The US Securities and Exchange Commission (SEC) has fined cryptocurrency exchange Poloniex $10m for trading unregistered securities in the form of digital assets.
Today we announced that Poloniex LLC has agreed to settle charges for operating an unregistered online digital asset exchange in connection with its operation of a trading platform that facilitated buying and selling of digital asset securities.
According to the regulator's order, between July 2017 and November 2019, Poloniex, through its trading platform, provided US investors with access to buy and sell digital assets that were investment contracts and therefore securities.
According to the SEC, around August 2017, the Poloniex team decided to be more "aggressive" in promoting such assets to increase market share. In July 2018, the company felt that continuing to trade tokens, which could be classified as securities, carried "medium risk" amid rising revenues from it.
"Poloniex chose to increase profits by complying with federal securities laws by including support for recognisable digital assets on its unlisted exchange. The company attempted to circumvent the Commission's regulatory regime, which applies to any marketplace to bring together buyers and sellers of securities, regardless of the technology used," SEC Chief Security Officer Christina Littman said.
Poloniex neither admitted nor denied the regulator's findings and agreed to pay
$8,484,313 in illegally generated income, as well as $403,995 in interest;
A $1.5 million fine.
The total amount was $10,388,309.
In January 2018, the exchange was acquired by bitcoin start-up Circle, allegedly for $400 million. According to media reports, the change of ownership then saved Poloniex from SEC harassment.
However, in November 2019, the platform was bought by a group of investors involving the founder of blockchain project TRON, Justin Sun.
Recall that in May 2021, a lawsuit was filed against Poloniex by the Ontario Securities and Exchange Commission. The regulator accused the platform of unregistered trading in shares and derivatives.