SEC hits the curb with Poloniex fair fund
The Securities and Exchange Commission (SEC) has encountered hurdles regarding the distribution of the money from the Poloniex fair fund.
The Division of Enforcement has requested an extension of time until October 12, 2022 to submit a Proposed Plan of Distribution under Rule 1101(a) of the Commission’s Rules on Fair Fund and Disgorgement Plans.
As FNG has reported, on August 9, 2021, the SEC imposed a Cease-and-Desist Order against Poloniex, LLC.
In that Order, the regulator found that from July 2017 through November 2019, Poloniex operated a digital asset trading platform that meets the definition of an “exchange” under the federal securities laws. The Commission found that Poloniex did not register as a national securities exchange nor operate pursuant to an exemption from registration at any time, in violation of Section 5 of the Securities Exchange Act of 1934.
The Commission ordered Poloniex to pay $8,484,313.99 in disgorgement, $403,995.12 in prejudgment interest, and a $1,500,000.00 civil money penalty to the Commission. The Commission also created a Fair Fund, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, so the penalty paid, along with the disgorgement and interest paid, can be distributed to harmed investors.
The Fair Fund consists of the $10,388,309.10 paid by Poloniex. The Fair Fund has been deposited in an interest-bearing account at the U.S. Department of the Treasury’s Bureau of the Fiscal Service, and any accrued interest will be for the benefit of the Fair Fund.
On November 22, 2021, the Division, pursuant to delegated authority, issued an order that appointed DST Asset Manager Solutions, Inc. as the fund administrator for the Fair Fund and set the administrator’s bond at $10,388,309.10.
Since the issuance of the Appointment Order, the scope of the engagement has changed to require that the fund administrator administer a claims process in connection with any distribution of the Fair Fund. DST’s appointment was based on the original scope of the engagement and DST has informed the staff that it is unable to participate in an engagement requiring a claims process.
Given this development, the Division now states 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.