A pair of crypto firms that operated an unregistered crypto trading platform, Phemex Ltd. and Phemex Technology Pte. Ltd., have now been sanctioned by Ontario’s Capital Markets Tribunal.
Last December, the tribunal ruled that Phemex violated Ontario securities law when it operated a crypto trading platform without complying with registration and prospectus requirements — including trading without registration and illegally distributing securities.
Specifically, between late 2019 and early 2023, the platform traded over US$74 million in the tether stable coin (USDT) for investors in Ontario via its mobile apps — generating 39,712 in USDT in trading fees.
Now, following a hearing, the tribunal has permanently banned the firms and ordered them to pay almost $500,000. That amount includes a $300,000 penalty, $135,000 in costs, and an order to disgorge US$39,712 (since USDT traded at par with the U.S. dollar).
According to the tribunal’s ruling, Phemex didn’t oppose the permanent ban, or the disgorgement order — it began blocking Ontario-based IP addresses in 2023. However, it did oppose the penalty and costs orders sought by the Ontario Securities Commission (OSC).
The panel imposed a lower penalty than the $500,000 the OSC had requested, reasoning that Phemex’s cooperation with the regulator warranted a smaller penalty.
At its enforcement hearing, Phemex and the OSC jointly filed an agreed statement of facts, and the company admitted that it breached securities rules.
“The penalties in earlier crypto cases often reflect not only the seriousness of the conduct at issue, but also the grave aggravating factor of noncooperation,” the panel said in its decision. “By contrast, we have found the respondents’ cooperation in this case to be a mitigating factor.”
In addition to deterring misconduct, “The penalty should also foster engagement with the regulatory process,” the panel said, in imposing a $300,000 penalty.
“Absent the respondents’ cooperation, a higher administrative penalty would have been appropriate,” it said.
While the tribunal imposed a lower penalty, it upheld the OSC’s requested costs order.
According to its decision, the firm argued that the costs sought by the commission were excessive, and didn’t reflect its cooperation. It called for a costs order of around $75,000 instead.
However, the tribunal rejected that argument, saying that the firm’s cooperation was factored into the penalty calculation. Also, it said the fact that this cooperation came relatively late in the proceedings meant that OSC staff still had to go to the expense of preparing for a contested hearing.
“Although the late agreement did shorten the hearing considerably, this is already reflected in the [OSC’s] bill of costs,” it noted. “We therefore find it to be in the public interest to grant the costs order sought by the commission.”