eToro Settles SEC Charges, Agrees to Pay $1.5M Penalty

• eToro, a multi-asset trading platform, will pay $1.5 million as part of a cease-and-desist agreement with the SEC.
• The SEC determined that the firm was functioning as an unregistered broker and clearing agency for crypto assets classified as securities.

Recently, multi-asset trading platform eToro reached a settlement to address the allegations made by the US Securities and Exchange Commission (SEC). According to the regulator’s press release issued on Thursday, the company has consented to pay $1.5 million concerning this matter.

The SEC’s Accusation Against eToro

The SEC claimed that eToro was functioning as an unregistered broker and clearing agency by utilizing its trading platform to offer and sell cryptocurrencies considered as securities. The federal agency indicated that the firm has been serving US clients “since at least 2020” within that jurisdiction.

The allegations were similar to the language that the SEC has used against other crypto-related exchanges and companies in recent years. To date, the regulator’s efforts targeting the sector have resulted in substantial fines and even the imprisonment of prominent industry figures, such as former Binance CEO Changpeng Zhao. Reports suggest that the agency, led by Chairman Gary Gensler, has collected over $4.6 billion in penalties through its controversial “regulation by enforcement” strategy.

While the trading platform did not admit to the charges, it agreed to pay the financial penalty resulting from the SEC’s findings. Additionally, the commission required the firm to halt any further offerings or sales of assets deemed as securities.

The SEC instructed eToro to return the crypto assets in question to customers. If that is not feasible, the company should liquidate the existing positions related to those assets. eToro has 187 days from receiving the order to complete these actions.

In response to the order, eToro notified users that its platform would offer a 180-day period for them to manually close their trades involving the affected digital assets. If they do not act, the platform will automatically liquidate the positions before the SEC’s deadline.

It is important to note that the SEC permitted eToro to continue facilitating trades in Bitcoin (BTC), Bitcoin Cash (BCH), and Ethereum (ETH) until further notice.

“By removing tokens considered as investment contracts from its platform, eToro has opted to comply and operate within our defined regulatory framework,” commented Gurbir Grewal, Director of the SEC Division of Enforcement. “This resolution not only bolsters investor protection but also provides a pathway for other crypto intermediaries.”

“The $1.5 million fine demonstrates eToro’s agreement to stop violating relevant federal securities laws as it continues its operations in the U.S.,” the official added.