Case 1:22-cv-23174-RKA Document 1 Entered on FLSD Docket 09/30/2022 Page 1 of 30
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE SOUTHERN DISTRICT OF FLORIDA
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`Commodity Futures Trading Commission,
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`Plaintiff,
`
`v.
`
`
`Adam Todd, Digitex LLC, Digitex Limited,
`Digitex Software Limited, and Blockster
`Holdings Limited Corporation (d/b/a Digitex
`Futures)
`
`
`Defendants.
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`
`
`CIVIL ACTION NO:
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`
`Hon.____________________
`
`Jury Trial Demanded
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`COMPLAINT FOR INJUNCTIVE AND OTHER EQUITABLE RELIEF AND
`CIVIL MONETARY PENALTIES UNDER THE COMMODITY EXCHANGE ACT
`AND COMMISSION REGULATIONS
`
`Plaintiff Commodity Futures Trading Commission (“CFTC” or “Commission”), an
`
`independent federal agency, alleges as follows:
`
`
`
`SUMMARY
`
`1.
`
`Between December 2017 and the present, (the “Relevant Period”), Defendant
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`Adam Todd (“Todd”) owned, built, and operated an illegal digital asset derivatives trading
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`platform through a common enterprise of corporate entities including Defendants Digitex LLC,
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`Digitex Limited, Digitex Software Limited, and Blockster Holdings Limited Corporation. This
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`complaint refers collectively to the entity Defendants listed in the preceding sentence as “Digitex
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`Futures” and the web-based exchange as the “Exchange.” Through the operation of the Exchange
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`and the activities described in greater detail below, Digitex Futures and Todd violated applicable
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`Case 1:22-cv-23174-RKA Document 1 Entered on FLSD Docket 09/30/2022 Page 2 of 30
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`sections of the Commodity Exchange Act (“Act” or “CEA”), 7 U.S.C. §§ 1–26, and Commission
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`Regulations promulgated thereunder (“Regulations”), 17 C.F.R. Pts. 1–190 (2021).
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`2.
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`The Exchange operated from no later than July 31, 2020, the date of its “launch,”
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`through at least May 2022, the approximate date Digitex Futures removed the trading interface
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`from its website (the “Exchange Period”). During the Exchange Period, Digitex Futures accepted
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`customer funds as margin and matched customer orders for digital asset derivatives such as bitcoin
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`futures contracts and ether futures contracts. In connection with its offering of digital asset futures
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`contracts, Digitex Futures allowed users, including customers located in the United States, to trade
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`with leverage of up to 100 to 1.
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`3.
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`Through the operation of the Exchange, Digitex Futures became subject to the
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`requirements under Section 4 of the Act, 7 U.S.C. § 6, to register with the Commission as a
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`designated contract market (“DCM”) or foreign board of trade (“FBOT”), as well as the
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`requirement under Section 4d of the Act, 7 U.S.C. § 6d, to register as a futures commission
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`merchant (“FCM”). Digitex Futures and Todd have never been registered with the Commission
`
`in any capacity and therefore violated 7 U.S.C. §§ 6 and 6d.
`
`4.
`
`Because Digitex Futures also met the statutory definition of an FCM, Regulation
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`42.2, 17 C.F.R. § 42.2 (2021), required it to comply with applicable provisions of the Bank Secrecy
`
`Act (“BSA”), including requirements to implement effective know-your-customer (“KYC”)
`
`procedures and a customer information program (“CIP”). However, Digitex Futures did not have
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`effective KYC procedures at any time nor did it implement an effective CIP, thus violating
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`17 C.F.R. § 42.2.
`
`5.
`
`Digitex Futures’ business model, memorialized in a “white paper” penned by Todd,
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`promised an exchange with commission-free trading. To realize this “futures trader’s Utopian
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`Case 1:22-cv-23174-RKA Document 1 Entered on FLSD Docket 09/30/2022 Page 3 of 30
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`dream,” Digitex Futures planned to require users to margin all trading activity on the Exchange
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`with its “native currency,” a digital asset with the symbol DGTX.
