Cryptocurrencies To Watch

Tag: SEC

  • Robinhood’s Chief Legal Officer Could be the Next SEC Chair If This Happens

    Robinhood’s Chief Legal Officer Could be the Next SEC Chair If This Happens

    Robinhood’s chief legal officer (CLO), Dan Gallagher, could be the top candidate to lead the United States Securities and Exchange Commission (SEC) if presidential candidate Donald Trump wins the upcoming 2024 presidential election, Politico reported Monday.

    Gallagher previously served as a Republican SEC commissioner from 2011 to 2015. Before that, he was counsel to SEC Commissioner Paul Atkins, handling matters related to the agency’s enforcement and trading divisions. In recent years, he has criticized the agency’s regulatory stance on crypto assets.

    Donald Trump to Fire SEC Chair Gary on Day One

    The recent report comes after Donald Trump made headlines with his promises to make Bitcoin great again, ensure the federal government holds bitcoin, and fire SEC chair Gary Gensler on day one.

    Trump revealed that if he is elected as president for the second time, he will make many adjustments to fit the masses’ demands, including eliminating ten old regulations for every new regulation.

    Other potential candidates to replace Gensler, should Trump be elected, include former CFTC Chair Chris Giancarlo, former SEC General Counsel Robert Stebbins, and current Republican SEC Commissioner Hester Peirce. According to Axios, Peirce has announced her intention to leave the agency when her term concludes in 2025.

    SEC vs. Crypto

    Over the years, tension between the SEC and the crypto industry has grown. The regulator has repeatedly warned that crypto exchanges must register with the agency, claiming that most crypto assets qualify as securities.

    The securities watchdog has filed numerous lawsuits against prominent crypto firms, such as Coinbase, Kraken, Binance, and others, for alleged violations of securities laws.

    Gensler’s tenure has seen a push to bring many crypto assets under the securities umbrella. The SEC chief recently came under fire, where congress members labeled him the most destructive SEC chair.

    Gensler was accused of inventing the term ‘crypto asset security’ and never provided a framework for defining crypto assets.

  • SEC Charges TrustToken and TrueCoin Over Stablecoin Investment Fraud

    SEC Charges TrustToken and TrueCoin Over Stablecoin Investment Fraud

    The United States Securities and Exchange Commission (SEC) filed a lawsuit against two companies, TrueCoin and TrustToken, for selling a stablecoin called TrueUSD (TUSD) without proper registration and making false claims about its backing.

    TrueCoin issued the TUSD stablecoin, while TrustToken developed and operated TrueFi, a decentralized lending platform that uses the stablecoin to enable lending and borrowing activities.

    SEC Charges TrustToken and TrueCoin

    The SEC alleged that TrueCoin and TrustToken falsely claimed their stablecoin, TUSD, was fully backed by the U.S. dollar from November 2020 to April 2023, contradicting the regulator’s findings. The financial agency reported that the companies invested a substantial portion of TUSD’s backing assets in a speculative offshore investment fund to earn extra returns.

    By March 2022, over $500 million of TUSD’s backing assets were invested in this fund. Despite knowing about redemption problems at the fund since late 2022, the companies continued to falsely assure investors that TUSD was backed one-to-one by the U.S. dollar. In September 2024, about 99% of TUSD’s reserves were invested in the speculative fund.

    Concerning the case, Jorge Tenreiro, Acting Chief of the SEC’s Crypto Assets & Cyber Unit, said:

    “TrueCoin and TrustToken sought profits for themselves by exposing investors to substantial, undisclosed risks through misrepresentations about the safety of the investment, this case is a prime example of why registration matters, as investors in these products continue to be deprived of the key information needed to make fully informed decisions.”

    TrustToken and TrueCoin Agree to Settlement

    TrueCoin and TrustToken have agreed to settle the charges, paying $163,766 each in civil penalties. TrueCoin will also pay $340,930 in disgorgement and $31,538 in prejudgment interest. As part of the settlement, the companies have been prohibited from violating federal securities laws in the future.

    Meanwhile, the SEC is intensifying its crackdown on the crypto industry, with monetary sanctions surging to over $4.6 billion in 2024. Chairman Gary Gensler cites investor protection concerns, but critics argue the approach stifles innovation and drives businesses overseas.

  • Restaurant Project Flyfish Club Settles SEC with $750k Over NFT Violations

    Restaurant Project Flyfish Club Settles SEC with $750k Over NFT Violations

    The United States Securities and Exchange Commission (SEC) has ordered Flyfish Club, a restaurant project, to pay $750,000 for selling unregistered non-fungible tokens (NFTs). This recent development shows that despite claims that the SEC dismisses crypto as securities, the regulatory body’s stance on NFTs remains unchanged.

    SEC Fines Flyfish Club

    SEC issued a cease and desist order against Flyfish Club on September 16, stating the company sold 1,600 unregistered NFTs to U.S. investors, generating $14.8 million in revenue. The NFTs granted access to a proposed Manhattan restaurant, but the financial agency deemed them securities, requiring registration under federal law.

    By classifying the NFTs as securities, the regulatory watchdog assert that Flyfish Club violated registration requirements, resulting in regulatory action. The restaurant project, founded by the NFT enthusiast Gary Vaynerchuk, will destroy its remaining tokens and forfeit future royalties from sales as part of its settlement with the SEC.

