This Crypto Firm Faces a $3M Fine for Selling Crypto Products Without a License

9 months ago 3

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The United States Securities and Exchange Commission (SEC) has filed charges against TradeStation Crypto for reportedly operating a crypto lending product without possessing an appropriate securities license.

The SEC argues that TradeStation Crypto failed to meet the requirements for a registration exemption, consequently exposing it to a significant fine.

TradeStation Crypto Faces Hefty Fines

A recent statement reveals that the platform advertised to customers the potential for their crypto assets to earn interest. However, it was disclosed that the platform retained sole control over the utilization of these assets to generate income.

“TradeStation marketed the interest feature as a way for investors to earn interest and “Put your crypto assets to work for you,” and TradeStation had complete discretion over how to deploy the assets to generate revenue to pay interest to investors.”

The SEC imposed a $1.5 million penalty on TradeStation, alongside an additional $1.5 million fine levied by state regulators. However, it’s important to note that the settlement agreement does not entail TradeStation admitting to the SEC’s findings.

Furthermore, the SEC issued a cease-and-desist order against TradeStation Crypto.

However, the firm explicitly declares on its website that it lacks licensing from the SEC or the Commodities Futures and Trading Commission (CFTC).

The SEC has been clamping down on crypto firms for unregistered securities sales in recent times.

SEC Recent Legal Action Against Crypto Firms

In July 2023, the SEC targeted the smart contract auditing firm Quantstamp for raising $28 million through an Initial Coin Offering (ICO) of unregistered securities.

In August 2023, the SEC charged Los Angeles-based media and entertainment company Impact Theory with conducting an unregistered offering of crypto asset securities. The action was the first enforcement action of its kind against NFTs.

BeInCrypto reported that the firm purportedly enticed investors by promising them profits if the company achieved its objective of “building the next Disney.”

Both these aspects posed legal concerns. According to the Howey Test, key traits of a security include the “expectation of profit” and the “efforts of others.”

Impact Theory appeared to have made such interpretations markedly easier with its hype the NFTs.