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`6.
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`Digitex Futures was the sole initial source of DGTX. Beginning no later than
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`January 2018, Digitex Futures sold DGTX tokens directly to market participants; although once
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`sold by Digitex Futures, DGTX subsequently traded in the secondary market on third-party digital
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`asset exchanges.
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`7.
`
`In addition to the registration and regulatory violations described above, between
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`approximately May 1, 2020 and at least August 15, 2020 (the “Attempted Manipulation Period”),
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`Todd attempted to manipulate the price of DGTX by engaging in non-economic trading activity—
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`here, trading that was expected to lose money rather than make money—on third-party digital asset
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`trading platforms with the intent to artificially inflate (or “pump”) the price of DGTX to increase
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`the value of the DGTX tokens held by Todd and Digitex Futures and to benefit Digitex Futures by
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`attempting to legitimize its “native currency.” Todd’s attempted manipulation of DGTX violated
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`Section 6(c)(1), 6(c)(3), and 9(a)(2) of the Act, 7 U.S.C. §§ 9(1), 9(3), and 13(a)(2), and
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`Regulations 180.1(a)(1) and 180.2, 17 C.F.R. §§ 180.1(a)(1), 180.2 (2021).
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`8.
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`Unless restrained and enjoined by this Court, Defendants are likely to continue to
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`engage in the acts and practices alleged in this complaint and similar acts and practices, as more
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`fully described below.
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`9.
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`Accordingly, the CFTC brings this action pursuant to Section 6c of the Act,
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`7 U.S.C. § 13a-l, to enjoin Defendants’ unlawful acts and practices and to compel their compliance
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`with the Act. In addition, the CFTC seeks civil monetary penalties and remedial ancillary relief,
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`including, but not limited to, trading and registration bans, disgorgement, restitution, pre- and post-
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`judgment interest, and such other relief as the Court may deem necessary and appropriate.
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`
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`JURISDICTION AND VENUE
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`10.
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`This Court has jurisdiction over this action under 28 U.S.C. § 1331 (federal
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`question jurisdiction) and 28 U.S.C. § 1345 (district courts have original jurisdiction over civil
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`actions commenced by the United States or by any agency expressly authorized to sue by Act of
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`Congress). Section 6c of the CEA, 7 U.S.C. § 13a-1(a), authorizes the CFTC to seek injunctive
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`relief against any person whenever it shall appear to the CFTC that such person has engaged, is
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`engaging, or is about to engage in any act or practice constituting a violation of any provision of
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`the CEA or any rule, regulation, or order thereunder.
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`11.
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`Venue properly lies with this Court pursuant to Section 6c(e) of the Act, 7 U.S.C.
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`§ 13a-1(e), because Defendants transacted business in the Southern District of Florida, and
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`Defendants engaged in acts and practices in violation of the CEA and Regulations within this
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`District.
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`
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`PARTIES
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`A.
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`The CFTC
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`12.
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`Plaintiff Commodity Futures Trading Commission is the independent federal
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`regulatory agency charged by Congress with the administration and enforcement of the CEA and
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`Regulations promulgated thereunder.
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`B.
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`Defendants
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`13.
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`Digitex Limited, Digitex Software Limited, Blockster Holdings Limited, and
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`Digitex LLC are a common enterprise of corporate entities that comprise Digitex Futures, as
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`defined above, which operated the Exchange from an office in Miami, Florida. None of the entities
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`comprising Digitex Futures has ever been registered with the Commission in any capacity. Digitex
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`Limited was registered in the Republic of Seychelles on December 11, 2017. Digitex Software
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`Limited was registered in Ireland on March 8, 2018, and operated in Dublin with a small staff of
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`Case 1:22-cv-23174-RKA Document 1 Entered on FLSD Docket 09/30/2022 Page 5 of 30
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`software developers for several months. At all times relevant to the Proposed Complaint, Todd
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`owned Digitex Limited and Digitex Software Limited. Since at least January 27, 2021, Todd has
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`co-owned Blockster Holdings Limited, a Gibraltar entity. On April 27, 2021, Todd and Blockster
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`Holdings Limited applied to form Digitex LLC in St. Vincent & the Grenadines.