    The restaurant, initially funded through the NFT sales, is scheduled to open this month despite the regulatory issues. Vaynerchuk, who gained fame during the 2021 NFT boom, will move forward with the launch while complying with the SEC’s terms. The settlement resolves the regulatory scrutiny surrounding Flyfish Club.

    SEC Officials Criticize Settlement

    SEC Commissioners Hester Peirce and Mark Uyeda criticized the agency’s decision to fine Flyfish Club for selling unregistered NFTs. They claim these NFTs were simply a creative way to sell restaurant memberships and should not be classified as securities.

    The officials expressed concerns that this enforcement action will stifle innovation and could harm the NFT market. Peirce and Uyeda argue that this approach fails to recognize the distinct nature of NFTs and their potential to facilitate new and innovative business models. They further called for more precise guidelines to ensure that innovations are not halted.

    The latest report follows a line-up of the SEC’s regulatory actions against NFT-focused platforms. Last month, the financial regulator issued a Wells notice to OpenSea, a leading NFT marketplace. The timing of the Wells notice has raised questions about whether it influenced Magic Eden’s decision to separate U.S.-based users.

    The SEC’s stance on NFTs is still unfolding and may change as the market expands, and new cases arise.

  • Kraken Replies SEC, Says Crypto Assets Are Not Securities

    Kraken Replies SEC, Says Crypto Assets Are Not Securities

    United States-based crypto exchange Kraken has replied to the U.S. Securities and Exchange Commission (SEC) charges that it offers crypto asset securities and investment contracts. The exchange stated that the SEC violated federal securities laws and that its securities classification is unclear. The agency has expressed regrets for misclassifying crypto assets as securities.

    Kraken Denies SEC Claims

    The SEC filed a case against Kraken, accusing it of violating securities regulations. The agency claims that the exchange offers its users unregistered securities in cryptocurrencies. It adds that Kraken raised billions from U.S. investors without registering to obtain the legal protections required for trading securities. After evaluating the case last month, a California judge ruled that the case would go to trial.

    Kraken has not pleaded guilty to the laid charges. Instead, it has responded to the SEC, claiming it is entirely innocent of the charges brought against it. The exchange states that it was never required to register before operating in the United States. It also maintains that the asset in question does not meet the legal definition of securities according to U.S. laws.

    The filing states, “Kraken admits that it has operated its trading platform since 2013 and that it has not registered with the SEC as a national securities exchange, a broker-dealer, or a clearing agency because it was never required to do so.” It added, “Kraken denies that the term “crypto asset securities” fairly or accurately describes the assets identified by that term and denies that crypto assets “that form the basis of transactions on Kraken are investment contracts, or are themselves securities.”

    Additionally, Kraken claims that the SEC has no authority to regulate its platform. It also added that since the SEC did not clarify its obligations under the law, the exchange lacked fair notice that its conduct was prohibited.

    SEC Admits to Misclassification of Crypto Assets

    The SEC has accused and attacked crypto firms for offering securities to customers in many cases. Therefore, Many in the crypto ecosystem have criticized the agency for opposing crypto adoption in the U.S.

    In an amended complaint, the SEC clarified that it does not classify cryptocurrencies as securities. Instead, it considers the agreements, contracts, and expectations related to crypto promotion as securities.

  • eToro Settles with SEC, Halts Trading Activity For Most Crypto Assets

    eToro Settles with SEC, Halts Trading Activity For Most Crypto Assets

    Popular social trading platform eToro has reached a $1.5 million settlement with the United States Securities and Exchange Commission (SEC). Under the agreement, the company will cease offering trading services for most crypto assets to U.S. customers.

    The SEC noted that since 2020, eToro has functioned as a broker and clearing agency by enabling U.S. customers to trade crypto assets classified as securities through its online trading platform. Still, it failed to meet the registration requirements under federal securities laws.

    The $1.5 million penalty signifies eToro’s agreement to adhere to federal securities laws as it maintains its U.S. operations, according to the announcement.

    eToro Limits Crypto Assets Available for Trading

    eToro, without admitting or denying the SEC’s findings, will liquidate any crypto assets classified as securities that cannot be transferred to customers, returning the proceeds to them accordingly.

    Under the settlement terms, eToro agreed to restrict the crypto assets available for trading in the U.S. to a limited selection and to comply with federal securities laws moving forward. 

    The trading platform noted that its U.S. customers could only trade Bitcoin, Bitcoin Cash, and Ether. eToro further stated that affected users will need to sell all other crypto assets within 180 days, starting September 12.

    “By removing tokens offered as investment contracts from its platform, eToro has chosen to come into compliance and operate within our established regulatory framework. This resolution not only enhances investor protection but also offers a pathway for other crypto intermediaries,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.

    The SEC’s latest move follows a long line-up of regulatory clampdowns on crypto-focused entities. A recent report confirmed that the financial agency has imposed 11 fines worth $4.68 billion on crypto firms and individuals this year alone. The infamous blockchain project Terraform Labs and its founder, Do Kwon, received the biggest civil penalty, worth about $4.5 billion.