UNITED STATES OF AMERICA 

Before the 

COMMODITY FUTURES TRADING COMMISSION 

In the Matter of: 

Deridex, Inc. 

Respondent. 

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CFTC Docket No. 23-42

ORDER INSTITUTING PROCEEDINGS PURSUANT TO 

SECTION 6(c) AND (d) OF THE COMMODITY EXCHANGE ACT, MAKING 

FINDINGS, AND IMPOSING REMEDIAL SANCTIONS

I. INTRODUCTION

The Commodity Futures Trading Commission (“Commission”) has reason to believe 

that, from at least approximately January 1, 2023 to approximately March 2023 (the “Relevant 

Period”), Deridex, Inc. (“Deridex” or “Respondent”) violated Sections 4(a), 4d(a)(1), and 

5h(a)(1) of the Commodity Exchange Act (“Act”), 7 U.S.C. §§ 6(a), 6d(a)(1), 7b-3(a)(1), and 

Commission Regulations (“Regulations”) 37.3(a)(1) and 42.2, 17 C.F.R. §§ 37.3(a)(1), 42.2 

(2022). Therefore, the Commission deems it appropriate and in the public interest that public 

administrative proceedings be, and hereby are, instituted to determine whether Respondent 

engaged in the violations set forth herein and to determine whether any order should be issued 

imposing remedial sanctions. 

In anticipation of the institution of an administrative proceeding, Respondent has 

submitted an Offer of Settlement (“Offer”), which the Commission has determined to accept. 

Without admitting or denying any of the findings or conclusions herein, Respondent consents to 

the entry of this Order Instituting Proceedings Pursuant to Section 6(c) and (d) of the Commodity 

Exchange Act, Making Findings, and Imposing Remedial Sanctions (“Order”), and 

acknowledges service of this Order.1

1

 Respondent consents to the use of the findings of fact and conclusions of law in this Order in this proceeding and 

in any other proceeding brought by the Commission or to which the Commission is a party or claimant, and agrees 

that they shall be taken as true and correct and be given preclusive effect therein, without further proof. Respondent 

does not consent, however, to the use of this Order, or the findings or conclusions herein, as the sole basis for any 

other proceeding brought by the Commission or to which the Commission is a party or claimant, other than: a 

proceeding in bankruptcy or receivership; or a proceeding to enforce the terms of this Order. Respondent does not 
2 

II. FINDINGS 

The Commission finds the following: 

A. SUMMARY 

 Deridex developed, deployed and maintained a blockchain-based digital asset trading 

platform (the “Deridex Protocol”), which it marketed as a “decentralized on-chain derivatives 

platform.” During the Relevant Period, Respondent offered leveraged trading of digital asset 

derivatives to retail and institutional users in the United States and abroad. By accessing the 

Deridex Protocol directly or through Respondent’s website, users could contribute margin 

(collateral), and establish and liquidate positions in “perpetual contracts,” a leveraged derivative 

product whose value was based on the relative price difference between two digital assets. 

 In doing so, Respondent – who has never registered with the Commission – unlawfully 

engaged in activities that could only lawfully be performed by Commission registrants and 

registered entities. Respondent violated Section 5h(a)(1) of the Act, 7 U.S.C. § 7b-3(a)(1), and 

Regulation 37.3(a)(1), 17 C.F.R. § 37.3(a)(1) (2022), by operating a facility for the trading or 

processing of swaps without being registered as a swap execution facility or as a designated 

contract market. Respondent violated Section 4(a) of the Act, 7 U.S.C. § 6(a), by offering to 

enter into, entering into, executing, and/or confirming the execution of leveraged or margined 

retail commodity transactions with U.S. customers who were not eligible contract participants or 

eligible commercial entities2

 (collectively, “ECPs”). Respondent also operated as an 

unregistered futures commission merchant (“FCM”) in violation of Section 4d(a)(1) of the Act, 7 

U.S.C. § 6d(a)(1), by soliciting and accepting orders for swaps and leveraged or margined retail 

commodity transactions and accepting money or property to margin those transactions. In 

addition, Respondent violated Regulation 42.2, 17 C.F.R. § 42.2 (2022), by failing to conduct 

know-your-customer (“KYC”) diligence on its customers as part of a customer identification 

program (“CIP”), as required of FCMs. 

 In accepting the Offer, the Commission recognizes Respondent’s substantial cooperation 

with the Commission’s Division of Enforcement. The Commission also acknowledges 

Respondent’s representations concerning its remediation in connection with this matter. The 

Commission’s recognition of Respondent’s substantial cooperation and appropriate remediation 

is reflected in the form of a reduced civil monetary penalty. 