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`14.
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`Defendant Adam Todd is a natural person who resides in Miami, Florida. Todd is
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`the founder and CEO of Digitex Futures. Todd owned and controlled all of the entities comprising
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`Digitex Futures at all times relevant to this complaint. Todd has never been registered with the
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`Commission in any capacity.
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`
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`STATUTORY BACKGROUND AND LEGAL FRAMEWORK
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`15.
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`The purpose of the CEA is to “serve the public interests . . . through a system of
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`effective self-regulation of trading facilities, clearing systems, market participants and market
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`professionals under the oversight of the Commission,” as well as “to deter and prevent price
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`manipulation or any other disruptions to market integrity; to ensure the financial integrity of all
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`transactions subject to [the] Act and the avoidance of systemic risk; to protect all market
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`participants from fraudulent or other abusive sales practices and misuses of customer assets; and
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`to promote responsible innovation and fair competition among boards of trade, other markets and
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`market participants.” Section 3 of the Act, 7 U.S.C. § 5.
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`16.
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`Derivatives are financial instruments such as futures, options, or swaps that derive
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`their value from something else, like a benchmark or a physical commodity. The CEA requires
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`that, subject to certain exemptions, commodity derivative transactions must be conducted on
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`exchanges designated by, or registered with, the CFTC. For example, trading of commodity
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`futures contracts must be conducted on a board of trade designated by the CFTC as a contract
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`Case 1:22-cv-23174-RKA Document 1 Entered on FLSD Docket 09/30/2022 Page 6 of 30
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`market or on a registered foreign board of trade. Section 4 of the Act, 7 U.S.C. § 6; Regulation
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`48.3, 17 C.F.R. § 48.3 (2021).
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`17.
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`A digital asset is anything that can be stored and transmitted electronically and has
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`associated ownership or use rights. Digital assets include virtual currencies, such as bitcoin or
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`ether, which are digital representations of value that function as mediums of exchange, units of
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`account, and/or stores of value. Certain digital assets are “commodities,” including those alleged
`
`herein, as defined under Section 1a(9) of the Act, 7 U.S.C. § 1a(9).
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`18.
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`Some digital assets function as “native” tokens or currencies, which are designed
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`to have specific uses on particular platforms or applications, similar to a poker chip in a casino.
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`19.
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`In recent years, as digital asset markets have evolved, the CFTC has approved the
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`offer of futures contracts, including bitcoin and ether futures and options, on certain digital assets
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`by boards of trade registered with the CFTC such as the Chicago Mercantile Exchange and
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`Chicago Board Options Exchange.
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`20.
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`The provisions of the Act and Regulations that apply to DCMs—i.e., the markets
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`where trading of U.S. futures is required to occur—establish important protections for United
`
`States derivatives markets and market participants. For example, DCMs must conform to core
`
`principles that are designed to achieve the prevention of market abuse, Section 5(d)(12)(A) of the
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`Act, 7 U.S.C. § 7(d)(12)(A); ensure their financial stability, Section 5(d)(21) of the Act, 7 U.S.C.
`
`§ 7(d)(21); protect their information security, Regulation 38.1051(a)(2), 17 C.F.R. § 38.1051(a)(2)
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`(2021); and safeguard their systems in the event of a disaster, Regulation 38.1051(a)(3), 17 C.F.R.
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`§ 38.1051(a)(3) (2021). Further, DCMs must ensure that the contracts they list for trading are “not
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`readily susceptible to manipulation,” Section 5(d)(3) of the Act, 7 U.S.C. § 7(d)(3); DCMs must
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`“prevent market disruption,” Section 5(d)(4) of the Act,7 U.S.C. § 7(d)(4); DCMs must impose
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`Case 1:22-cv-23174-RKA Document 1 Entered on FLSD Docket 09/30/2022 Page 7 of 30
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`position limits designed to reduce the potential threat of market manipulation or congestion,
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`Section 5(d)(5) of the Act, 7 U.S.C. § 7(d)(5); DCMs must establish and enforce rules to minimize
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`conflicts of interest, Section 5(d)(16) of the Act,7 U.S.C. § 7(d)(16); and DCMs must maintain
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`and retain important records and provide them to the Commission, Section 5(d)(18) of the Act,
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`7 U.S.C. § 7(d)(18).
