Digital Token Trading Platform Settles Charges for Operating Unregistered Exchange

A digital trading platform settled SEC charges for operating an unregistered exchange that paired purchasers with sellers of securities that are considered "collectible assets."

The SEC charged the trading platform for maintaining and providing a platform, website, app and trading ability that, between July 2018 and November 2021, allowed retail investors in the U.S. to buy and sell securities linked to "collectible assets" such as high-value cars and watches. According to the Order, trading of these securities (i) occurred exclusively on the platform within specific trading windows, (ii) used an algorithm to match orders based on price and time priority and (iii) required confirmation from matched buyers and sellers to execute transactions at a final clearing price. The SEC found that despite marketing the platform as a stock exchange, the operators failed to register it as a national securities exchange or operate under an exemption.

In the Order, the SEC found that the platform met the definition of an exchange under Exchange Act Rule 3b-16(a) ("Definitions of terms used in Section 3(a)(1) of the Act") as it brought together multiple buyers and sellers and used established methods for order interaction. Further, the SEC found that the platform violated Exchange Act Section 5 ("Transactions on unregistered exchanges") by operating as an unregistered exchange.

Without admitting or denying the SEC's findings, the platform agreed to cease and desist from further violations and pay $350,000 civil liability penalty. The SEC considered the platform's cooperation during the investigation in accepting the settlement.