OSC holds global crypto asset trading platforms accountable

Successful enforcement actions lead to monetary sanctions, market participation ban

TORONTO – The Ontario Securities Commission (OSC) announced today the outcome of two successful enforcement actions against non-compliant crypto asset trading platforms.

A panel of the Capital Markets Tribunal today approved a settlement agreement between the OSC and Bybit Fintech Limited (Bybit), incorporated in the British Virgin Islands, for failing to comply with Ontario securities law.

In a separate decision, a panel of the Capital Markets Tribunal ordered substantial monetary sanctions and a permanent market participation ban against Mek Global Limited, incorporated in the Republic of Seychelles, and PhoenixFin Pte. Ltd., incorporated in Singapore (collectively, KuCoin) for failing to comply with Ontario securities law.

Bybit and KuCoin both operate unregistered crypto asset trading platforms and allowed Ontario investors to trade securities without a prospectus or any exemption from the prospectus requirements.

“Foreign crypto asset trading platforms that want to operate in Ontario must play by the rules or face enforcement action,” said Jeff Kehoe, Director of Enforcement at the OSC. “The outcomes announced today should serve as a clear indication that we refuse to tolerate non-compliance with Ontario securities law.”

The OSC successfully obtained orders permanently banning KuCoin from participating in Ontario’s capital markets and requiring KuCoin to pay an administrative penalty of CAD $2,000,000 and a further $96,550.35 towards the costs of the OSC’s investigation.

Unlike KuCoin, Bybit responded to the OSC’s enforcement action, maintained an open dialogue, provided requested information, and committed to engaging in registration discussions. As part of a settlement agreement, Bybit has disgorged USD $2,468,910 and paid a further CAD $10,000 towards the cost of the OSC’s investigation. Bybit has also given an undertaking to the OSC, which holds the firm accountable for taking steps to bring its operations into compliance. This undertaking represents a legally enforceable commitment by Bybit to the OSC.

In addition, while registration discussions are ongoing, Bybit confirms that it will not accept new accounts for Ontario residents, offer any new products to existing accounts held by Ontario investors, or engage in any marketing and promotional activities targeted at Ontario residents. If registration discussions fail, Bybit confirms that it will wind up its Ontario operations.

For existing Ontario retail investors, Bybit confirms that it will require investors to wind down their positions in certain restricted products, such as contracts that involve leverage, margin, or the extension of credit. Any funds or assets remaining in Ontario retail investor accounts may be used for non-restricted products or withdrawn from the Bybit platform.

On March 29, 2021, the OSC warned crypto asset trading platforms that offer trading in derivatives or securities in Ontario that they must contact the OSC or face enforcement action. The warning included a deadline of April 19, 2021 for such platforms to start registration discussions. Despite this warning, Bybit and KuCoin did not contact the OSC by the deadline and continued operations in Ontario.

The OSC will continue to take action against non-compliant crypto asset trading platforms and are in contact with international securities regulators to exchange information to support enforcement action.

The OSC thanks the British Virgin Islands Financial Services Commission for their assistance in the Bybit matter, and the Seychelles Financial Services Authority for their assistance in the KuCoin matter.

All crypto asset trading platforms registered in Ontario are listed on the Registered Crypto Asset Trading Platforms page on the OSC’s website.

Investors are encouraged to check the registration of any person or business trying to sell investments or offer investment advice. This can be done by visiting the Check Before You Invest or the Registered Crypto Asset Trading Platforms pages on the OSC website. Investors can also sign up for email notifications when new warnings and alerts are issued and can follow the OSC’s Twitter feed at @OSC_News.

The mandate of the OSC is to provide protection to investors from unfair, improper or fraudulent practices, to foster fair, efficient and competitive capital markets and confidence in the capital markets, to foster capital formation, and to contribute to the stability of the financial system and the reduction of systemic risk. Investors are urged to check the registration of any persons or company offering an investment opportunity and to review the OSC investor materials available at http://www.osc.ca.

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