Crypto firm settles with SEC, state regulators

Crypto firm TradeStation Crypto, Inc. will pay US$3 million in a settlement with an array of U.S. state and federal regulators over an interest-earning program that violated securities registration requirements.

The North American Securities Administrators Association (NASAA), an umbrella group of state and provincial regulators, announced that a task force of state regulators and the U.S. Securities and Exchange Commission (SEC) reached a settlement with the company following an investigation of its crypto interest-earning program.

Regulators alleged that the program, which allowed investors to passively earn interest on crypto assets by loaning them to TradeStation, represented unregistered securities, and that investors didn’t receive adequate disclosure about the risks of the program.

“TradeStation maintained total discretion over the revenue-generating activities utilized to earn returns for investors,” regulators said.

Without admitting or denying the regulators’ findings, TradeStation agreed to pay a US$1.5 million penalty to the SEC, and another US$1.5 million to the 26 states participating in the agreement.

It also agreed to cease offering, selling or renewing its crypto interest-earning program until it complies with state and federal securities laws. Additionally, the company has repaid investors, with interest and earnings, the regulators said.

“The SEC charged TradeStation with failure to register its crypto lending product before offering it to investors. 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,” said Stacy Bogert, associate director of the SEC’s enforcement division, in a release.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.