B.C. regulator fines offshore crypto trading platform $500K, bans it from financial markets

A phone and representations of cryptocurrencies are seen in this file photo.

A crypto trading platform incorporated in the Cayman Islands has been banned from operating in British Columbia and ordered to pay the provincial regulator $500,000.

A panel of the B.C. Securities Commission imposed the sanctions on LiquiTrade Ltd. in a decision issued Tuesday and published online. 

LiquiTrade did not participate in the sanctions process, according to the decision.

Earlier this year, the BCSC found that LiquiTrade's crypto trading platform LATOKEN, which launched in 2020, was operating as a derivatives market, promoting derivatives and operating as an exchange. It was not registered or authorized to engage in any of those activities under B.C.'s Securities Act. 

The decision notes that LATOKEN no longer allows Canada-based phone numbers or email addresses to set up accounts, though an investigator was able to create an account by using a VPN to change his location to Australia.

The panel considered this change to be a mitigating factor of "moderate value," but concluded that LiquiTrade's conduct still required "a strong message of specific deterrence" from the BCSC.

"Although LiquiTrade has belatedly changed its behavior, LiquiTrade initially chose to ignore our regulatory framework," the decision reads. "LiquiTrade chose to work outside of important requirements which are designed to mitigate some risks faced by investors in this province."

In determining that a $500,000 administrative penalty and a permanent market ban were appropriate sanctions, the BCSC panel also considered the fact that there was no evidence any B.C. residents lost money because of LiquiTrade's failure to register in the province.

Less than one per cent of visits to LiquiTrade's website were from Canadian IP addresses, as of April 2022, suggesting that the number of B.C.-based customers on the LATOKEN platform was small, according to the decision.

Despite this, the panel concluded that its sanctions were necessary to protect the public.

"Regardless of where they are located, platforms that facilitate Canadians' buying and selling of crypto assets must register with provincial or territorial securities regulators and abide by certain conditions to help protect investors," the BCSC said in a news release announcing the decision Tuesday.

The regulator also shared a list of crypto trading platforms authorized to do business in Canada, which can be found on the Canadian Securities Administrators website. 

"The BCSC’s action against LiquiTrade is part of an ongoing, co-ordinated effort by Canadian securities regulators to ensure that crypto trading platforms comply with securities legislation in Canada," the BCSC said.