TradeStation Crypto to pay $3M to settle SEC, state charges

The Securities and Exchange Commission announced that it charged TradeStation Crypto with the unregistered offer and sale of a crypto lending product.

“According to the SEC’s order, on June 30, 2022, TradeStation voluntarily stopped offering and selling the interest feature to investors. TradeStation announced earlier this year that it intends to terminate all its crypto-related products and services in the U.S. market on February 22, 2024,” the SEC said.

The press release said TradeStation didn’t admit or deny the regulator’s claims, but the company agreed to a cease and desist order and will pay $1.5 million to the SEC.

“The SEC charged TradeStation with failure to register its crypto lending product before offering it to investors. 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.

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Additionally, TradeStation will pay $1.5 million as part of a multi-state settlement according to a separate enforcement order. The New Jersey press release said the task force comprised eight states including California, Mississippi, North Carolina, Ohio and South Carolina.

“From approximately August 2021 to June 2022, TradeStation offered the crypto interest-earning program to at least 142 New Jersey investors,” the press release said.

The SEC alleged that TradeStation offered and sold a crypto lending product in 2020, which had an interest feature.

“TradeStation marketed the interest feature as a way for investors to earn interest and ‘Put your crypto assets to work for you,’ and TradeStation had complete discretion over how to deploy the assets to generate revenue to pay interest to investors. The order finds TradeStation offered and sold the crypto lending product with the interest feature as a security, and, since it did not qualify for a registration exemption, TradeStation was required to register its offer and sale but failed to do so,” the SEC said.

The North American Securities Administrators Association (NASAA) also cited the TradeStation product in the New Jersey press release.

“Investors passively earned interest on crypto assets by loaning them to TradeStation, which had total control over the revenue-generating activities used to earn returns,” the task force found.

“TradeStation Crypto does not comment on regulatory investigations and settlements,” a TradeStation spokesperson told Blockworks.

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