20.04.2024

Crypto exchange Poloniex will pay 10 million dollars in fine

The US Securities and Exchange Commission (SEC) has issued a ruling ordering the payment of a fine of over $ 10 million from the Poloniex cryptocurrency exchange. This is the result of a lengthy regulatory investigation that lasted from July 2017 to November 2019 .

The SEC is confident that Poloniex was engaged in the purchase and sale of «digital assets, which are investment contracts, respectively, they can be classified as securities» – and this is prohibited by law without permission.

We checked the actual data: today Poloniex is in 43rd place in the ranking of spot cryptocurrency exchanges according to Coingecko. The trading volume over the last 24 hours on the platform amounted to the equivalent of $ 158 million, which is a relatively small result for the world famous exchange. At the same time, it supports 223 cryptocurrencies.

For a visual comparison, we present the indicators of the first five cryptocurrency exchanges in this rating. The leader of the top is the Binance exchange with 24 billion dollars in trading volumes in the last 24 hours. Please note that the number of supported coins on the leading platforms is quite comparable to that of Poloniex.

cryptoexchange rating top

Major cryptocurrency exchanges in the industry

And here is a graph of changes in the share of cryptocurrency exchanges in the market over the past 2.5 years. The Poloniex indicator (in blue) ended up lowering over this period.

cryptocurrency exchanges

Change in the shares of cryptocurrency exchanges in the market

Be that as it may, in the near future the platform should have fewer problems.

What’s going on with Poloniex?

The regulator considers securities as investment contracts – assets that give investors the expectation of profit. To sell securities in the United States, you need to have a special license, which Poloniex just does not have. This was the reason for creating problems for the management of the cryptocurrency platform.

Initially, Poloniex informed those wishing to list – that is, add an asset – on its platform that the exchange could not launch trading in tokens, which «are similar in their properties to securities.» In addition, in some cases, the trading floor also resorted to the assistance of lawyers in matters of possible consequences of the listing.

Poloniex exchange buy company

In early 2018, Circle acquired Poloniex for $400 million. It was one of the largest transactions in the history of the crypto market.

But around August 2017, Poloniex said the company wanted to be more «aggressive» in listing new assets – including those that could be considered securities. Thus, the exchange planned to increase its presence in the market, sources say.

Here is a quote from the report of representatives of the Securities and Exchange Commission on this matter, in which they share their attitude to what is happening. Reply leads Decrypt.

The coin listing resulted in Poloniex making available for trading on its platform digital assets that fall into the Howey Investment Contract category. Accordingly, they may be considered securities.

The Howey test is a special evaluation mechanism developed by the US Supreme Court that determines whether certain transactions qualify as «investment contracts». If the asset test is positive, then it is subject to the regulation of the Securities Act of 1933.

Bitcoin coin dollar money

Crypto will rule the world

Poloniex’s management did not accept or deny the SEC’s claims, but agreed to pay $10.3 million in fines and no longer violate securities regulations. As you can see, financial regulators have enough power to significantly influence the business processes of cryptocurrency companies.

That is why, in order to avoid unpleasant incidents, we strongly advise you not to store most of your cryptocurrency reserves on exchanges. It is advisable to do this using separate wallet programs or hardware wallets like Ledger. Acquaintance with the latter we painted in a special material.

wallet ledger device

Ledger Hardware Wallet

We think that this practice of solving problems with the department is quite amusing. Nevertheless, the management of the cryptocurrency platform chose not to deny or confirm the Commission’s accusations, that is, it did not admit its guilt. In this case, the exchange will pay a fine and continue to work without violations. Accordingly, in fact, by its actions, the department in the future will not prevent such situations that affect the state of investors. And other companies simply need to be ready to spend money on lawyers and fines if something happens.

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