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01/07/24
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U.S. SEC Files a Lawsuit Against Consensys for Operating as an Unregistered Broker and More
On June 28, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Consensys because of its operation as an unregistered broker and engagement in the unregistered provision and sale of securities via MetaMask Swaps over the past four years.
According to the SEC, the firm operated as a broker for cryptocurrency asset transactions and collected fees valued at over $250 million. Further, ConsenSys allegedly offered staking services but did not properly register, so those who invested with the firm were deprived of critical protections.
“Since January 2023, Consensys has engaged in the unregistered offer and sale of securities in the form of crypto asset staking programs, and acted as an unregistered broker, through its MetaMask Staking service. By its conduct as an unregistered broker, Consensys has collected over $250 million in fees.”
Hence, the commission is seeking a permanent injunction, civil penalties as well as other equitable relief against the firm for allegedly violating federal securities laws. Furthermore, ConsensSys allegedly facilitated investments in the staking programs of Lido and Rocket Pool, acted as an intermediary in unregistered transactions, and denied investors crucial protections.
“Consensys has offered and sold tens of thousands of securities for two issuers: Lido and Rocket Pool. By this conduct, Consensys acts as an underwriter of those securities and participates in the key points of their distribution,” reads the filing.
The SEC sent a Wells notice to the firm a while ago and Consensys acted by filing a lawsuit against the commission, claiming that there were attempts toward classifying Ether (ETH) and related staking services as securities, and that the commission had been exhibiting regulatory overreach by pursuing an anti-crypto agenda led by ad hoc enforcement action.
The SEC classified staking programs as investment contracts in the lawsuit, and Lido and Rocket Pool did not file a registration statement with the commission. Five months ago, Kraken had to settle with the commission and stopped offering staking services to its clients in the U.S.
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