The BitMEX and Poloniex exchanges have agreed to pay a $2.5 million fine and a $50,000 civil penalty for their role in trading fake tokens on their platforms. The trading of these tokens, which end up being fake and not backed by any gold or silver, is a common occurrence on both exchanges. The trades in the fake tokens are often not reported, with the exchange not even attempting to liquidate these fake assets off their platform.
On Tuesday, August 22, 2018, BitMEX and Poloniex announced they had settled disputes with US regulators. In a joint release, the companies announced they were paying a combined $5 million in penalties to the commission, to settle charges that they had engaged in market manipulation by spoofing bitcoin futures contracts. The companies also agreed to cooperate with the CFTC in its future investigations.
BitMEX and Poloniex have settled with the CFTC, the Commodity Futures Trading Commission. Both firms will pay $300,000 each, and will be required to register as “trading advisors” with the CFTC. The news came as a surprise to many because it is widely believed that BitMEX and Poloniex are the “good guys” in the crypto community.. Read more about gary gensler and let us know what you think.
The term of the week has been “enforcement action.” Several authorities slapped hefty penalties on key figures in the digital asset sector at this time, prompting a dissenting comment from one of their own.
Poloniex and the Securities and Exchange Commission (SEC) have reached an agreement.
Poloniex, a digital asset exchange, was recently accused by the Securities and Exchange Commission (SEC) for selling securities via an unregistered platform. Poloniex has already paid penalties totaling more than $10 million USD to resolve these allegations.
The SEC’s hefty punishment is based on more than just the fact that Poloniex provided unauthorized access to stocks. The SEC discovered throughout its inquiry that Poloniex made a deliberate choice behind closed doors to continue selling such assets in the sake of profit, despite recognizing the error of its ways.
According to Kristina Littman, Chief of the SEC’s Enforcement Division’s Cyber Unit,
“By incorporating digital asset securities on its unregistered exchange, Poloniex chose greater profits above compliance with federal securities regulations… Poloniex tried to get beyond the SEC’s regulatory framework, which applies to any marketplace that brings buyers and sellers of securities together, regardless of the technology used.”
Poloniex’s popularity has decreased over time, but with these accusations behind it, it may be able to reclaim some of it.
BitMEX and the CFTC have reached an agreement.
The SEC isn’t the only agency keeping an eye on the digital asset market. In a similar approach to Poloniex, BitMEX recently stated that it has reached an agreement with the CFTC. BitMEX has agreed to pay a whopping $100 million USD as a result of previous KYC/AML breaches.
BitMEX CEO Alexander Höptner spoke out about the development, emphasizing how critical it is for the exchange to go ahead.
“Today is a watershed moment in our company’s history, and we’re relieved to have it behind us. We’ve developed into the biggest crypto derivatives platform with a fully vetted user base as crypto develops and enters a new age. User verification, compliance, and anti-money laundering skills are not just trademarks of our company; they are also key drivers of our long-term success.”
Surprisingly, despite the growth of digital assets in recent years, the CFTC and SEC have yet to agree on who is in charge of their regulation. We recently brought this up because members of the CFTC, both past and current, made comments that brought the problem to light.
Dissenting Opinion
It has long been known that not everyone at the SEC agrees with the agency’s continuing emphasis on “enforcement-based regulation.” Commissioner Hester Peirce gave a lecture about a year ago that touched on a recent settlement between the SEC and Telegram — a speech in which she expressed her displeasure with the outcome. Now fast forward to the present, and Commissioner Peirce has once again expressed her displeasure with the circumstances surrounding Poloniex.
Poloniex’s refusal to register as a national securities exchange or seek exemption resulted in the settlement with the SEC, as previously stated. Commissioner Peirce emphasizes in his most recent statement that,
“There is just one small issue: throughout the time period in question (mid-2017 to mid-2019), the Commission was treading carefully when it came to regulated companies’ involvement with crypto assets. Poloniex may have attempted to register as a securities exchange or, more likely, as a broker-dealer in order to run an alternative trading system (ATS), a kind of regulated trading venue that may be more suited to non-traditional securities. If it had done so, it would have most certainly waited…and waited…and waited some more.”
“Given how slow we have been in determining how regulated entities can interact with crypto, market participants may understandably be surprised to see us appear now with our enforcement guns blazing and argue that Poloniex was not registered or operating under an exemption as it should have been,” she continues.
Commissioner Peirce, clearly sympathetic to the regulatory uncertainty in which digital asset exchanges have found themselves, thinks that a number of unanswered questions/issues must be resolved going ahead. The SEC will be able to control not just via enforcement, but also by clear and deliberate frameworks as a result of this.
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