CUBE RegNews:
June 12th
CFTC in landmark victory in Ooki DAO litigation
In a significant win for the Commodity Futures Trading Commission (CFTC), US District Judge William H Orrick has granted a default judgment order against Ooki DAO, a decentralized autonomous organization accused by the CFTC of operating an illegal trading platform and unlawfully acting as a futures commission merchant (FCM). The judgment requires Ooki DAO to pay a substantial civil monetary penalty of $643,542, imposes permanent trading and registration bans, and mandates the shutdown of the organization’s website along with the removal of its content from the Internet.
The court determined that the Ooki DAO qualifies as a “person” under the Commodity Exchange Act, establishing a precedent that holds decentralized autonomous organizations accountable for violations of the law. The court further concluded that the Ooki DAO did indeed violate the charges brought against it.
Final banking guidance for third-party risk management
US federal bank regulatory agencies have published final joint guidance designed to help banks manage risks associated with third-party relationships, including relationships with financial technology companies.
The final guidance describes principles and considerations for banking organisations’ risk management of third-party relationships and covers risk management practices for the stages in the life cycle of third-party relationships: planning, due diligence and third-party selection, contract negotiation, ongoing monitoring, and termination.
The final guidance also includes illustrative examples to help banking organizations align their risk management practices with the nature and risk profile of their third-party relationships. The final guidance replaces each agency’s existing general third-party guidance and promotes consistency in the agencies’ supervisory approaches toward third-party risk management.
Read further analysis here.
Financial advisor charged with fraud
The Securities and Exchange Commission (SEC) has taken legal action against Douglas McKelvey, a former financial advisor, for engaging in fraudulent activities resulting in the misappropriation of more than $1.7 million from two elderly brokerage customers, who were also close relatives of McKelvey.
According to the SEC’s complaint, McKelvey, while employed as a registered representative and investment adviser representative at a prominent financial institution’s office in Texas, orchestrated more than 300 unauthorized and fraudulent disbursements from the customers’ accounts between June 2013 and February 2022. These funds were used to make payments on credit cards belonging to McKelvey and his wife, covering their personal expenses. Additionally, McKelvey allegedly sold securities from the customers’ accounts to obtain some of the misappropriated funds, and he took steps to conceal his illicit activities.
CUBE RegNews:
A selected summary of key developments for regulated financial institutions
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