TradeStation Crypto settles charges by SEC, 26 states over asset lending

The subsidiary of Japanese Monex Group had already said it would cease providing services in the United States.

Trading platform TradeStation Crypto settled with the United States Securities and Exchange Commission (SEC) and a taskforce of state regulators for failing to register an interest-bearing lending product on Feb. 6. The SEC and 26 states will split $3 million in penalties from the case.

Between August 2020 and June 30, 2022, TradeStation Crypto offered “a crypto lending product that allowed U.S. investors to deposit or purchase crypto assets in a TradeStation account in exchange for the companys promise to pay interest,” the SEC said in a statement. TradeStation had complete discretion over how the assets were used to generate revenue to pay interest to investors, it added.

The SEC issued a consent order finding that the product was an unregistered security. TradeStation Crypto did not admit to or deny the SEC findings.

Simultaneously, the North American Securities Administrators Association (NASAA) announced that TradeStation Crypto had reached a settlement with regulators in 26 states. NASAA president Claire McHenry said:

“This joint investigative effort is typical of how state regulators work every day to protect Main Street investors. This settlement also demonstrates the value of state and federal authorities working together to benefit investors nationwide.”

Eight states conducted a yearlong investigation of TradeStation Crypto with NASAA coordination. The NASAA, working with the SEC, was also instrumental in the shuttering of Nexos interest-bearing product in 2023.

Related: Securities regulators oppose special treatment of crypto in Coinbase case

TradeStation Crypto has already announced that it would cease offering its services and products in the United States on Feb. 24.

The CSI joined a task force of 26 state securities regulators and the U.S. Securities and Exchange Commission (SEC) to announce a $3 million settlement in principle with TradeStation Crypto, Inc. over its unregistered crypto interest earning program.

Read the full press release… pic.twitter.com/LpwfwcSiZc

— Commissioner Troy Downing (@DowningCSIMT) February 7, 2024

Florida-based TradeStation Crypto is a subsidiary of the Japanese brokerage firm, asset manager and cryptocurrency exchange Monex Group. The group invests actively in the crypto sector. It expressed interest in buying FTX Japan last year.

The group announced plans to list its Japan-based Coincheck cryptocurrency exchange on the U.S. Nasdaq stock exchange in 2022 through a merger with special purpose acquisition company (SPAC) Thunder Bridge Capital Partners IV. The listing was originally planned to take place in July 2023, but later rescheduled for July 2024. Monex Group acquired Coincheck in 2018 after the exchange had been hacked for $534 million.

Monex Group acquired a controlling share in Canadian 3iQ Digital Holdings in December, citing its experience launching Bitcoin (BTC) and Ether (ETH) spot exchange-traded funds in Canada.

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