BlackRock’s iShares Bitcoin Trust has been listed on the Depository Trust and Clearing Corporation (DTCC) amid staunch demand for an ETF within the crypto industry and broader financial markets.
The addition, although routine, highlights progress made with bringing a spot Bitcoin (BTC) ETF to U.S. markets for the first time. DTCC is the clearing house for NASDAQ trading according to ETF expert Eric Balchunas.
Additionally, the listing on DTCC confirmed that BlackRock’s BTC fund will trade under the ticker IBTC. It is also the first spot Bitcoin ETF out of a dozen applications submitted since June 15 to appear on DTCC’s list.
In an amendment made to its filing with the U.S. Securities and Exchange Commission (SEC), BlackRock reportedly disclosed the seeding schedule slated to begin in October 2023.
Seeding refers to an ETF’s initial funding geared toward day-one trading. Bloomberg’s Balchunas noted that this amount is typically moderate.
Note: Seeding is typically not a lot of money just enough to get ETF going. So I wouldn’t read this as ‘omg Blackrock is buying a ton of bitcoin’ at all but more the fact they doing it and disclosing it shows another step in the process of launching.
SEC Chair Gary Gensler and his securities watchdog remain at the forefront of ETF conversations as the federal agency continued its application assessment, per a crypto.news report on Oct. 19.
BTC prices previously surged beyond $30,000 on the back of an unconfirmed ETF approval announcement from crypto news site Cointelegraph.
While Bitcoin retraced shortly after the news was debunked, TradingView data showed that the crypto token had regained its price position above $31,000 at press time.
Indeed, BTC’s market price was up 5 percent on Oct. 23 following a week-long rally and final formalities in the SEC v Grayscale case. The U.S. Court of Appeals for the D.C. Circuit published its mandate reaffirming its ruling which compels the SEC to reconsider Grayscales filing for a spot Bitcoin ETF.
Grayscale’s victory in its bid to convert its Bitcoin Trust or GBTC into a Bitcoin ETF is widely regarded as a boon to ETF proponents. The company also filed a new application after urging the SEC to approve its punt in the race to list America’s first spot Bitcoin ETF.
In response to Commissioner Hester Peirce’s expression of confusion about the rationale behind the SEC’s failure to greenlight a Bitcoin ETF, John E Deaton, a lawyer at Crypto-Law US, shares what this means for the public.
One of the outcomes is the possibility that approval would occur before the end of the year, or at the latest, by the close of the first quarter of 2024.
An important factor
In her response, Commissioner Hester Peirce expressed uncertainty regarding the SEC’s timeline for approving a spot BTC fund. Peirce, a staunch advocate for the spot Bitcoin ETF approval, highlighted that while the ongoing court case remains a significant influencing factor, she finds it perplexing to predict her colleagues’ perspective on the matter.
One of two things:
1) the @SECGov has capitulated on the spot #BTC ETF and approval, before the end of the year, or certainly, before the end of the 1st Quarter of 2024, is a certainty;
or
2) the SEC is gathering more information during these discussions to come up with a… https://t.co/NQqTfof6It
Peirce commented, “The logic for why we haven’t [approved a Bitcoin ETF] has always mystified me. The court case obviously is an important factor in the landscape, but I can’t guess my colleague’s approach to this topic.”
In this unfolding scenario, Deaton proposes there are two distinct possibilities to consider: Firstly, the SEC may have shifted its stance and is on the brink of approving the spot BTC ETF, either by year-end or certainly within the initial quarter of 2024, signifying a significant shift in their position.
Alternatively, Deaton suggests the SEC’s ongoing discussions could indicate a strategic move to gather additional information, possibly with the intention of devising a fresh rationale for denying the spot ETF, creating what might be one of the most remarkable head fakes or ‘rug pulls’ in SEC history.
Several applications being actively scrutinized
In an Oct. 19 post, the SEC Chairman Gary Gensler has affirmed that the regulatory body is actively scrutinizing several applications for Bitcoin spot ETFs.
Although Gensler alluded to the existence of eight or nine such applications at this time, he underscored the nature of the review process, refraining from providing explicit details about their status.
John E Deaton, a prominent lawyer known for representing XRP holders and vocalizing his criticisms of Jay Clayton’s tenure as the SEC Chairman, recently took to Twitter to highlight what he believes to be glaring conflicts of interest surrounding the SEC’s enforcement action against Ripple, its CEO Brad Garlinghouse, and co-founder Chris Larsen.