B. RESPONDENT 

Deridex, Inc. is a Delaware corporation, with its principal place of business in North 

Carolina. Deridex has never been registered with the Commission in any capacity. 

 

consent to the use of the Offer or this Order, or the findings or conclusions in this Order, by any other party in any 

other proceeding.

2

 Eligible commercial entities and eligible contract participants and are defined in Sections 1a(17) and (18) of the 

Act, 7 U.S.C. §§ 1a(17), (18), respectively. 
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C. FACTS 

During the Relevant Period, the Deridex Protocol was a collection of smart contracts on 

the Algorand blockchain that functioned as a blockchain-based digital asset trading platform.3 

Respondent developed, deployed and maintained the Deridex Protocol. Respondent began 

developing the Deridex Protocol in mid-2022 and launched it on the Algorand blockchain on 

January 1, 2023. Respondent also operated a website, https://app.deridex.org/, to solicit orders 

for, and facilitate access to the Deridex Protocol. 

By accessing the Deridex Protocol, any person with a digital asset wallet could contribute 

margin (collateral) and open leveraged derivative positions that Respondent referred to as 

“perpetual contracts,” which provided for the exchange of one or more payments based on the 

relative value of STABL2 and another virtual currency. Users could establish perpetual contract 

positions on a leveraged or margined basis, up to a maximum leverage ratio of 15x, meaning that 

the user’s collateral was required to be worth at least 1/15th (6.6%) of the value of a newly 

established position.4

 To finance the remainder of a leveraged position, the Deridex Protocol 

enabled users to borrow additional digital assets from a liquidity pool, whose assets were 

supplied by other users of the Deridex Protocol (“liquidity providers”) at a fluctuating interest 

rate that was algorithmically determined by the Deridex Protocol’s smart contracts. Respondent 

retained a small portion of the interest paid by users on such leveraged positions, with the 

balance distributed pro rata to liquidity providers. 

The Deridex Protocol was accessible to retail and institutional users in the United States 

and abroad through Respondent’s website, and through direct interaction with the smart contracts 

that constituted the Deridex Protocol. Respondent did not take any steps to exclude U.S. persons 

or non-ECPs. Respondent also did not maintain a CIP, and did not require that any user of the 

Deridex Protocol provide any identifying information as would have been a necessary 

precondition for Respondent to implement KYC and anti-money laundering procedures. 

Deridex, through the Deridex Protocol, held custody of users’ assets through the smart 

contracts that it developed, deployed, and maintained. In addition, Deridex retained substantial 

 

3

 A blockchain is a distributed, shared, immutable ledger that facilitates the process of recording transactions 

and tracking digital assets in a consensus-based network. A smart contract is a piece of computer code that is 

deployed on a blockchain to automatically execute pre-programmed actions when predetermined conditions are met, 

and is often intended to contain all terms of a contract—meaning the software can execute the agreement contained 

in the contract without additional input from the parties. A digital asset is anything that can be stored and 

transmitted electronically and has associated ownership or use rights. Digital assets include virtual currencies, 

which are digital representations of value that function as mediums of exchange, units of account, and/or stores of 

value. A stablecoin is a type of digital asset that is designed to maintain a stable value relative to a national currency 

or other specified reference asset or assets. In addition, the Algorand Standard Asset (“ASA”) technical standard 

allows any individual to develop new digital asset tokens that can be traded on the Algorand blockchain. For 

example, STABL2 is an ASA token, and is a stablecoin that is intended to maintain a stable value relative to the 

U.S. dollar. 

4

 Although the maximum leverage ratio was 15x when establishing a position, Respondent designed the Deridex 

Protocol to allow positions to fluctuate up to a maximum leverage ratio of 30x. If the value of a user’s collateral fell 

below 1/30th of a user’s open positions, the Deridex Protocol was designed to facilitate the rapid liquidation of the 

position by allowing any user of the platform to seize and liquidate the borrower’s collateral, repay the sums 

borrowed from liquidity providers, and retain a share of the residual proceeds. 
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control over the Deridex Protocol. For example, Respondent retained the ability to update 

relevant smart contract code to adjust how the smart contracts operated in order to, among other 

things, suspend trading or prevent users from depositing collateral. 

During the Relevant Period, a notional value of approximately $1.65 million in perpetual 

contracts were traded on the Deridex Protocol. Respondent collected less than $100 in fees on 

those trades. 

