The British Columbia Securities Commission (BCSC) has uncovered that Liquitrade's cryptocurrency trading platform, Latoken, was operating unlawfully. The BCSC's thorough investigation revealed that the platform misled its users by offering contractual rights instead of actual crypto assets.
**Latoken's Misrepresentation: Contractual Rights Over Crypto Assets**
On the 3rd of July, the BCSC disclosed that Liquitrade Ltd. had been running Latoken without official authorization, constituting an illicit exchange within the region. The BCSC's investigative panel discovered that, contrary to claims, Latoken's users were not engaging in the purchase and sale of crypto assets.
Rather, the transactions involved contractual rights linked to these assets, granting users the ability to request future withdrawals. These rights, as determined by the panel, are classified as derivatives, their value dependent on the associated crypto assets. The BCSC elaborated in a **statement**:
"Liquitrade, unregistered under the Securities Act, nonetheless enabled trading through various methods. This included establishing a market for derivatives trading and promoting derivatives available on LATOKEN. LiquiTrade was found to be functioning as an exchange without the BCSC's authorization, a requirement stipulated by the Act."
**Potential Sanctions Looming Over Liquitrade**
Prior to its recent announcement concerning Liquitrade's Latoken operations, the BCSC had issued a **warning** in November 2022. It stated that Latoken's parent company, based in the Cayman Islands, lacked recognition from the Commission. Liquitrade was instructed to attend a meeting at the BCSC's offices on January 10, 2023, preceding the commencement of a hearing on its operations.
Nonetheless, as reported by CNBC, Liquitrade **failed** to engage in the investigation as directed, despite being kept informed by the BCSC. The Commission's panel is now contemplating appropriate sanctions, which could range from financial fines to prohibitions on market activities.
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