confidently scale their digital asset portfolios, knowing that their trades are executed in a secure and compliant manner.”

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