Silicon Valley startup Sand Hill Exchange dubbed itself “The New Wall Street,” allowing ordinary people to invest in startups. Now the firm has gotten a taste of what old Wall Street has long since grown accustomed to: tough love from financial regulators.

The Securities and Exchange Commission announced Wednesday that it had shut down Sand Hill’s complex derivatives trading operation and entered a $20,000 settlement with the company over charges that it violated securities trading laws.

Originally envisioned as something akin to a fantasy sports league for startups, Sand Hill eventually promised to offer users the ability to speculate with real money on the price of tech companies that hadn’t gone public yet. Anyone with some spare cash and a hunger for Uber could hop in.

It was “startup investment, democratized,” Sand Hill, based in San Mateo, California, said on its website. “You can trade private companies before they IPO,” the company promised.

The SEC had a dimmer view of the matter. Sand Hill “illegally offered complex derivatives products to retail investors,” the agency said in a statement.

“We were able to act quickly before any losses materialized in this offering that occurred outside the proper regulatory framework,” said Reid A. Muoio, a deputy chief in the enforcement division. Sand Hill’s questionable trades went on for seven weeks before the SEC intervened in early April.

The enforcement action comes as more and more promising startups forgo or delay initial public offerings, content with the funds streaming in from venture capital firms. With more than 100 pre-IPO companies valued at more than $1 billion apiece, a Silicon Valley cottage industry has sprung up offering employees complex financial products that allow them to cash in on big valuations early.

The ability of companies like Pinterest and Airbnb to secure financing in private markets has raised questions of Wall Street’s waning import in a new economy. But as billions of dollars pour into opaque contracts and lightly regulated financial arrangements, others have questioned the soundness of Silicon Valley finance -- and the sanity of its ballooning valuations.

The derivatives Sand Hill offered functioned as so-called contracts for difference, not direct investments in the company. Users would enter into contracts equivalent to one billionth of a company’s valuation, which would pay out at a “liquidity event” -- a buyout, dissolution or initial public offering. They would then win or lose money based on how the price moved. Trading took place on the blockchain, the same technology that settles bitcoin transactions.

In March, Snapchat was going for $17.56. Uber traded at $41.20. Neither of them is a publicly traded company as yet.

The system appeared sound. But as the SEC noted, Sand Hill’s founders “falsely claimed that they were in the process of seeking regulatory approval.”

And unfortunately for Sand Hill, Dodd-Frank essentially outlawed these types of transactions. The company also took a more laid-back attitude toward its investors than the SEC deemed appropriate for participants in swaps trades. “We accept everybody regardless of accreditation status,” Sand Hill advertised.

Now accreditation status shouldn’t matter -- for the SEC or Sand Hill. As the company's updated website makes clear, Sand Hill now exists “for entertainment purposes only.”