After the Division began an inquiry into Deridex’s unregistered activity, Deridex 

promptly took remedial action and provided substantial cooperation with the Division of 

Enforcement’s investigation, which materially assisted the investigation. In particular, Deridex 

took immediate steps to set the Deridex Protocol into a wind-down mode so that no new deposits 

or positions could be made or created, and voluntarily provided relevant information to Division 

staff. 

III. LEGAL DISCUSSION 

A. Deridex Engaged in Unlawful, Off-Exchange Leveraged or Margined Retail 

Commodity Transactions in Violation of Section 4(a) of the Act 

Certain digital assets, including STABL2, are “commodities” under the Act. See, e.g., 

United States v. Reed, No. 20-cr-500 (JGK), 2022 WL 597180, at *3-5 (S.D.N.Y. Feb. 28, 2022); 

CFTC v. McDonnell, 287 F. Supp. 3d 213, 228-29 (E.D.N.Y. 2018); In re Coinflip, Inc., CFTC 

No. 15-29, 2015 WL 5535736, at *2 (Sept. 17, 2015); In re Tether Holdings Limited, 2021 WL 

8322874, CFTC No. 22-04 (Oct. 15, 2021); see also Retail Commodity Transactions Involving 

Certain Digital Assets, 85 Fed. Reg. 37734-01, at 37741 (June 24, 2020) (“As a commodity, 

virtual currency is subject to applicable provisions of the CEA and Commission regulations, 

including CEA section 2(c)(2)(D).”). 

Pursuant to Section 2(c)(2)(D)(iii) of the Act, 7 U.S.C. § 2(c)(2)(D)(iii), any agreement, 

contract, or transaction in any commodity that is entered into with or offered to (even if not 

entered into with) non-ECPs on a leveraged or margined basis or financed by the offeror, 

counterparty, or a person acting in concert with the offeror or counterparty is, with certain 

exceptions, subject to Section 4(a) of the Act, 7 U.S.C. § 6(a), “as if the agreement, contract, or 

transaction was a contract of sale of a commodity for future delivery.”5

 

Section 4(a) of the Act makes it unlawful for any person to offer to enter into, enter into, 

execute, confirm the execution of, or conduct an office or business in the United States for the 

purpose of soliciting, or accepting any order for, or otherwise dealing in any transaction in, or in 

connection with, a commodity futures contract, unless such transaction is made on or subject to 

 

5

 Section 2(c)(2)(D)(ii)(III)(aa) of the Act, 7 U.S.C. § 2(c)(2)(D)(ii)(III)(aa), provides an exception for contracts of 

sale that result in actual delivery within 28 days. That exception is inapplicable to perpetual contract transactions on 

the Deridex Protocol, because (i) the transactions were not physically settled contracts of sale of the underlying 

commodities, but rather involved leveraged financially-settled positions whose value was determined by the price 

difference between two digital assets; (ii) the positions did not require delivery within 28 days, but rather the 

positions could exist perpetually; and (iii) the positions were subject to forced liquidation. See Retail Commodity 

Transactions Involving Certain Digital Assets, 85 Fed. Reg. 37,734-01 at 37,743-37,744 (June 24, 2020). 
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the rules of a board of trade that has been designated or registered by the CFTC as a contract 

market for the specific commodity. 

During the Relevant Period, utilizing the Deridex Protocol and Deridex’s website, 

Respondent offered to enter into, entered into, executed, and/or confirmed the execution of 

leveraged or margined retail commodity transactions with non-ECP persons, in the form of 

perpetual contracts based on the relative prices of two virtual currencies, which did not result in 

actual delivery within 28 days. Deridex conducted an office or business in the United States for 

the purpose of soliciting, accepting, or otherwise dealing in such transactions. These leveraged 

or margined retail commodity transactions were not conducted on or subject to the rules of a 

board of trade that has been designated or registered by the CFTC as a contract market, and 

therefore Deridex violated Section 4(a) of the Act. 

B. Deridex Operated as an Unregistered Swap Execution Facility in Violation of 

Section 5h(a)(1) of the Act and Regulation 37.3 

The SEF registration requirement applies to “multiple-to-multiple” platforms. Section 

1a(50) of the Act, 7 U.S.C. § 1a(50), defines a SEF as “a trading system or platform in which 

multiple participants have the ability to execute or trade swaps by accepting bids and offers made 

by multiple participants in the facility or system, through any means of interstate commerce, 

including any trading facility, that: (A) facilitates the execution of swaps between persons; and 

(B) is not a designated contract market.” 