`
`21.
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`An FCM is an individual, association, partnership, corporation, or trust that is:
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`(i) engaged in soliciting or in accepting orders for regulated transactions, including futures, swaps,
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`commodity options, or retail commodity transactions; or (ii) acts as a counterparty to retail
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`commodity transactions; and (iii) which, in connection with these activities, “accepts any money,
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`securities, or property (or extends credit in lieu thereof) to margin, guarantee, or secure any trades
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`or contracts that result or may result therefrom.” Section la(28)(A) of the Act, 7 U.S.C.
`
`§ la(28)(A).
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`22.
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`FCMs can accept and hold customer funds to margin commodity derivative
`
`transactions. They are a critical component of the U.S. financial system, and therefore must
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`comply with applicable requirements under the Act and Regulations. Among the most
`
`fundamental of these requirements is Section 4d(a) of the Act, 7 U.S.C. § 6d(a), which makes it
`
`illegal for any person to act as an FCM unless registered as such with the Commission. FCMs
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`must establish safeguards to prevent conflicts of interest, Section 4d(c) of the Act, 7 U.S.C.
`
`§ 6d(c); segregate customer assets to protect them from the risk of the FCM’s insolvency, Section
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`6d(a)(2) of the Act; 7 U.S.C. § 6d(a)(2); and employ only salespeople who register with the CFTC
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`and meet strict proficiency requirements, Section 4k(1) of the Act, 7 U.S.C. § 6k(1).
`
`23.
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`Regulation 42.2, 17 C.F.R. § 42.2 (2021), requires, among other things, that every
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`FCM shall comply with applicable provisions of the Bank Secrecy Act (“BSA”), regulations
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`Case 1:22-cv-23174-RKA Document 1 Entered on FLSD Docket 09/30/2022 Page 8 of 30
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`promulgated by the Department of the Treasury under the BSA and codified at 31 C.F.R.
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`chapter X, and requirements of 31 U.S.C. § 5318(l) and the implementing regulation jointly
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`promulgated by the Commission and the Department of the Treasury at 31 C.F.R. § 1026.220
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`(2021), which require that a CIP be adopted as part of the FCM’s BSA compliance program.
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`24.
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`FCMs are required to implement effective KYC procedures to verify the identity of
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`any person seeking to open an account, maintain records to verify a person’s identity, and consult
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`lists of known or suspected terrorists or terrorist organizations (such as those created and
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`distributed by the Office of Foreign Asset Control of the United States Department of Treasury
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`(“OFAC”)) to determine whether a person seeking to open an account appears on any such list.
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`See 17 C.F.R. § 42.2 and 31 U.S.C. § 5318(l).
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`25.
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`Regulation 42.2 specifically mandates compliance with 31 C.F.R. chapter X, which
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`requires that every FCM must: (1) implement a written CIP that, at a minimum, includes
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`procedures for verifying the identify of each customer sufficient to enable the FCM to form a
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`reasonable belief that it knows the true identify of each customer; (2) retain records collected
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`pursuant to the CIP; and (3) implement procedures for determining whether a customer appears on
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`any list of known or suspected terrorists or terrorist organizations.
`
`26.
`
`Section 6(c)(1) of the Act, 7 U.S.C. § 9(1), and Regulation 180.1(a)(1), 17 C.F.R.
`
`§ 180.1(a)(1) (2021), make it unlawful for any person, directly or indirectly, in connection with
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`any contract of sale of any commodity in interstate commerce to intentionally or recklessly use or
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`employ, or attempt to use or employ, any manipulative device, scheme, or artifice to defraud.
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`27.
