This week, the Securities and Exchange Commission (SEC), Division of Enforcement, requested an extension pertaining to the disgorgement of funds affiliated with Poloniex.
To go back in time a bit, Poloniex is one of the few crypto exchanges that the SEC has targeted with an enforcement action. At one point it was an independent operation, then acquired by stablecoin issuer Circle, only to be sold at a later date. It was rumored that Circle acquired Poloniex for around $400 million as it sought to “accelerate the emerging token economy.”
After Poloniex was no longer part of Circle, the crypto exchange was hit by an SEC enforcement action alleging that the crypto marketplace was operating an unregistered digital asset exchange.
Poloniex had the difficult decision of battling an entity with unlimited resources or calling it a day and settling the charges. Without admitting nor denying the SEC claims, Poloniex settled. At that time, SEC Commissioner Hester Peirce took moment to criticize the SEC’s inclination to regulate by enforcement, highlighting the fact that the SEC could be more supportive of Fintech innovation and maybe the Commission should find a path beyond enforcement to work with crypto marketplaces.
This week, in a blast from the not-so-distant past, the SEC requested a delay in settling the matter because the “scope” has changed. The Division of Enforcement now claims that it needs “additional time to solicit and appoint a fund administrator able to execute a claims process and to develop and propose a plan of distribution.” The selected fund administrator apparently was not up to the task and now the SEC needs to find another entity to manage the settlement. It was not immediately clear how the scope enlarged as the amount of the penalties remained the same
The SEC has ordered Poloniex to pay $8,484,313.99 in disgorgement, $403,995.12 in prejudgment interest, and a $1,500,000.00 civil penalty. This has yet to be distributed to the “harmed investors” although it has been paid.
As for Poloniex, after moving around a bit and being “spun out” from Circle, it is still in operation – it just does not accept US investors.