BC Securities Commission cracks down on crypto platform LiquiTrade

BC Securities Commission cracks down on crypto platform LiquiTrade

A mysterious Cayman Islands trading platform is under fire in British Columbia after a recent decision by that province's Securities Commission indicates the platform was in violation of the law.

Enter LiquiTrade's "LATOKEN"

Slogan on the LATOKEN.com website

LiquiTrade was found to have been operating a trading platform that allowed users to trade cryptocurrencies and fiat currencies without the necessary registration, essentially functioning as an unrecognized exchange within British Columbia. An upcoming decision in the next few months might mean sanctions will be placed on the platform.

Dubbed "LATOKEN", the platform enabled users to trade digital assets, hold these assets in wallets controlled by the platform, and advertise significant trading volumes and user registration numbers.

Many crypto exchanges exist in this world; some are regulated by Canadian agencies and some are not

The BCSC panel found that LiquiTrade engaged in trading derivatives since the users' rights to the cryptocurrencies (termed as "Rights" within the platform) were derived from the actual cryptocurrencies that were stored by LiquiTrade. This activity required registration under section 34 of the Act, which LiquiTrade did not comply with.

Section 25: “a person must not carry on business as an exchange or
clearing agency in British Columbia unless the person is recognized by the commission under
section 24.”

Despite the platform's extensive activities in British Columbia, evidenced by the BCSC investigators' experiences and the platform's own marketing efforts, LiquiTrade failed to participate in the hearings or provide any evidence that could suggest exemptions from these regulations.

Investigators went through the effort of depositing some bitcoin into the exchange, and then attempted to withdraw it. But because they didn't have the minimum amount required, they weren't allowed to take it out again due to the company's terms of use.

LiquiTrade's marketing materials were rather interesting; making reference to political and financial figures around the world such as including photos of former presidents of Mexico and even Bulgaria.

“More than 100 senior economists, regulators, government officials, investors, and
bankers have come together to share their views and vision in our roundtable
discussions at the LATOKEN Blockchain Economic Forum.” - Liquitrade Quote cited in the BSCS decision

Further complicating its legal stance, LiquiTrade failed to provide evidence of any exemption that would allow it to operate without the necessary registrations. This lack of compliance led the BCSC to affirm that LiquiTrade was indeed operating illegally as an unregistered exchange in British Columbia, thus putting an end to its unauthorized activities in the province.

The panel eventually concluded that users of LATOKEN weren't actually engaged in the purchase of crypto, but just the contractual rights. This places them into the category of derivatives which are subject to regulation, and thus one of the reasons BCSC got involved in the first place.

The end result for LATOKEN could include sanctions such as fines, or bans.

For Canadians interested in exploring crypto trading platforms, the Canadian Securities Administrators has a list showing authorized and also banned crypto trading platforms. That list can be viewed here

Other crypto bans in Canada:

This isn't the first time Canadian regulators have made moves to curb unregulated crypto exchanges. Catalyx, xt.com, Poloniex and KuCoin have all been banned in the past.

Approximately 15 crypto trading platforms are authorized to operate in the country.