SEC and NASAA Clamp Down on TradeStation with Hefty $3M Crypto Fine

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The Securities and Exchange Commission (SEC) has taken action against TradeStation Crypto for failing to register the offer and sale of a cryptocurrency lending product that promised investors the opportunity to earn interest.

On Wednesday, the Florida-based company agreed to settle the charges by paying a $1.5 million penalty without admitting or denying the SEC’s findings, as stated in an official statement.

TradeStation, a mainstream finance platform established in 1982 and acquired by the Japanese finance group Monex in 2011, expanded its services in 2020 to include cryptocurrency deposit accounts that allowed customers to earn interest.

According to filings, TradeStation had 11,122 active users participating in the interest feature globally as of 2021.

SEC Claims TradeStation’s Lending Product Was a Security

The SEC determined that TradeStation’s crypto lending product constituted a security and did not qualify for a registration exemption.

Consequently, on June 30, 2022, TradeStation ceased offering the service in compliance with the SEC’s order.

Earlier this year, TradeStation announced the termination of its crypto-related products and services in the United States, effective February 22.

The company, however, did not admit any wrongdoing.

TRADESTATION SETTLES WITH SEC FOR $3M

– SEC charges TradeStation Crypto with unregistered offer and sale of a crypto lending product.

– TradeStation voluntarily ceased offering the interest feature on June 30, 2022, and plans to terminate all crypto-related products and… https://t.co/tUSdJYmgGHpic.twitter.com/Q2m7Ib0pIQ

— BSCN (@BSCNews) February 7, 2024

Stacy Bogert, associate director of the SEC’s division of enforcement, emphasized the significance of ensuring that investors benefit from the disclosure requirements provided by federal securities laws, regardless of how the offering is labeled.

“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.”

TradeStation to Pay $1.5M to Settle Investigation by NASAA

In a parallel development, TradeStation also agreed to pay an additional $1.5 million to settle an investigation conducted by the North American Securities Administrators Association (NASAA), a group of state securities regulators, regarding its crypto products.

The investigation involved a task force consisting of eight state securities regulators who examined TradeStation’s crypto interest-earning program over the past year, according to NASAA’s statement.

“While we understand that investing in crypto asset securities may be alluring, investors must take the time to investigate a cryptocurrency-related investment before they hand over their money,” Elizabeth Harris, chief of New Jersey’s Bureau of Securities, said.

In another incident, the SEC has recently frozen the assets of Victorious Grace Church for selling unregistered security tokens.

The agency has also filed a lawsuit against Colorado-based pastor Eligio “Eli” Regalado and his wife, Kaitlyn, for allegedly defrauding investors of millions of dollars through the sale of an unregistered crypto token, called INDXcoin.

More recently, in the SEC and Coinbase case, a federal judge questioned whether allowing the commission to impose its regulations on Coinbase would give the agency sway over markets it doesn’t have authority to supervise.

“I want to understand how your standard does not sweep in the collectible market or commodities,” U.S. District Judge Katherine Polk Failla told SEC lawyers in the courtroom.

“It is a real fear that I have that your argument is just sweeping too broadly.”

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