The SEC announced today that it reached a settlement with Poloniex, LLC (“Poloniex”), in connection with the SEC’s inquiry that began back in December 2017 into whether Poloniex operated an exchange under federal securities laws without registering as an exchange. 

Specifically, the SEC alleged that the Poloniex trading platform, from July 25, 2017 to November 4, 2019, met the definition of an “exchange” under federal securities laws by providing a limit order book that matched the orders of multiple buyers and sellers in digital assets—including assets that the SEC alleged were investment contracts under S.E.C. v. W.J. Howey Co., 328 U.S. 293 (1946), and therefore securities.  Despite operation of this alleged “exchange,” Poloniex did not register as a national securities exchange, nor did it operate pursuant to an exemption from registration at any time.  According to the SEC, its failure to do so was a violation of Section 5 of the Exchange Act.

Without admitting or denying the findings in the SEC’s order, Poloniex agreed to cease and desist from further violations and to pay a total of $10,388,209.10 to the SEC, including $8,484,313.99 in disgorgement, $403,995.12 in prejudgment interest, and a civil money penalty of $1,500,000.

Poloniex was represented in the matter by Matthew G. Lindenbaum and Robert L. Lindholm of Nelson Mullins and Grant P. Fondo of Goodwin Procter LLP.