SEC targets crypto companies over fake investment adviser registrations

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SEC targets crypto companies

Companies used nonexistent SEC registrations

According to the regulator, the defendants provided inaccurate information about their addresses, ownership structures and other aspects of their operations. Some companies also claimed that financial statements for affiliated private funds had been audited, but the auditors they named could not be found in public federal or state registries.

Pinnacle Crypto Exchange promoted digital asset trading and claimed that it operated in compliance with U.S. regulatory requirements. Quantum Financial Institute presented itself as a registered investment adviser and used a fake SEC certificate to support that claim.

Ftaexchange promoted digital asset trading and custody services while also claiming to be registered with the SEC. Other defendants used similar claims to market investment and cryptocurrency products.

The regulator alleges that the defendants violated Sections 204(a) and 207 of the Investment Advisers Act. The lawsuits do not specify the amount of potential investor losses.

SEC seeks restrictions on defendants

During its investigation, SEC staff attempted to contact many of the companies, but some of the phone numbers they provided were disconnected or belonged to unrelated organizations. Correspondence sent to some of the listed addresses was returned as undeliverable.

Some defendants claimed to operate from Colorado despite having no actual presence at the addresses they provided. The SEC also identified the use of foreign IP addresses to access the regulator's filing system.

The SEC is seeking permanent injunctions and civil penalties through federal court. At the regulator's direction, FINRA has already removed the companies' non-compliant forms from the public investment adviser database.

Meanwhile, the SEC is advancing changes to rules governing the custody of digital assets by investment advisers and funds. The proposed amendments were submitted to the White House Office of Information and Regulatory Affairs (OIRA) for review on August 25.

The new rules are expected to clarify how investment advisers and companies can custody clients' crypto assets in compliance with SEC requirements. The full proposal has not yet been published, as the document must return to the commission following White House review before further approval and public consultation.

Earlier, we reported that the SEC is also advancing Regulation Crypto Assets, a proposal to establish a separate capital-raising framework for crypto projects. The initiative would introduce specific requirements for digital asset offerings and disclosures aimed at protecting investors.

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