SEC Accuses TradeStation of Unauthorized Crypto Offering

The SEC alleges TradeStation failed to register its offering, prompting a multistate settlement involving NASAA.

The Securities and Exchange Commission (SEC) accused TradeStation Crypto of the unauthorized offer and sale of a cryptocurrency lending product, the commission announced.

“As per the SEC’s directive, TradeStation ceased voluntarily offering and selling the interest feature to investors on June 30, 2022. The SEC stated that on February 22, 2024, TradeStation will stop showing all crypto-related products and services in the United States, as announced earlier this year.

TradeStation did not acknowledge or deny the regulator’s allegations, according to the press release; however, the company consented to a cease-and-desist order and will pay the SEC $1.5 million.

SEC Allegations and Cease-and-Desist Order

As per the commission’s allegation, TradeStation neglected to register its cryptocurrency lending product before its distribution to investors.

“Irrespective of the label affixed to the offering, this case demonstrates the criticality of ensuring that investors benefit from the disclosure requirements mandated by federal securities laws,” said Stacy Bogert, associate director of the commission’s Division of Enforcement.

Based on an additional enforcement order, TradeStation must remit a payment of $1.5 million as an integral component of a settlement reached among multiple states.

The eight states that composed the task force, according to the New Jersey press release, were California, Mississippi, North Carolina, Ohio, and South Carolina.

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

The commission alleged that TradeStation offered and sold an interest-bearing cryptocurrency lending product in 2020.

“TradeStation advertised the interest feature as a means for investors to accrue interest and “put your crypto assets to work for you.” To generate revenue to pay interest to investors, TradeStation retained absolute discretion over how the assets were utilized.

“According to the order, TradeStation offered and sold the crypto lending product with the interest feature as a security. TradeStation failed to register its offer and sale because it did not qualify for a registration exemption,” the commission stated.

In its press release from New Jersey, the North American Securities Administrators Association (NASAA) also mentioned the TradeStation product.

The task force discovered that “investors earned interest on crypto assets passively by lending them to TradeStation, which had complete control over the revenue-generating activities used to generate returns.”

A TradeStation spokesperson stated, “TradeStation Crypto does not comment on regulatory investigations and settlements.”