Cryptocurrency derivatives exchange LedgerX has accused former U.S. Commodity Futures Trading Commission Chairman J. Christopher Giancarlo of carrying out a revenge campaign.
LedgerX wrote two letters of complaining about Giancarlo to the CFTC in July, Coindesk reported September 28. Giancarlo is known as “Crypto-Dad” because of his favorable view of the cryptocurrency industry.
Coindesk obtained the letters, written on July 3 and July 11 from the CFTC via a Freedom of Information Act request. In them, LedgerX CEO Paul Chou claimed Giancarlo deliberately sabotaged and delayed its vital derivatives clearing organization (DCO) license application.
“In January, the Chairman called one of our board members and told him that he was going to make sure our DCO order was revoked within two weeks, due to a blog post written by myself the previous year implying that preferential treatment was being given to larger companies so he could ‘cement his legacy,’” Chou wrote in a July 3 complaint to the CFTC. “This refers to the ICE / Bakkt [exchange] approval, which was running into issues that were frustrating the chairman.”
Intercontinental Exchange (ICE) is the parent of the New York Stock Exchange (NYSE). It’s Bakkt platform had also applied for a license to offer physically settled futures contracts. These are futures contracts settled by turning over a physical commodity —in this case, bitcoin—rather than paying out cash.
In the letters to the CFTC, Chou accused CFTC staff of taking steps to delay approval, as well as dirty tricks like requiring it to report to ICE Trade Vault, a product run by ICE, a direct competitor of LedgerX.
The July 3 letter also said that a high-level CFTC staffer admitted the issue to LedgerX, and that the firm’s independent auditor said it “had never seen this kind of thing before.”
The result of this campaign, Chou continued, was a costly attempt to overcome the regulatory roadblocks unfairly thrown up. In a July 11 follow-up letter, LedgerX called the delay a “clear violation of the Commodity Exchange Act.”
The alleged actions delayed LedgerX from starting its business for more than five months, costing the company the prestige of being first to market.
Coindesk reported on September 28 that Chou confirmed the contents of the letter.
Embarrassment and outrage
On July 31, LedgerX announced to great fanfare that it had received the license to offer physically settled futures contracts. Chou told Modern Consensus via email that “CFTC approval to offer physically settled bitcoin futures, options, and swaps to retail investors is the culmination of years of hard work.”
The next day, the CFTC sent out a statement saying that LedgerX had not received the necessary approvals.
That led Chou to launch a profane August 1 Twitter storm, in which he announced plans to sue the CFTC. He accused the CFTC of “breaking the law” and acting “in horrible ‘good faith,’” tweeting, “i have recordings for this type of thing, and i am going to release all of them on twitter until the government does their fucking job.”
LedgerX’s public relations firm, RGPR, quit as a result of the tweets.
Five days later, in an August 6 blog, a more subdued Chou toned down the public accusations, blaming “miscommunication around a single word” for “incorrectly announc[ing] that LedgerX is live with trading futures for retail.”
On September 23, Bakkt launched physically settled cryptocurrency future, although not directly to retail customers, Coindesk reported. The initial results were extremely lackluster.