SEC Files Charges Against Crypto Asset Trading Platform for Registration Failures

The SEC filed charges against a trading platform and its CEO for operating as a broker-dealer, an exchange and a clearing agency of crypto asset securities without registering with the SEC.

In a Complaint filed with the U.S. District Court for the Western District Court of Washington Seattle Division, the SEC alleged that the trading platform operated as an unregistered (i) broker-dealer by soliciting investors, overseeing customer funds and assets, and collecting a fee for its services and (ii) clearing agency by holding customers' assets in a digital wallet and facilitating their transactions. Additionally, the SEC stated that the trading platform coordinated with its foreign affiliate to operate as an unregistered exchange by providing a marketplace for the buying and selling of crypto assets.

Among others, the SEC alleged that the trading platform directed issuers to remove any language from public statements that would alert the SEC to crypto asset-related activities in order to conceal the "true nature" of its operations. The SEC stated that the trading platform raised $1.3 billion in revenues from investor transaction fees.

As result, the SEC claimed that the trading platform and CEO violated Exchange Act Sections 5 ("Transactions on unregistered exchanges"), 15a ("Registration and regulation of brokers and dealers"), and 17A(b) ("National system for clearance and settlement of securities transactions").

The SEC asked that the Court issue an Order against the trading platform and CEO that includes (i) permanent enjoinment from further regulatory violations, (ii) disgorgement of any ill-gotten gains, (iii) prohibiting further use of means to act as a broker-dealer or clearing agency and (iv) a civil monetary penalty.