SEC Settles with A Crypto Firm Over Unregistered Crypto Product

The Securities and Exchange Commission (SEC), a U.S. government oversight agency, alleged that Linus Financial, a crypto firm, offered and sold its retail crypto lending product. Linus Financial was offering its services without registering it with the agency as required by law. Linus Financial has stopped offering its product while also requesting the investors to withdraw their funds after realizing the oversight.

SEC Statement Over Linus Financial

The U.S. SEC declared it will refrain from imposing civil penalties on the crypto firm for its unregistered crypto lending product. It can be said that the SEC’s decision is a result of swift cooperation and corrective actions by Linus Financial.

According to the filing “At no point has Linus filed a registration statement with the Commission for the offer and sale of the Linus Interest Accounts. Nor did the offer and sale of the Linus Interest Accounts qualify for an exemption from registration.”

On September 7, 2023, the SEC shared that it will not be pressing charges against Linus Financial. However, it intends to strongly convey a message to companies offering crypto lending products without the proper licenses.

The statement further noted, “Today’s settlement provides a valuable message to other market participants about the importance of cooperation and remediation.” Meanwhile, the crypto firm halted its crypto lending product after the government agency took regulatory action against a similar crypto lending program.

Linus Financial’s Previous Working Strategy

Until the SEC’s action, Linus Financial was allowing U.S. investors to deposit cash with the firm in exchange for promised rates of return. The crypto firm would then use those funds to buy crypto assets, producing profits to both the company and investors.

According to a media report, “the crypto firm converted investors’ cash into crypto assets, pooled the crypto assets, and controlled how the pooled assets were used to generate income for Linus Financial itself and for investors’ interest payments.”

Linus Financial realized this and allegedly stopped offering crypto lending accounts to new investors afterward. However, they also requested that existing investors withdraw their funds within the next 30 days. As noted in the statement “all investor funds have since been withdrawn.”

After the announcement, Stacy Bogert, Associate Director of the SEC’s Division of Enforcement, issued a strong warning. She also clarified that the SEC is still actively pursuing companies offering crypto products without the required licenses.

On the other hand, earlier this month, Coinbase (NASDAQ: COIN) launched a crypto lending service for institutional clients in the United States. It raised $57 Million for the program as of September 1, 2023, according to a SEC filing. The new service will be quite different from the controversial “Lend program” that Coinbase canceled in 2021.

Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing