TradeStation Crypto to Pay $1.5 Million to Settle SEC Charges Over Unregistered Crypto Lending Product

News | February 28, 2024 By:

On Wednesday, February 7, 2024, the Securities and Exchange Commission (SEC) announced charges against Florida-based company TradeStation Crypto, Inc. for failing to properly register the offer and sale of a crypto lending product that promised to pay interest to U.S. investors.

The SEC order states that starting in August 2020, TradeStation began offering a crypto lending product that allowed investors to deposit or purchase crypto assets in a TradeStation account. In exchange, the company promised to pay interest to investors and marketed the interest feature as a way for investors to earn returns from their crypto assets. However, TradeStation had full control over how the deposited crypto assets were used to generate revenue to pay interest.

According to the SEC, the crypto lending product offered by TradeStation met the definition of a security and therefore should have been registered with the SEC. But TradeStation did not register the offering or ensure it qualified for a registration exemption. By failing to properly register with the SEC before offering the crypto lending product, TradeStation violated federal securities laws.

To settle the charges, TradeStation agreed to pay a $1.5 million penalty. The company also agreed to a cease-and-desist order prohibiting it from violating the registration provisions of the Securities Act of 1933.

TradeStation voluntarily stopped offering the interest-earning feature to investors on June 30, 2022. It terminated all its crypto-related products and services in the U.S. market on February 22, 2024.

“This case highlights the importance of ensuring that investors benefit from the disclosure requirements provided by the federal securities laws, regardless of the label applied to the offering,” said Stacy Bogert, Associate Director of the SEC’s Division of Enforcement.

Please contact BlockTribune for access to a copy of this filing.