Speaking at CoinDesk’s Consensus 2019 conference in New York, the Securities and Exchange Commission (SEC) Advisor for Digital Assets and Innovation, Valerie Szczepanik, warned of legal trouble awaiting exchanges that list IEOs and do not follow broker-dealer activity requirements.
“Platforms seeking to list these tokens for a listing fee, or bring buyers to the table for issuers, are probably engaging in it. If they are not registered, they will find themselves in trouble in the US, if they have a US issuer, or US buyers if they are operating on the US market,” said the commissioner.
In her comments, Szczepanik referred to one specific case of a platform breaking the broker-dealer activity requirements and paying the price for that infringement, namely TokenLot – a self-proclaimed “ICO superstore” which closed operations back in 2018 “due to the ever-changing regulatory landscape of the cryptocurrency space” according to an announcement on the company’s website.
“This was a platform that was assisting to bring buyers to ICOs… In that case, there was an enforcement action charging the platform with acting as an unregistered broker-dealer and participating in the distribution in violation of the registration provisions,” said Szczepanik.
As a result of that action, TokenLot settled to pay US$471,000 in disgorgement, plus US$7,929 in interest and another US$45,000 from both founders of TokenLot.
Valerie Szczepanik is the co-author of the SEC’s updated crypto regulatory framework published in April 2019.