CFTC: Tera Exchange failed to enforce prohibitions against circular trading schemes

The US Commodity Futures Trading Commission (CFTC) has charged Tera Exchange for failing to enforce prohibitions against circular trading schemes.

According to the CFTC, wash trading and prearranged trading were conducted between counterparties on its platform without intervention.

Both trades are illegal in CFTC-regulated venues and elsewhere, and are prohibited according to Tera’s own rulebook. Such trades give a false impression of activity to other market participants and can be employed to manipulate prices for unfair gain.

Tera allegedly brought the two participants together, telling one that the trade would be “to test the pipes by doing a round-trip trade with the same price in, same price out, no custodian required.” The startup then allegedly issued a press release and made statements at the CFTC’s Global Markets Advisory Committee (GMAC) announcing the transactions, giving the impression of genuine trading interest in contracts on its platform.

The charges by the CFTC against Tera were simultaneously settled, with the regulator requiring that the platform cease and desist from future violations.

The U.S. Commodity Futures Trading Commission is an independent agency of the US government created in 1975, that regulates futures and option markets. Tera Exchange is a bitcoin derivatives platform.