TradeStation Crypto Settles with SEC and State Regulators, Pays $3 Million in Penalties
The SEC deemed TradeStation's crypto lending product as a security, which required registration.
TradeStation Crypto, Inc., based in Florida, has reached a settlement with the Securities and Exchange Commission (SEC) and state regulators regarding its crypto lending product, agreeing to pay $3 million in penalties.
The SEC charged TradeStation for offering a crypto lending product without registering it, thus violating securities laws. The product promised investors the opportunity to earn interest on their cryptocurrency deposits. TradeStation agreed to settle the charges by paying a $1.5 million penalty without admitting or denying the SEC's findings.
TradeStation, established in 1982 and acquired by Monex Group in 2011, expanded its services to include cryptocurrency deposit accounts in 2020, allowing customers to earn interest. The SEC deemed TradeStation's crypto lending product as a security, which required registration. TradeStation ceased offering the service on June 30, 2022, following the SEC's order, and recently announced the termination of its crypto-related products and services in the U.S. on Feb. 22, 2023.
Stacy Bogert, associate director of the SEC's division of enforcement, emphasized the importance of investor protection and disclosure requirements under federal securities laws, regardless of the label applied to the offering.
In addition to the settlement with the SEC, TradeStation agreed to pay another $1.5 million to settle an investigation by the North American Securities Administrators Association (NASAA), representing state securities regulators. Eight state securities regulators participated in investigating TradeStation's crypto interest-earning program over the past year.
Elizabeth Harris, chief of New Jersey’s Bureau of Securities, cautioned investors to thoroughly research cryptocurrency-related investments before investing, underscoring the need for due diligence and awareness of potential risks.
TradeStation's settlement underscores the regulatory scrutiny faced by companies offering crypto-related financial products and the importance of compliance with securities laws to protect investors.
