Is Poloniex a Scam? Should We Invest In It?

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Founded in 2013, Poloniex is a digital asset exchange which offers a huge number of cryptocurrencies with lowest trading fees. Read this review to learn more about Poloniex with us!

1. What is Poloniex?

Poloniex was founded in 2013 and purchased by Circle who is a digital asset and financial service company in 2018. In 2019, Poloniex was spun out into the entity Polo Digital Assets which is backed by an Asian investment agency.

As part of the spin-out, Poloniex stopped supporting U.S users and giving them a chance to withdraw their funds on the exchange until 15 December 2019.

Poloniex strives to become one of the most used cryptocurrency exchanges and evolve into an agent of influence and change for the cryptocurrency and digital space.

Banking on its experience and longevity in the cryptocurrency arena, Poloniex has positioned itself to act as a mentor and partner in the industry as well as an active exchange.

There are some key features which offered by Poloniex including

Large cryptocurrency selection & Low trading fee

Poloniex offers a platform for trading cryptocurrencies, non-fungible tokens, and crypto futures. There are over 200 cryptocurrencies available in the exchange.

The trading fees on this exchange are also very low, about 0.1550%. Thus users can get a 30% discount if they pay them in TRON (TRX), as the team of TRON is a partner of Poloniex.

Highly-rated mobile app

Poloniex platform is available on websites and mobile apps for Android and IOS with highly rating in both devices. The app almost has the same features as the website platform, making it convenient for users to access your crypto anytime.

Earn staking rewards

There is a feature of Poloniex called crypto staking in which users are allowed to put their funds to work and earn rewards on them. Users can stake several different cryptocurrencies and there's no lockup period required. They can deposit and withdraw your crypto at any time.

Crypto futures

Moreover, this exchange also offers futures with up to 100-times leverage on Poloniex Futures but not available to residents of some regions.

A futures contract is an agreement to trade an asset at a predetermined price in the future. Futures are extremely risky, and even more so with cryptocurrencies, so they're not recommended unless you're an advanced investor.

NFT marketplace

Poloniex is also partnered with the APENFT marketplace. Poloniex users can access APENFT directly from the exchange. They can also get additional benefits on Poloniex if they own any NFTs from APENFT.

2. How does Poloniex work?

Poloniex is designed for cryptocurrency trading, and specifically swapping different types of cryptocurrency. Poloniex offers over 500 spot trading pairs, so there are all kinds of trades users can make.

Instead of setting up to process cryptocurrency purchases and sales itself, Poloniex allows users to buy cryptocurrencies through a payment processing partner, Simplex. A debit card or credit card are accepted, but fees are on the high side.

Users in supported countries can also buy and sell crypto using a Simplex bank account. Transaction fees are lower with this payment method than with card payments.

3. Poloniex scandal

In May of 2021, Poloniex was charged by the Ontario Securities Commission for violating Ontario securities law.

In August of 2021, Poloniex settled charges with the U.S. Securities and Exchange Commission (SEC) that it was operating as an unregistered national exchange and offered products considered securities under the Howey test. Poloniex paid $10 million in fines to the SEC.

In January 2022, Poloniex ceased all trading in Ontario, announcing that the territory had become a restricted jurisdiction.

On March 9, 2022, the exchange began shutting down its margin and lending products as it worked to build a better trading experience for its users.

4. Is Poloniex safe?

There are some facts about Poloniex that might be considered as red flags for cryptocurrency users:​
  • Poloniex doesn’t commit to any security regulation or any best track record in terms of security.​
  • Hackers stole 97 BTC from Poloniex in March 2014, which was 12.3% of the exchange's supply. In response, it temporarily reduced customer balances by 12.3% and increased trade fees to raise money. It repaid customers in full by July of that year.​
  • A list of alleged account emails and passwords at Poloniex was posted on Twitter in December 2019. According to a Poloniex representative, only 5.5% of the emails on the list were associated with accounts. Those users were required to reset their passwords.​
  • Poloniex agreed to pay the SEC over $10 million in August 2021. The settlement was related to charges for operating an unregistered online digital asset exchange.​
  • Poloniex has connections with Tron founder - Justin Sun who has considerable control over Poloniex and that at one point, he instructed employees to fake the KYC (know your customer) identity verification process to speed up user adoption in 2022. Furthermore, a report claims Sun ordered Poloniex engineers to look for Bitcoin that customers had mistakenly deposited into the wrong type of crypto wallet over the years. In total, 230 BTC were siphoned out of those old crypto wallets to the Poloniex communal wallet. It's impossible to tell where it went after that because of the massive amount of funds going through that communal wallet.​

To sum up, the Poloniex offers some advantages for users trading on their exchange such as low fees and massive cryptocurrency lists are available to trade. However, its history was too turbulent by changing the owner many times thus being charged and banned in Ontario and U.S.

In addition, it's difficult to fully assess Poloniex's security, because the exchange isn't entirely open about what protections it offers. It doesn't have a dedicated security page on its website, and it doesn't explain how much crypto it keeps in cold storage, or if it has any type of insurance.

Therefore, we are not sure if Poloniex is a scam or not but we won't suggest you to invest in it because there are many problems on Poloniex that might cause you loss.​

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