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`Section 6(c)(3) of the Act, 7 U.S.C. § 9(3), and Regulation 180.2, 17 C.F.R. § 180.2
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`(2021), make it “unlawful for any person, directly or indirectly, to manipulate or attempt to
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`manipulate the price . . . of any commodity in interstate commerce . . . .”
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`28.
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`Finally, Section 9(a)(2) of the Act, 7 U.S.C. § 13(a)(2), makes it unlawful for “[a]ny
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`person to manipulate or attempt to manipulate the price of any commodity in interstate commerce.”
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`
`
`FACTS
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`A.
`
`The Digitex Futures Exchange and Products
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`29.
`
`During the Exchange Period, Todd operated Digitex Futures from Miami, Florida.
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`For substantial portions of the Relevant Period, Todd exercised strategic control of all business
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`decisions from Digitex Futures’ Miami office. In addition, throughout the Relevant Period,
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`Digitex Futures conducted major portions of its business from its Miami office, including
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`marketing of the Exchange by Todd and Digitex Futures’ chief marketing officer, and “launching”
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`the Exchange on July 31, 2020—an event that included a YouTube “livestream” broadcast from
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`Florida and interviews of Todd with United States-based “influencers.”
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`30.
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`Digitex Futures offered to enter into or execute, and accepted funds to margin,
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`transactions in off-exchange leveraged digital asset futures to customers in the U.S. and throughout
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`the world. Digitex Futures made the Exchange accessible on its website, available variously at the
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`U.S.-hosted URLs www.digitexfutures.com and www.digitex.io, and through the Digitex Futures
`
`mobile application, until the Exchange was removed from the website in May 2022.
`
`31.
`
`Todd published his “white paper” on the internet on December 5, 2017. The “white
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`paper” is titled “DIGITEX—A commission-free, trustless futures exchange for trading digital
`
`currency prices . . . v.1.1,” and theorizes about a platform with commission-free trading in which
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`all profits, losses, margin requirements, and account balances on the Exchange would be
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`denominated in its “native currency,” DGTX. In lieu of transaction fees for digital asset futures
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`trading, Digitex Futures was to earn revenue by selling DGTX to the Exchange’s market
`
`participants, commencing in January 2018. Out of the contemplated supply of 1 billion DGTX
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`tokens, at least 300 million would be retained by Todd and Digitex Futures.
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`32.
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`Beginning January 15, 2018, customers could obtain DGTX tokens directly from
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`Digitex Futures at the digitexfutures.com or digitex.io websites, or in the secondary market by
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`trading at third-party digital asset exchanges. Todd publicly represented in 2018 that the Digitex
`
`Futures’ initial DGTX token sales raised $5.2 million in 17 minutes.
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`33.
`
`Todd’s business plan called for periodic sales of tranches of DGTX to the public
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`after the launch of the Exchange to generate revenue for Digitex Futures. Sales of DTGX were
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`the sole source revenue for Digitex Futures, consistent with Todd’s “white paper.” Beginning in
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`2019, the Digitex Futures “treasury” sold DGTX tokens to customers at a 5% mark-up over the
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`DGTX price, as published by CoinMarketCap, a third-party aggregator of digital asset-related
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`information.
`
`34.
`
`Traders were required to hold DGTX to participate on the Exchange, where DGTX
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`served multiple specific purposes. For example, traders were required to maintain margin balances
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`denominated in DGTX, minimum “tick sizes” on the Exchange equaled the value of one DGTX
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`token, and traders’ profit-and-loss was denominated in terms of DGTX.
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`35.
`
`DGTX tokens did not confer any ownership rights in the Exchange and did not
`
`permit the token holder to participate in any matters concerning the corporate governance of
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`Digitex Futures.
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`36.
`
`According to Todd’s “white paper,” Digitex Futures intended to offer DGTX
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`futures contracts to Exchange users so users could hedge any price risk associated with their DGTX
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`tokens. These DGTX futures contracts, called a “peg system,” would “allow[ ] anyone who owns
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`DGTX tokens to lock in a sale price at the current market price, whilst keeping physical possession
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`of their DGTX tokens . . . .”
