Ontario fines Bybit, bars Kucoin for selling unregistered securities
The Ontario Securities Commission (OSC) has secured fines against two cryptocurrency exchanges, Bybit and KuCoin. The OSC alleges that Bybit and KuCoin had been operating non-compliant exchange platforms that allowed residents of Ontario to trade unregistered securities. The allegations against Bybit involved dealing in crypto-futures contracts. It was alleged that Kucoin dealt in investment contracts involving customers' crypto-assets and crypto-futures.
The Director of Enforcement at OSC, Jeff Kehoe, recently said via a press statement:
Foreign crypto asset trading platforms that want to operate in Ontario must play by the rules or face enforcement action... The outcomes announced today should serve as a clear indication that we refuse to tolerate non-compliance with Ontario securities law.
Bybit cooperated with the OSC's investigation and reached a settlement with the regulator. According to the OSC's press release, Bybit agreed to pay CAD$2.5 million in penalties, as well as providing a legally enforceable undertaking to work with the regulator to bring its business into compliance. In the meantime, Bybit has also undertaken not to accept any new accounts for Ontario-based consumers.
KuCoin did not cooperate with the OSC's investigation and has been barred from participating in Ontario's capital markets. KuCoin is also liable for CAD$2.1 million in penal fines.
The investigations follow a warning from the OSC on 29 March 2021 requiring all crypto asset trading platforms trading in derivatives and securities in Ontario to contact the regulator, or face enforcement action. ByBit and Kucoin allegedly failed to contact the OSC and continued to operate in Ontario. This is a timely reminder that crypto exchanges face enhanced scrutiny from regulators around the globe and to seek appropriate licenses.