Section 5h(a)(1) of the Act establishes the SEF registration requirement. The Act 

prohibits any person from operating a “facility for the trading or processing of swaps unless the 

facility is registered as a swap execution facility or as a designated contract market 

[“DCM”] . . . .” 7 U.S.C. § 7b-3(a)(1). Regulation 37.3(a)(1) similarly requires any 

“person operating a facility that offers a trading system or platform in which more than one 

market participant has the ability to execute or trade swaps with more than one other market 

participant on the system or platform” to register as a SEF or DCM. 17 C.F.R. § 37.3(a)(1) 

(2022). 

During the Relevant Period, utilizing the Deridex Protocol and Deridex’s website, 

Respondent operated a multiple-to-multiple trading platform designed to facilitate the trading of 

perpetual contracts, which are “swaps” under the Section 1a(47) of the Act. See CFTC v. HDR 

Global Trading Ltd., No. 1:20-cv-08132, 2021 WL 3722183, at ⁋⁋ 29, 37 (S.D.N.Y. Aug. 10, 

2021) (consent order). However, Deridex did not register the platform as a SEF or DCM. 

Accordingly, Deridex violated Section 5h(a)(1) of the Act and Regulation 37.3(a)(1).

C. Deridex Unlawfully Engaged in Activities That Could Only Lawfully Be 

Performed by Registered FCMs in Violation of Section 4d(a)(1) of the Act. 

Section 1a(28) of the Act, 7 U.S.C. § 1a(28), in relevant part, defines an FCM as any 

individual, association, partnership, corporation or trust that engages in soliciting or in accepting 

orders for or acting as a counterparty in “a swap . . . [or] any agreement, contract, or transaction 

described in . . . section (2)(c)(2)(D)(i)” and, in connection therewith, “accepts any money . . . or 
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property (or extends credit in lieu thereof) to margin . . . trades or contracts that result or may 

result therefrom.” Section 4d(a)(1) of the Act, 7 U.S.C. § 6d(a)(1), in pertinent part, makes it 

unlawful for any person to act as an FCM unless registered with the Commission as an FCM. 

As described above, Deridex, while not registered as an FCM, acted during the Relevant 

Period as an FCM as defined in Section 1a(28) of the Act by soliciting and accepting orders for 

swaps and leveraged or margined retail commodity transactions via the Deridex Protocol. By 

creating and deploying smart contracts that were designed and intended to allow users of the 

Deridex Protocol to contribute collateral and establish leveraged perpetual contract positions, 

Deridex accepted property to margin these transactions. Therefore, Respondent violated Section 

4d(a)(1) of the Act. 

D. Deridex Failed to Adopt a CIP in Violation of Regulation 42.2 

Regulation 42.2, 17 C.F.R. § 42.2 (2022), provides that every FCM shall comply with the 

Bank Secrecy Act and related regulations, which require the FCM to adopt a CIP to facilitate 

KYC diligence on the FCM’s customers. Regulation 42.2 applies to individuals and entities 

acting as unregistered FCMs. See, e.g., HDR Global Trading, 2021 WL 3722183 at ¶ 39 

(finding defendant who acted as an unregistered FCM liable for failing to adopt a CIP as required 

by Regulation 42.2); In re bZeroX, LLC, CFTC No. 22-31, 2022 WL 4597664 (Sept. 22, 2022) 

(same). 

During the Relevant Period, by acting as an unregistered FCM, Deridex was required to 

adopt a CIP but failed to do so. In so doing, Respondent violated Regulation 42.2. 

IV. FINDINGS OF VIOLATIONS 

Based on the foregoing, the Commission finds that, during the Relevant Period, 

Respondent violated Sections 4(a), 4d(a)(1), and 5h(a)(1) of the Act, 7 U.S.C. §§ 6(a), 6d(a)(1), 

7b-3(a)(1), and Regulations 37.3(a)(1) and 42.2, 17 C.F.R. §§ 37.3(a)(1), 42.2 (2022). 

V. OFFER OF SETTLEMENT 

Respondent has submitted the Offer in which it, without admitting or denying the 

findings and conclusions herein: 

A. Acknowledges service of this Order; 

B. Admits the jurisdiction of the Commission with respect to all matters set forth in this 

Order and for any action or proceeding brought or authorized by the Commission based 

on violation of or enforcement of this Order; 

C. Waives: 

1. The filing and service of a complaint and notice of hearing; 

2. A hearing; 
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3. All post-hearing procedures; 

4. Judicial review by any court; 

5. Any and all objections to the participation by any member of the Commission’s 

staff in the Commission’s consideration of the Offer; 

6. Any and all claims that it may possess under the Equal Access to Justice Act, 

5 U.S.C. § 504, and 28 U.S.C. § 2412, and/or the rules promulgated by the 

Commission in conformity therewith, Part 148 of the Regulations, 17 C.F.R. 

