The Securities and Exchange Commission on Wednesday announced a settlement with Florida-based TradeStation Crypto, Inc., over charges related to the unregistered offer and sale of a crypto asset lending product. The company agreed to pay a $1.5-million penalty to resolve the allegations.
What Happened: The SEC's investigation found that starting in August 2020, TradeStation Crypto offered a lending product that promised interest payments to U.S. investors who deposited or purchased crypto assets in a TradeStation account.
The company marketed this product as an opportunity for investors to earn interest on their crypto assets, with TradeStation having full control over the use of these assets to generate revenue for interest payments.
The SEC determined the crypto lending product was offered and sold as a security without the necessary registration or qualifying for an exemption from registration, violating federal securities laws.
On June 30, 2022, TradeStation voluntarily ceased offering the interest feature of its crypto lending product. Furthermore, the company has announced plans to discontinue all crypto-related products and services in the U.S. market by Feb. 22, 2024.
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Why It Matters: Stacy Bogert, Associate Director of the SEC’s Division of Enforcement, emphasized the importance of compliance with federal securities laws, stating, “This case highlights the importance of ensuring that investors benefit from the disclosure requirements provided by the federal securities laws, regardless of the label applied to the offering.”
In addition to the SEC settlement, TradeStation has agreed to pay another $1.5 million in fines to settle similar charges brought by state regulatory authorities, bringing the total settlement amount to $3 million, according to the SEC.
As part of the agreement with the SEC, TradeStation has consented to a cease-and-desist order that prohibits future violations of the registration provisions of the Securities Act of 1933, without admitting or denying the findings of the SEC’s investigation.
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