SEC Charges Crypto Trading Platform for Failing to Register as an Exchange

The SEC charged an online crypto asset trading platform for failing to register with the SEC as an exchange, as a clearing agency and as a broker-dealer of crypto asset securities.

In a Complaint filed with the U.S. District Court for the Northern District of California, the SEC alleged that the trading platform's registration failures created risk for its investors by taking "billions of dollars" in fees and trading revenue without following securities regulations. The SEC said that the trading platform lacked internal controls and adequate recordkeeping practices that would have been required of registered securities intermediaries while holding customer crypto assets of $33 billion in value. Further, the SEC alleged that the trading platform commingled customer assets with its own and that recordkeeping failures caused the trading platform to make material errors on its financial statements. As a result, the SEC asserted that the trading platform violated Exchange Act Sections 5 ("Transactions on unregistered exchanges"), 15(a) ("Registration and regulation of brokers and dealers") and 17A(b) ("National system for clearance and settlement of securities transactions").

The SEC seeks: (i) a permanent injunction preventing further regulatory violations, including from acting as an unregistered exchange, broker, dealer, or clearing agency, (ii) disgorgement of ill-gotten gains and (iii) civil money penalties.