pt. 148 (2021), relating to, or arising from, this proceeding; 

7. Any and all claims that it may possess under the Small Business Regulatory 

Enforcement Fairness Act of 1996, Pub. L. No. 104-121, tit. II, §§ 201–253, 110 

Stat. 847, 857–74 (codified as amended at 28 U.S.C. § 2412 and in scattered 

sections of 5 U.S.C. and 15 U.S.C.), relating to, or arising from, this proceeding; 

and 

8. Any claims of Double Jeopardy based on the institution of this proceeding or the 

entry in this proceeding of any order imposing a civil monetary penalty or any 

other relief, including this Order; 

D. Acknowledges that the Commission is the prevailing party in this action for purposes of 

the waiver of any and all rights under the Equal Access to Justice Act and the Small 

Business Regulatory Enforcement Fairness Act of 1996, specified in subparts 6 and 7 of 

Paragraph C of this Section. 

E. Stipulates that the record basis on which this Order is entered shall consist solely of the 

findings contained in this Order to which Respondent has consented in the Offer; and 

F. Consents, solely on the basis of the Offer, to the Commission’s entry of this Order that: 

1. Makes findings by the Commission that Respondent violated Sections 4(a), 

4d(a)(1), and 5h(a)(1) of the Act, 7 U.S.C. §§ 6(a), 6d(a)(1), 7b-3(a)(1), and 

Regulations 37.3(a)(1) and 42.2, 17 C.F.R. §§ 37.3(a)(1), 42.2 (2022); 

2. Orders Respondent to cease and desist from violating Sections 4(a), 4d(a)(1), and 

5h(a)(1) of the Act, and Regulations 37.3(a)(1) and 42.2; 

3. Orders Respondent to pay a civil monetary penalty in the amount of one hundred 

thousand US dollars ($100,000), plus post-judgment interest in the event such civil 

monetary penalty is not paid within ten days of the date of entry of this Order; 

4. Orders Respondent and its successors and assigns to comply with the conditions 

and undertakings consented to in the Offer and as set forth in Part VI of this Order. 

Upon consideration, the Commission has determined to accept the Offer. 
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VI. ORDER 

Accordingly, IT IS HEREBY ORDERED THAT: 

A. Deridex, Inc., and its successors and assigns shall cease and desist from violating 

Sections 4(a), 4d(a)(1), and 5h(a)(1) of the Act, 7 U.S.C. §§ 6(a), 6d(a)(1), 7b-3(a)(1), 

and Regulations 37.3(a)(1) and 42.2, 17 C.F.R. §§ 37.3(a)(1), 42.2 (2022). 

B. Respondent shall pay a civil monetary penalty in the amount of one hundred thousand US 

dollars ($100,000) (“CMP Obligation”), within ten days of the date of the entry of this 

Order. If the CMP Obligation is not paid in full within ten days of the date of entry of 

this Order, then post-judgment interest shall accrue on the unpaid portion of the CMP 

Obligation beginning on the date of entry of this Order and shall be determined by using 

the Treasury Bill rate prevailing on the date of entry of this Order pursuant to 28 U.S.C. 

§ 1961. 

Respondent shall pay the CMP Obligation and any post-judgment interest by electronic 

funds transfer, U.S. postal money order, certified check, bank cashier’s check, or bank 

money order. If payment is to be made other than by electronic funds transfer, then the 

payment shall be made payable to the Commodity Futures Trading Commission and sent 

to the address below:

MMAC/ESC/AMK326 

Commodity Futures Trading Commission 

Division of Enforcement 

6500 S. MacArthur Blvd. 

HQ Room 266 

Oklahoma City, OK 73169 

9-AMC-AR-CFTC@faa.gov 

 If payment is to be made by electronic funds transfer, Respondent shall contact Tonia 

King or her successor at the above email address to receive payment instructions and 

shall fully comply with those instructions. Respondent shall accompany payment of the 

CMP Obligation with a cover letter that identifies the paying Respondent and the name 

and docket number of this proceeding. The paying Respondent shall simultaneously 

transmit copies of the cover letter and the form of payment to the Chief Financial Officer, 

Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW, 

Washington, D.C. 20581; 

C. Respondent and its successors and assigns shall comply with the following conditions 

and undertakings set forth in the Offer: 

1. Public Statements: Respondent agrees that neither it nor any of Deridex, Inc.’s 

successors and assigns, agents or employees under their authority or control shall take 

any action or make any public statement denying, directly or indirectly, any findings 

or conclusions in this Order or creating, or tending to create, the impression that this 

Order is without a factual basis; provided, however, that nothing in this provision