In recent years, the cryptocurrency industry has experienced significant growth, with a multitude of new projects, platforms, and tokens emerging to meet the ever-increasing demand. However, with this rapid expansion comes increased regulatory scrutiny and the need for companies operating in the space to ensure compliance with the appropriate legal frameworks.
The SEC has been spying on crypto companies for a long time. Last month, the SEC sent a “Wells Notice” to the cryptocurrency exchange Coinbase as a warning. With this notice, a contention started between the SEC and Coinbase and resulted in Coinbase filing a lawsuit against the SEC. Continuing its investigations on the exchanges SEC, recently accused the crypto exchange Bittrex and its former CEO of running an unregistered exchange.
The SEC’s stance towards exchanges potentially impacts the future of cryptocurrency exchanges and the industry as a whole. It seems that crypto exchanges can only escape possible SEC charges if they unite under regulatory clarifications and frameworks.
Why Was Coinme Punished?
A recent example of this increased scrutiny of SEC on exchanges is the case of Coinme, a cryptocurrency ATM operator that later evolved into a full-fledged exchange. The company faced trouble with the United States Securities and Exchange Commission (SEC) due to claims that it broke securities laws while selling and advertising its crypto token, UpToken (UP).
The SEC has imposed a hefty fine of nearly $4 million on Coinme, accusing the company of offering unregistered securities and disseminating misleading statements concerning its UpToken ICO.
On April 28, the Securities and Exchange Commission (SEC) published an article regarding the charges against Coinme, it’s subsidiary Up Global SEZC, and Neil Bergquist, the CEO of both firms.
The SEC revealed that they have settled charges with Seattle-based company Coinme Inc., it’s subsidiary Up Global, and their CEO Neil Bergquist. They faced accusations of carrying out unregistered offers and sales for a crypto asset named “UpToken” and providing false and deceptive information about the token’s demand and the funds collected during the offering.
”According to the order, from October 16, 2017, to December 15, 2017, Coinme, Up Global, and Bergquist engaged in unregistered offers and sales of crypto asset securities during which, among other things, they marketed the financial benefit that UpToken investors would reap from Coinme purchasing UpToken in the secondary market after the ICO.”SEC Letter.
Up Global has agreed to pay a penalty of $3.52 million, for which Coinme is also liable.
Additionally, separate penalties of $250,000 against Coinme and $150,000 against Bergquist have been imposed, both of whom have agreed to pay their respective fines.
This recent agreement between the SEC and Coinme demonstrates that cryptocurrency exchanges and companies operating in this field are taking a cautious approach in the face of stringent scrutiny. Exchanges need to adhere to regulatory clarity to avoid legal issues and penalties; otherwise, the SEC subjects these organizations to intense examination.