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`37.
`
`DGTX was a digital asset, a digital representation of value that functioned as a
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`medium of exchange, and also traded on web-based trading platforms that were accessible to
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`market participants in the United States, including Todd, and therefore was a commodity in
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`interstate commerce.
`
`38.
`
`During the Exchange Period, Digitex Futures allowed customers to trade at least
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`two futures contracts: bitcoin/USD and ether/USD. Transactions in these futures contracts that
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`were entered into on the Exchange did not occur on a DCM or FBOT; instead, Digitex Futures
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`purported to operate its own unregulated trading platform.
`
`39.
`
`Digitex Futures’ “white paper” provided the standardized contract specifications
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`for its futures contracts, which were fungible contracts that featured a 24-hour duration with an
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`automatic “roll” of any open positions into a new contract at the end of the trading day. A
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`transaction in the Exchange’s futures contracts did not result in a transaction in the underlying
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`digital asset or delivery of the underlying digital asset, and Digitex Futures customers were
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`required to exit a position in the futures contracts through an offsetting transaction on the
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`Exchange.
`
`40.
`
`For each contract listed on the Exchange, the customer interface displayed the
`
`relevant contract’s price, transaction volume over the most recent 24 hours, a 7-day price chart,
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`and the unexecuted orders to buy and sell at various prices that made up the Exchange’s central
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`limit order books, sometimes called price “ladders.” The Exchange’s customer interface also
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`displayed mechanisms by which customers could submit orders, including a button that said
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`“trade.”
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`41.
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`The Exchange allowed customers to place buy and sell orders in an electronic order
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`book and matched customer orders in what it called its “trading engine.”
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`42.
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`The Exchange allowed customers to exchange bitcoin or ether for DGTX, and
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`customers could use DGTX to margin, guarantee, or secure futures transactions on Digitex
`
`Futures.
`
`43.
`
`Digitex Futures acted as the counterparty to transactions on its platform due to its
`
`trading as a “market-maker” in various products.
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`Acceptance and/or Control of Customer Funds
`
`44.
`
`Digitex Futures deployed a smart contract to accept customer funds in the form of
`
`DGTX as margin and controlled the circumstances under which a customer’s collateral was subject
`
`to a margin call.
`
`B.
`
`Todd Controlled Digitex Futures and Operated Digitex Futures as a
`Common Enterprise
`
`45.
`
`At all relevant times, Todd has been the majority shareholder or owner of each of
`
`the various corporate entities that comprise Digitex Futures and has exercised general control over
`
`the Exchange’s operations.
`
`46.
`
`Since January 2018, Todd has controlled virtually all material aspects of the Digitex
`
`Futures business, including strategic decisions, business development, and marketing of Digitex
`
`Futures. For example, Todd has:
`
`a. been responsible for building and overseeing the Exchange’s trading engine;
`
`b. determined the contract specifications of Digitex Futures’ financial products;
`
`c. overseen the development of and deployment of the Digitex Futures’ internal
`market maker trading algorithms, which engaged in proprietary trading on the
`Exchange;
`
`d. signed contracts for Digitex Futures;
`
`e. controlled Digitex Futures’ bank and trading accounts; and
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`f. hired, fired, and determined the compensation of Digitex Futures employees.
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`Case 1:22-cv-23174-RKA Document 1 Entered on FLSD Docket 09/30/2022 Page 13 of 30
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`47.
`
`Digitex Futures operated as a common enterprise at all relevant times. Digitex
`
`LLC, Digitex Limited, Digitex Software Limited, and Blockster Holdings Limited were
`
`interrelated companies that shared common ownership and management through Todd, as well as
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`common employees, software development resources, email domains, office space, and marketing
`
`efforts.
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`48.
