SEC Charges TradeStation Crypto for Unregistered Offer of Crypto Lending Product

  • SEC charges TradeStation with allegations of unregistered offer and sale of crypto lending products.
  • TradeStation agrees to $1.5 million penalty; ceases crypto-related services.
  • The SEC emphasizes disclosure requirements for crypto asset offerings.

The Securities and Exchange Commission (SEC) has filed charges against TradeStation Crypto, Inc., a Florida-based company, for the unregistered offer and sale of a crypto lending product. This product allowed U.S. investors to deposit or purchase crypto assets in a TradeStation account in exchange for the promise of interest payments. In response, TradeStation has agreed to settle the charges by paying a $1.5 million penalty.

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TradeStation initiated the offering of the crypto lending product with the interest feature around August 2020, marketing it as an avenue for investors to earn interest on their crypto assets. 

he SEC found that TradeStation, exercising complete discretion over deploying assets for interest payments, offered and sold the crypto lending product as a security. However, since it did not qualify for a registration exemption, TradeStation was obligated to register its offer and sale, which it failed to do.

As of June 30, 2022, TradeStation voluntarily ceased offering and selling the interest feature. The company has also announced its intention to terminate all crypto-related products and services in the U.S. market by February 22, 2024.

Stacy Bogert, Associate Director of the SEC’s Division of Enforcement, emphasized the importance of ensuring investor benefits through federal securities laws’ disclosure requirements, regardless of the offering’s label. Without admitting or denying the SEC’s findings, TradeStation agreed to a cease-and-desist order and a $1.5 million civil penalty.

In parallel actions, TradeStation will pay an additional $1.5 million in fines to settle similar charges by state regulatory authorities. The SEC’s investigation was conducted with the assistance of the North American Securities Administrators Association.

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