In re Coinflip, Inc., d/b/a Derivabit

Francisco Riordan (defendant) was the founder of Coinflip, Inc. (defendant). Among other things, Riordan designed, implemented, and oversaw Coinflip’s operations. Coinflip did business as Derivabit. Until March 2014, Derivabit offered Bitcoin options. Between March 2014 and July 2014, Derivabit offered a platform for the purchase and sale of over-the-counter Bitcoin forward contracts. Specifically, Derivabit connected buyers and sellers of various put- and call-option contracts for which Bitcoin was the underlying asset. Derivabit’s users posted bids or offers for option contracts designated by Derivabit, which Derivabit would confirm by communicating with the users via Derivabit’s website. Coinflip did not register Derivabit with the Commodity Futures Trading Commission (CFTC) as either a swap-execution facility or a designated contract market. The CFTC instituted an administrative proceeding against Coinflip and Riordan, alleging that they violated §§ 4c(b) and 5h(a)(l) of the Commodity Exchange Act and CFTC Regulations 32.2 and 37.3(a)(l) by engaging in commodities-options activities and by operating a facility for the trading or processing of swaps without registering as a swap-execution facility or as a designated contract market. Coinflip and Riordan made a settlement offer to the CFTC, which made certain findings in connection with its acceptance of Coinflip and Riordan’s settlement offer.