`
`Blockster Holdings Limited holds the U.S. trademark on the word “Digitex” and
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`the trademark application described Digitex’s Goods and Services as including the following
`
`items:
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`a. “Cryptocurrency exchange services;”
`
`b. “Cryptocurrency trading services;”
`
`c. “Futures brokerage;”
`
`d. “Futures exchange services;”
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`e. “Agencies for commodity futures trading;”
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`f. “Brokerage houses in the fields of stocks, commodities and futures;”
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`g. “Financial brokerage services for cryptocurrency trading;”
`
`h. “Financial services, namely, dealing in securities as a market maker and trading
`commodities, options, futures, equities and fixed income products in the United
`States and overseas market securities;” and
`
`i. “Financial services, namely, proprietary trading in commodities, securities,
`options, futures, equities and fixed income products in the United States and
`overseas market securities.”
`
`C.
`
`Digitex Futures Failed To Implement an Effective Anti-Money Laundering
`Program, KYC Procedures, or a Customer Information Program
`
`49.
`
`KYC procedures and CIPs collect verifiable customer identifying information such
`
`as a copy of a government-issued ID or beneficial ownership information that allows a financial
`
`services firm like an FCM to know who its customers are and where they are located.
`
`
`
`13
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`Case 1:22-cv-23174-RKA Document 1 Entered on FLSD Docket 09/30/2022 Page 14 of 30
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`50.
`
`During the Exchange Period, Digitex Futures failed to implement an AML program
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`and did not implement any KYC procedures or a CIP that would have enabled it to identify U.S.
`
`persons on the platform—or the true identity of its customers, whether from the U.S. or elsewhere.
`
`51.
`
`In March 2020, Digitex Futures posted a YouTube video of Todd conceptually
`
`disparaging anti-money laundering programs (in particular, KYC procedures) and stating his
`
`refusal to comply with them:
`
`We do not need to do KYC. People are not laundering ethereum into Digitex to
`fund international terrorism. It’s [expletive] ridiculous to say that. I’m calling out
`the charade, for the crock of [expletive] that it is. We are not doing KYC on
`anybody for any reason. . . . We don’t have the right to ask you for those
`documents, you should not have to give them in order to use my product. You
`should not have to give them because the U.S. government or whatever other
`[expletive] government in the world says that you need to. You do not need to. You
`just do not.
`
`52.
`
`Digitex Futures allowed customers to open accounts with only an anonymous email
`
`and password, and did not require that customers provide any additional identity-verifying
`
`documentation.
`
`53.
`
`As Digitex Futures’ CEO and principal owner, Todd had control over whether or
`
`not Digitex Futures would implement an effective AML program, a CIP, or KYC procedures.
`
`D.
`
`Todd’s and Digitex Futures’ Attempted Manipulation of the Price of
`DGTX Tokens
`
`54.
`
`During the Attempted Manipulation Period, Todd attempted to artificially increase
`
`the price of DGTX tokens. As founder and control person of Digitex Futures (and by extension,
`
`the individual who controlled the issuance and primary sales of the Exchange’s “native currency”
`
`DGTX), Todd had inside information concerning the supply of DGTX and ability to impact the
`
`price of DGTX.
`
`55.
`
`Todd’s attempted manipulation generally consisted of trying to drive up, or
`
`“pumping,” the price of DGTX by touting DGTX and the Exchange to increase demand for DGTX
`
`
`
`14
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`

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`Case 1:22-cv-23174-RKA Document 1 Entered on FLSD Docket 09/30/2022 Page 15 of 30
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`and engaging in non-economic trading activity on third-party exchanges to benefit Defendants’
`
`accumulated positions in DGTX. Digitex Futures required customers to own DGTX to trade on
`
`the platform.
`
`56.
`
`The price of DGTX rose sharply during the Attempted Manipulation Period,
`
`consistent with Todd’s communications, as reflected below in the price chart based on data
`
`maintained by CoinMarketCap. This chart shows the price of DGTX between May 1, 2020 and
`
`September 15, 2020; the y-axis is denominated in U.S. dollars.
`
`
`
`
`
`57.
