The Empire Strikes back as the SEC shut down an exchange


#1

Guys - what do you think of the SEC starting to shut down exchanges and charge people with fraud?

https://www.sec.gov/news/press-release/2018-23


#2

Did you read the link before posting?


#3

The press release only talks about a specific exchange “BitFunder” and there is nothing about shutting down exchanges.

The Securities and Exchange Commission today charged a former bitcoin-denominated platform and its operator with operating an unregistered securities exchange and defrauding users of that exchange. The SEC also charged the operator with making false and misleading statements in connection with an unregistered offering of securities.

The SEC alleges that BitFunder and its founder Jon E. Montroll operated BitFunder as an unregistered online securities exchange and defrauded exchange users by misappropriating their bitcoins and failing to disclose a cyberattack on BitFunder’s system that resulted in the theft of more than 6,000 bitcoins.The SEC also alleges that Montroll sold unregistered securities that purported to be investments in the exchange and misappropriated funds from that investment as well.

“We allege that BitFunder operated unlawfully as an unregistered securities exchange. Platforms that engage in the activity of a national securities exchange, regardless of whether that activity involves digital assets, tokens, or coins, must register with the SEC or operate pursuant to an exemption. We will continue to focus on these types of platforms to protect investors and ensure compliance with the securities laws,” said Marc Berger, Director of the SEC’s New York Regional Office.


#4

Adafans_io your response to my post is annoying and condescending. I post an article and ask a question and you say did you read the article? How am I supposed to take that?

Did you think your question through before you asked it or you prone to just blurt out passive aggressive responses that question a person’s intelligence because you are emotionally tied to something?


#5

Siddharth most exchanges operate in a similar fashion i.e. they aren’t registered as a “securities exchange” and they do not have all the digital assets as they are more interested in trading fees within their system going back and forth. Additionally, hacks happen and are covered up and only exposed in the case of a digital bank run.


#6

Love the title of the post!

One of the reasons I like Binance…It has offices in Japan which is very crypto friendly.


#7

they tried to cover up the loss of 6000 btc. Good they are caught.


#8

Saline, I think you are only focussing on the wording of “unregistered securities”. In this particular case, hackers stole 6000 bitcoins worth USD 720,000; the founder denied the hacking and even provided false balance statements to the SEC.

It does not make it an acceptable outcome if some people can cover up these hacks. These trading platforms are accountable to the users and who else but the authorities can bring these platforms and hackers to justice?


#9

I am not focusing on anything just merely showing information and requesting a response. If anything there is a reason to infer that this might be common practice among the majority of exchanges considering the majority are unregulated by an agency or self regulation through community best practices.


#10

I think your title may have come across as a bit FUDdy because you used the plural ëxchanges" and the tone of the title seemed to suggest more than one shut down and the intonation was that this was or will be an ongoing behaviour; like saying that the police have started arresting people who break the law. It seems to me that the SEC found foul play and took action. The allegation is that specific fraud/s was/were committed. I don’t think this has any bearing on exchanges per se, just somewhat reassuring that action will be taken against nefarious actors. My opinion is that this is a good thing and shows that authorities are at least only going after those who are ultimately bad for the crypto space. I think that there are some exchanges that are either woefully incompetent or are in the process of fraud or may well lead to exit scams, authorities do well to rout these out and leave us with the honest and capable exchanges and some protections and security.


#11

I don’t get the FUD piece considering I listed a factoid. I completely agree that shutting down fraudulent actors is a good thing.


#12

Just that saying “SEC starts shutting down exchanges” sounds like the SEC are shutting down exchanges and saying that they “start shutting down exchanges” implies the beginning of a trend. When as I understand it, in this case, one person has been charged with committing fraud. Also likening the SEC to the empire that is striking back is kind of suggesting they are taking a strongly anti crypto stance all of a sudden.


#13

In actual fact, their stance is a very comforting one: “We allege that BitFunder operated unlawfully as an unregistered securities exchange. Platforms that engage in the activity of a national securities exchange, regardless of whether that activity involves digital assets, tokens, or coins, must register with the SEC or operate pursuant to an exemption. We will continue to focus on these types of platforms to protect investors and ensure compliance with the securities laws,” said Marc Berger, Director of the SEC’s New York Regional Office.

“As alleged in the complaint, Montroll defrauded exchange users by misappropriating their bitcoins and failing to disclose a cyberattack on the exchange’s system and the resulting bitcoin theft. We will continue to vigorously police conduct involving distributed ledger technology and ensure that bad actors who commit fraud in this space are held accountable,” said Lara S. Mehraban, Associate Regional Director of the SEC’s New York Regional Office."

They are just doing their job and in a way that is not anti-crypto at all. So pretty good really.


#14

How many crypto exchanges are “lawful”? Or in other words what is a “lawful” exchange? I would venture to say that Bitfinex and the Tether situation represents a huge red-flag…is regulation a trend in exchanges? I would say yes.


#15

There are those exchanges that are savvy enough to follow best practice in lieu of any existing letter of the law or regulation, by understanding the spirit of the legislation and any incumbent regulations that are likely to be applicable. Then there are exchanges and actors who are prepared to take advantage of the uncertainty and get away with what they can for as long as they can. Yes, regulation is becoming a trend in centralised points such as crypto exchanges and it is needed. There are decentralised aspects of blockchain and crypto that can’t be controlled by governments and I think the right balance is exactly what we need. Or there will be problems for crypto.


#16

It’s an interesting post and is sure to provoke some lively discussion, so my friendly unsolicited advice is to develop some thick skin. :wink: People get testy because there is So much market FUD surrounding cryptocurrency markets and if anything smells even Remotely like it, there will generally be a negative response.

On to your question, what do (I) think about it? I think we are in a weird space right now for the SEC and the IRS. The last federal regulations called crypto Personal Property (an asset) for taxation purposes. Now we have a rather confused stance that wants us to pay cap gains on each trade (no “exchange loophole”). That’s rather difficult because whenever you trade, say Ethereum for Cardano, you’re generally doing it at no profit (you purchase x amount of Ada for an equivalent market value of ETH). It’s not the same as trading stock, where you Sell your stock for Fiat and then Buy another stock for Fiat. You realize gains in Crypto when you cash out for Fiat, which is of course a normal taxation point (and Has Been, FWIW).

Re: SEC, and I’m not a finance guy or an expert in the field, it’s going to be hard to peg most crypto as a Security. It’s not a debt instrument. There is no corporate ownership or stock associated with it. Technically, I don’t think it fits the bill. It would be good to have someone that is more knowledgable chime in.

I think what’s happening here is that an Exchange might be operating in such a manner that it inadvertently (or intentionally) Creates a security or debt instrument out of crypto. If they do this without a license, well… big brother is definitely watching. Furthermore, the KYC rules are going to be strictly enforced, which I believe is a good thing.


#17

You are really something man)

So you ask this - what do you think of the SEC starting to shut down **exchanges** even if in the links its about only 1 exchange… you clearly didnt read it dude


#18

Okay child.


#19

Hey, 2 ada old dude look what you’ve posted and look what Questions you asked - and stop being aggressive


#20

Uh. I understand you don’t have communication skills so you think “did you the read the link” was an appropriate response for conversation which is what a child would do. They create conflict in a place where there is no conflict. So goodnight child.