The U.S. Securities and Exchange Commission has fined cryptocurrency exchange Poloniex LLC $10 million to settle charges of operating an unregistered online digital asset exchange.

The SEC’s order today found that Poloniex, owned by Circle Internet Financial Ltd. since 2018, ran a web-based trading platform that facilitated buying and selling digital assets between July 2017 and November 2019. Some of those assets included investment contracts that are deemed securities under U.S. law.

The SEC went on to say that the Poloniex trading platform met the criteria on an “exchange” as defined by security law because the trading platform provided a nondiscretionary means for trade orders to interact and execute through the Poloniex website, order book and trading engine.

The order finds that notwithstanding its operation of the Poloniex trading platform, the company did not register as a national securities exchange, nor did it operate under an exemption from registration. As such, Poloinex breach Section 5 of the Exchange Act.

Interestingly, the SEC investigation determined that Poloniex employees knew they were skirting securities laws. Employees stated internally that they want to be “aggressive” in making available trading assets that might be considered securities in 2017. In July 2018, Poloniex determined that it would continue doing so despite admitting there was a “medium risk” of those assets being considered securities.

“Poloniex chose increased profits over compliance with the federal securities laws by including digital asset securities on its unregistered exchange,” Kristina Littman, chief of the SEC Enforcement Division’s Cyber Unit, said in a statement. “Poloniex attempted to circumvent the SEC’s regulatory regime, which applies to any marketplace for bringing together buyers and sellers of securities regardless of the applied technology.”

The settlement includes Poloniex agreeing to a cease-and-desist order, paying $8.49 million in disgorgement, $404,000 in pre-judgment interest and a civil penalty of $1.5 million. The order also establishes a fund for the benefit of victims.

The settlement comes less than a month since Poloniex’s owner Circle announced its plans to go public through a special-purpose acquisition company merger. Circle will merge with Concord Acquisition Corp. in a deal that values the company at $4.5 billion.

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