TradeStation Crypto, a subsidiary of Japanese brokerage and cryptocurrency exchange Monex Group, has agreed to a $3 million settlement with the United States Securities and Exchange Commission (SEC) and regulators from 26 states.
The agreement resolves allegations that the Florida-based company offered an unregistered interest-bearing crypto-lending product to investors without the necessary registration.
The SEC identified that between August 2020 and June 2022, TradeStation Crypto engaged in activities where it allowed U.S. investors to deposit or purchase crypto assets in exchange for the promise of interest payments. The firm had sole discretion over the use of these assets to generate the revenue required to fulfill its interest obligations to investors.
The SEC’s consent order concluded that the product offered constituted an unregistered security, a finding to which TradeStation Crypto neither admitted nor denied. Simultaneously, the North American Securities Administrators Association (NASAA) disclosed that TradeStation Crypto had reached a settlement with state regulators.
The investigation leading to this settlement was spearheaded by eight states under the coordination of the NASAA, showcasing the regulatory scrutiny crypto lending products are subject to. This enforcement action follows similar regulatory efforts, including the closure of Nexo’s interest-bearing product in 2023, facilitated by the NASAA and the SEC.
TradeStation Crypto announced it would discontinue offering its products and services in the United States by Feb. 24, marking a significant shift in its operational focus. The move comes amidst broader strategic endeavors by its parent company, Monex Group, which has actively invested in the crypto sector and pursued expansion through acquisitions and planned listings on international stock exchanges.
Monex Group’s involvement in the cryptocurrency market extends beyond TradeStation Crypto, evidenced by its acquisition of Japan-based crypto exchange Coincheck after a major security breach and its investment in 3iQ Digital Holdings.
The company announced its intentions to list Coincheck it acquired in 2018, on the U.S. Nasdaq stock exchange through a merger with Thunder Bridge Capital Partners IV. The listing, initially scheduled for July 2023, has been postponed to July 2024.
In a broader context, the SEC’s enforcement activities extend beyond the TradeStation Crypto settlement, cracking down on unauthorized cryptocurrency operations. On Feb. 2, the regulator announced charges against Brian Sewell, the founder of the American Bitcoin Academy, for orchestrating a fraudulent cryptocurrency scheme.
According to the SEC, Sewell’s operation deceived students out of approximately $1.2 million under the guise of providing educational courses on cryptocurrency investing.