Poloniex implemented its plan and made it available for trading on its platform digital assets that were investment contracts, which are considered securities under Howey. . Around July 2018, the company continued to provide its users the ability to trade digital assets that were at “medium risk” of being considered as securities under Howey. As a result, the company operated an unregistered cryptocurrency exchange, according to the SEC Order.
Poloniex agreed to settle without admitting or denying the findings of the SEC. The company agreed to pay disgorgement of $8,484,313, prejudgment interest of $403,995, and a civil penalty of $1.5 million. The total settlement amount is $10,388.309.
In addition, the company agreed to the entry of a cease-and-desist order. The SEC will establish a Fair Fund for the benefit of the company’s victims.
In a statement, SEC Enforcement Division’s Cyber Unit Chief Kristina Littman said, “Poloniex chose increased profits over compliance with the federal securities laws by including digital asset securities on its unregistered exchange.” She added that the company tried to “circumvent” the Commission’s regulations, which apply to any exchange that brings together securities traders.
