TradeStation Crypto, a prominent trading platform, has agreed to a settlement with the United States Securities and Exchange Commission (SEC) and a coalition of state regulators. The settlement, announced on February 6, comes after allegations that the company failed to register an interest-bearing crypto lending product. As part of the agreement, TradeStation Crypto will pay $3 million in penalties, divided between the SEC and 26 state regulators.
The SEC’s investigation revealed that from August 2020 to June 30, 2022, TradeStation Crypto offered a product allowing U.S. investors to deposit or purchase crypto assets in exchange for the promise of interest payments. The company had full discretion over using these assets to generate revenue for interest payments. The SEC’s consent order concluded that this product constituted an unregistered security. TradeStation Crypto has neither admitted nor denied the findings of the SEC.
Regulatory collaboration and future actions
This case highlights the collaborative efforts of state and federal regulators to oversee the cryptocurrency market. The North American Securities Administrators Association (NASAA), representing the 26 states involved, emphasized the importance of this joint effort in protecting investors. Claire McHenry, NASAA president, praised the cooperative nature of the investigation and its outcome as a win for investor protection across the nation.
Following the settlement, TradeStation Crypto announced its decision to cease offering its services and products in the United States by February 24. This move underscores the regulatory challenges facing crypto lending platforms and the broader cryptocurrency sector in navigating U.S. securities laws.
TradeStation crypto’s parent company and future ventures
TradeStation Crypto is a subsidiary of Monex Group, a Japanese brokerage firm with significant investments in the cryptocurrency sector. The group has shown active interest in expanding its crypto-related ventures, including an attempt to acquire FTX Japan last year. Monex Group’s strategic investments extend to the acquisition of Coincheck in 2018, following a major hack, and a controlling share in Canadian 3iQ Digital Holdings in December, known for launching Bitcoin and Ethereum spot exchange-traded funds in Canada.
Monex Group had announced plans to list Coincheck on the U.S. Nasdaq stock exchange through a merger with Thunder Bridge Capital Partners IV. Initially scheduled for July 2023; the listing has been postponed to July 2024, demonstrating the group’s ongoing commitment to expanding its footprint in the global cryptocurrency market.
This settlement marks a significant moment in the regulatory oversight of cryptocurrency lending products. It serves as a reminder of the legal complexities and obligations facing crypto platforms operating within the U.S. financial system. As the industry continues to evolve, the collaboration between state and federal regulators will be crucial in shaping a secure and compliant marketplace for crypto investors.
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