The Securities and Exchange Commission on June 28 charged Consensys Software Inc., a blockchain software technology company, with failing to register as a broker of crypto asset securities through digital services called MetaMask Staking and MetaMask Swaps.
Consensys also was charged with engaging in the unregistered offer and sale of securities.
“By allegedly collecting hundreds of millions of dollars in fees as an unregistered broker and engaging in the unregistered offer and sale of tens of thousands of securities, Consensys inserted itself squarely into the U.S. securities markets while depriving investors of the protections afforded by the federal securities laws,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “As this enforcement action shows, we continue to hold noncompliant actors in this space accountable, as we do across the securities market.”
According to the SEC’s complaint, since at least January 2023, Consensys has offered and sold tens of thousands of unregistered securities on behalf of liquid staking program providers Lido and Rocket Pool, who create and issue liquid staking tokens in exchange for staked assets. The SEC’s complaint alleges that Consensys engages in the unregistered offer and sale of securities by participating in the distribution of the staking programs and operates as an unregistered broker with respect to these transactions.
The SEC’s complaint states Consensys has collected more than $250 million in fees as an unregistered broker.
The SEC’s complaint, filed in federal district court in the Eastern District of New York, also alleges that since at least October 2020, Consensys has brokered transactions in crypto asset securities by soliciting investors to trade crypto asset securities, providing pricing and other investment information regarding crypto asset securities, purporting to provide investors with the “best” quote, accepting and routing customer orders, among other things.
Blockchain Association CEO Kristin Smith said she was disappointed in the SEC’s action.
“Today’s SEC lawsuit against Consensys is more than an attack on one company – it’s a direct shot at the more than 50 million users of crypto in the United States. Chair Gensler’s SEC continues to operate indiscriminately – and today’s lawsuit is another example of the SEC’s regulatory overreach that is driving the domestic digital asset industry offshore,” Smith said.