SEC files charges against Florida firm for crypto violations

The Securities and Exchange Commission (SEC) brought charges against a Florida-based firm for violations related to crypto assets.

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The SEC alleges that TradeStation Crypto, Inc., based in Plantation, Fla, failed to register the offer and sale of a crypto lending product that allowed U.S. investors to deposit or purchase crypto assets in a TradeStation account in exchange for the company’s promise to pay interest.

TradeStation began to offer and sell the crypto lending product with the interest feature around August 2020, according to the SEC’s order. TradeStation marketed the interest feature as a way for investors to earn interest and “Put your crypto assets to work for you.” TradeStation, alleges the SEC, had complete discretion over how to deploy the assets to generate revenue to pay interest to investors.

The order finds that TradeStation offered and sold the crypto lending product with the interest feature as a security, and, since it did not qualify for a registration exemption, the firm was required to register its offer and sale but failed to do so.

Then, on June 30, 2022, TradeStation voluntarily stopped offering and selling the interest feature to investors, according to the SEC’s order.

“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,” Stacy Bogert, associate director of the SEC’s Division of Enforcement, said.

TradeStation announced earlier this year that it intends to terminate all its crypto-related products and services in the U.S. market on February 22, 2024.

To settle the SEC’s charges, TradeStation agreed to pay a $1.5 million penalty. Without admitting or denying the SEC’s findings, in addition to the civil penalty, TradeStation agreed to a cease-and-desist order prohibiting it from violating the registration provisions of the Securities Act of 1933.

Also, TradeStation agreed to pay an additional $1.5 million in fines to settle similar charges by state regulatory authorities.

The SEC’s investigation was conducted by Kevin Hayne and Ashley Sprague, under the supervision of Pei Chung and Bogert. The SEC appreciates the assistance of members of the North American Securities Administrators Association.