The United States Securities and Exchange Commission has hit cryptocurrency exchange, Poloniex, with a $10 million fine for running “an unregistered online digital asset exchange.” Poloniex was also charged for operating a trading platform that promoted the buying and selling of digital assets that were investment contracts securities.
The SEC revealed that although Poloniex qualifies as an “exchange” because it met all the requirements by the commission, it did not register as a national securities exchange. The company also violated Section 5 of the Exchange Act because it did not operate pursuant to an exemption from registration.
The investigation, which covered the period between July 2017 and November 2019, also revealed that Poloniex workers sold digital assets regarded as securities under the Howey Test. The workers traded these assets in or around August 2017, intending to increase market share.
Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit, stated that the exchange decided to put monetary gains ahead of compliance with the SEC by selling digital assets on their unregistered platform. She further claimed that “Poloniex attempted to circumvent the SEC’s regulatory regime, which applies to any marketplace for bringing together buyers and sellers of securities regardless of the applied technology.”
Poloniex did not admit or deny the SEC’s claim but has agreed to pay disgorgement of $8,484,313, a civil penalty of $1.5 million, and a prejudgement interest of $403,995. The payment totals $10, 388,309, and will serve as a Fair Fund for victims.
Image Credits: Pixabay
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