`
`Todd’s scheme to pump the price of DGTX included buying DGTX on third-party
`
`exchanges—notwithstanding Todd’s and Digitex Futures’ ownership of hundreds of millions of
`
`DGTX tokens. Todd’s trading activity on third-party exchanges was intended to increase the
`
`market price that was reflected on those exchanges, which in turn was incorporated into the price
`
`of DGTX as reported by CoinMarketCap. Because Digitex Futures priced its direct sales of DGTX
`
`based on CoinMarketCap’s reported price, Todd’s plan was therefore intended to increase the price
`
`at which Digitex Futures could sell DGTX out of its “treasury.”
`
`58.
`
`Todd’s plan was exemplified by communications and transactions between Todd
`
`and a Digitex Futures’ customer (“Customer A”), who is a U.S. citizen that resided in Illinois
`
`
`
`15
`
`

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`Case 1:22-cv-23174-RKA Document 1 Entered on FLSD Docket 09/30/2022 Page 16 of 30
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`during the Attempted Manipulation Period. In late June 2020, Todd and Customer A began
`
`discussing Todd’s plan to manipulate the price of DGTX to its all-time high price just ahead of the
`
`launch of the Digitex Futures Exchange on July 31, 2020. Todd explained his intention to
`
`influence the price of DGTX to customer A on June 24, 2020, when DGTX was trading at a price
`
`of 3.5 cents per token:
`
`Big exchange listing confirmed for July 3rd so it’s gonna pop then. July 10th we’ll
`announce the big public launch and livestream trading event for end of July with
`$300k of prizes and giveaways on the day and I’ll have a bunch of big influencers
`and trading view traders coming in as guests and talking about how they trade on
`[Digitex Futures]. Price will break ATH1 by this launch I think and then shortly
`after that we’ll drop the Digitex City whitepaper which will be very bullish and
`then we’ll launch the Digitex Spot market and then we’ll announce our first big
`$50m IEO/STO which is Blockster. DGTX price going to go crazy in July dude,
`hang on . . .
`
`59.
`
`And on July 8, 2020, Todd predicted to Customer A: “DGTX will pop on
`
`July 17th.”
`
`60.
`
`Throughout July 2020, Todd promoted the July 31, 2020 Exchange launch on social
`
`media platforms and the Digitex Futures blog and enlisted others to help him generate interest in
`
`DGTX and the Exchange. Todd told U.S. Customer A that “[a] big crypto youtuber is announcing
`
`the launch date on July 17th and he will talk about Digitex on his show for 6 minutes saying that
`
`we’re back from the dead and the exchange is great and there’s loads of users and he’s trading on
`
`there and he loves it and DGTX is going to blow up.”
`
`61.
`
`By July 16, Todd reported to Customer A: “Things are heating up. DGTX at 52
`
`week high.”
`
`62.
`
`Digitex Futures also marketed DGTX’s increasing prices to the public. On July 20,
`
`2020, Digitex Futures tweeted: “Growing demand has pushed the price up by nearly 167%
`
`
`1 ATH is slang for “all time high” in the digital asset space.
`
`
`
`16
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`

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`Case 1:22-cv-23174-RKA Document 1 Entered on FLSD Docket 09/30/2022 Page 17 of 30
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`throughout July. Despite the massive gains already posted, different on-chain metrics suggest
`
`#DGTX is poised for higher highs.” At this time, Digitex Futures did not publicize the fact that
`
`its owner, Todd, was engaged in non-economic trading activity on third-party exchanges for the
`
`purpose of “pumping” the price of DGTX.
`
`63. While soliciting money from Customer A on July 23, 2020, Todd described his
`
`intent to push up the DGTX token price: “I want to do a big pump this week to break our ATH
`
`leading up to the launch day and get the FOMO2 going crazy so if you can get me that $300k by
`
`tomorrow . . . . I’ll spend the lot on buying DGTX over the weekend 💥💰[.]” Customer A wired
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`$300,000 to Todd’s personal bank account on July 23, 2020.
`
`64.
`
`Between July 23, 2020 and the July 31, 2020 Exchange “public launch,” both Todd
`
`and Customer A continued to enter bids (buy orders) on a third-party exchange to purchase DGTX,
`
`putting upward pressure on the price. F