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SEC Slams Tradestation Crypto for Offering Illegal Interest Scheme

Last Updated February 9, 2024 3:40 PM
Teuta Franjkovic
Last Updated February 9, 2024 3:40 PM

Key Takeaways

  • TradeStation Crypto was fined $3M for offering an unregistered crypto lending program promising interest on deposits.
  • The company agreed to pay the fine to the SEC and state regulators to resolve the matter.
  • TradeStation also agreed to a cease-and-desist order, barring them from future unregistered offerings like this.

TradeStation has concluded a settlement  with the Securities and Exchange Commission (SEC) and various state regulators, consenting to a $3 million fine for providing U.S. investors with an unregistered crypto asset lending program.

This program allegedly involved the promotion and selling of an unregistered crypto asset lending service.

TradeStation Crypto Settles for $3 Million

TradeStation Crypto, Inc., based in Florida, has settled  with the Securities and Exchange Commission (SEC) and state regulatory agencies, agreeing to pay $3 million in fines. This settlement addresses accusations of promoting and selling an unregistered crypto asset lending service, which offered interest earnings on deposits to investors, according to an SEC announcement on Wednesday.

The SEC’s probe revealed  that between August 2020 and June 2022, TradeStation Crypto engaged in the marketing of a cryptocurrency lending scheme to U.S. investors, promising interest payments in return for crypto deposits or purchases.

The regulatory body concluded that the company did not register this offering, classified as a security, thus breaching federal securities regulations.

TradeStation Agrees to $3 Million Settlement for SEC and State Charges

To address the charges from the Securities and Exchange Commission (SEC), TradeStation has consented  to a $1.5 million fine without either admitting or denying the SEC’s allegations. Additionally, the company has agreed to a cease-and-desist order, which bars it from future breaches of the Securities Act of 1933’s registration requirements.

In a concurrent agreement with state regulators, facilitated by the North American Securities Administrators Association (NASAA), TradeStation will pay an extra $1.5 million to resolve analogous allegations. This comprehensive settlement totaling $3 million aims to rectify the issues related to the offering and selling of its unregistered crypto asset lending product.

TradeStation Crypto made the decision  to halt the offering and selling of its unregistered product on June 30, 2022. The company voluntarily ceased its crypto lending program at that time. TradeStation had announced plans  earlier in the year to terminate all of its crypto-related products and services in the United States by February 22. This move was aimed at distancing itself from the practices that had attracted regulatory scrutiny.

Regulatory Focus on Crypto Firms Intensifies

The $3 million settlement  between TradeStation Crypto and the SEC exposes the complex regulatory landscape facing cryptocurrency firms in the United States. Both federal and state agencies are actively scrutinizing crypto products and services, emphasizing investor protection through strict adherence to securities laws. This case exemplifies the trend of regulators taking decisive action against firms like TradeStation that operate outside the legal framework.

This incident holds particular significance for Tradestation’s parent company, Monex Group, which seeks to list its Coincheck exchange on the US Nasdaq. It serves as a reminder of the regulatory hurdles and compliance requirements that must be met before entering the US market.

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