Cryptocurrency platform TradeStation Crypto has agreed to pay a total of $4.5 million to settle charges brought by the U.S. securities regulator and multiple states. The charges were related to the offering and sale of unregistered securities through an interest-earning program.
The Securities and Exchange Commission (SEC) and state regulatory authorities, as per Reuters, alleged that TradeStation failed to register its crypto lending product, which allowed U.S. investors to deposit or purchase assets on its platform in exchange for yield.
Failure to Register Crypto Lending Product
According to the SEC's order, TradeStation began offering and selling the crypto lending product with an interest feature in August 2020. The company marketed this feature as a way for investors to earn interest and "Put your crypto assets to work for you." However, TradeStation did not register the offering, which the SEC deemed to be a security. As a result, TradeStation was required to register the offer and sale but failed to do so.
US News reported that on June 30, 2022, TradeStation voluntarily stopped offering and selling the interest feature to investors. The company also announced its intention to terminate all its crypto-related products and services in the U.S. market by February 22, 2024.
As part of the settlement, TradeStation agreed to pay the SEC a civil penalty of $3 million and state regulatory authorities an additional $1.5 million in fines. TradeStation neither admitted nor denied the SEC's findings but agreed to a cease-and-desist order.
Stacy Bogert, Associate Director of the SEC's Division of Enforcement, emphasized the importance of ensuring that investors benefit from the disclosure requirements provided by the federal securities laws. Bogert stated, "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."
Prohibition on Violating Registration Provisions
In addition to the penalties, TradeStation agreed to a cease-and-desist order that prohibits the company from violating the registration provisions of the Securities Act of 1933. Kevin Hayne and Ashley Sprague conducted the SEC's investigation under the supervision of Pei Y. Chung and Ms. Bogert. The SEC expressed appreciation for the assistance provided by North American Securities Administrators Association members.