US Securities And Exchange Commission Charges Digital Asset Trading Platform Founder For Operating Unregistered Exchange

Author:Shearman & Sterling LLP
Profession:Shearman & Sterling LLP

On November 8, 2018, the Securities and Exchange Commission has accused the founder of a digital asset trading platform of failing to register as a national securities exchange. Without admitting or denying the charges, the founder agreed to pay $300,000 in disgorgement and a $75,000 penalty, and to cease and desist from future violations of Section 5 of the Securities Exchange Act of 1934.

The SEC said that the trading platform facilitated secondary market trading of ERC20 tokens, which are a type of digital asset issued and distributed on the Ethereum blockchain. The platform provided a marketplace that matched buyers and sellers of digital assets through the use of its order book, using smart contracts to validate, confirm and execute orders.

The SEC alleges that over an 18-month period, the digital asset trading platform handled more than 3.6 million buy and sell orders for ERC20 tokens that were securities. Further, approximately 92% of this trading took place after the SEC issued the DAO Report, in which the SEC...

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