Deaton tweeted, “When the XRP case was filed on Clayton’s last day in charge at the SEC, I immediately pointed out the massive conflicts of interest by him voting to bring an enforcement action against Ripple, Brad Garlinghouse and Chris Larsen.”
This tweet comes in the wake of a statement made by Brian Costello, who lambasted the SEC’s role in allegedly concealing financial misdeeds connected to Chinese executives.
Costello remarked that under both Clayton and current chairman Gary Gensler’s leadership, the SEC may have overlooked potential misdemeanors tied to specific Chinese business magnates, singling out Neil Shen from Sequoia.
Costello stated:
The SEC’s role in hiding Chinese executives, like Neil Shen from Sequoia, and other US capital market crimes has played a significant role in normalizing China’s frauds. Gary Gensler and Jay Clayton, you had an opportunity to prioritize our nation’s defenders, but your personal interests prevailed.
The Hidden Agenda By Clayton And Gensler
Peeling back the layers of professional entanglements, Deaton unveiled potential biases arising from Clayton’s affiliations. He underscored Clayton’s association with Patrick Berarducci of the prestigious Sullivan & Cromwell law firm. Intriguingly, Berarducci had also served as Deputy GC at Consensys, a pivotal entity in the Ethereum ecosystem, and as Co-Chair of The Brooklyn Project.
Highlighting these intricate connections, Deaton noted, “One of Clayton’s partners at Sullivan & Cromwell, Patrick Berarducci, was deputy general counsel at Consensys and co-chair of The Brooklyn Project, which claimed to be building an alliance with the SEC related to crypto.”
As Deaton highlights, other lawyers from Sullivan & Cromwell also went to work at Consensys. Moreover, the law firm not only represented Ethereum’s Consensys but “also brokered the deal when Consensys acquired JP Morgan’s Quorum and the JPMCoin. Clayton & Hinman, along with Hinman’s partner Leming Chen, brought the Alibaba IPO to market. Simpson Thacher’s Chen went to Alipay.”
Further complicating matters, Deaton draws attention to the spirited rivalry between cryptocurrencies, underscoring the intense competition between XRP and ETH. He reminisces, “XRP & ETH battled each other for the #2 spot behind BTC for years.”
Such rivalries, when juxtaposed against Clayton’s professional affiliations, beget concerns of impartiality in enforcement decisions involving Ripple. The lawsuit against Ripple may have set the company back years – a head start that may have yielded major advantages for Consensus and Ethereum.
Challenging Clayton’s actions head-on, Deaton asserted, “At his confirmation, Clayton agreed he would be conflicted from voting AGAINST an enforcement action involving one of S&C’s clients. But, paradoxically, he voted FOR an action AGAINST Ripple, a formidable adversary of his law firm’s client.”
Pro-XRP Lawyer Uncovers More Ties
Deaton doesn’t stop there though. He delves into Clayton’s affiliations post-SEC, emphasizing his association with entities like Apollo Group and One River, which have substantial stakes in cryptocurrencies. Most notably, Deaton pointed out, “Clayton joined One River after it made a $1B bet on BTC & ETH, the only two Crypto assets given regulatory clarity by Hinman’s speech.”
Moreover, Deaton does not hold back on William Hinman, former director of the SEC’s Division of Corporation Finance, suggesting infractions and conflicts during his term. As Bitcoinist reported, William Hinman is in the crosshairs of the XRP community for his documented strong ties to Ethereum’s Vitalik Buterin and Joseph Lubin prior to his famous speech.
Expounding further, Deaton accentuates potential collusion, indicating a meeting between Clayton and Gensler, his successor. He provocatively ponders, “Why would you file a case of this magnitude on your last day and then leave it for the next administration to deal with? Or was this a coordinated effort?”
Investment expert and seasoned author Linda P. Jones recently weighed in on the ongoing legal showdown between Ripple and the United States Securities and Exchange Commission. The financial analyst provided an insight into what will likely go down if the payment company and the SEC meet at the negotiation table.
Talks of a potential settlement between Ripple and the SEC started cropping up after the financial regulator dropped the charges against executives Brad Garlinghouse and Chris Larsen, marking another victory for the company behind the XRP token.
Reason Why Ripple Has Upper Hand In Settlement: Linda P. Jones
In a post on the X (formerly Twitter) platform, Linda P. Jones implied that Ripple has the upper hand if they sit to negotiate with the SEC. This came as a response to a breakdown from Fred Rispoli, a lawyer and vocal XRP supporter.
I agree, however I think Ripple has a royal flush, meaning they aren’t negotiating and can literally name their terms. Due to exposure of the Hinman emails, the SEC has zero bargaining power. Ripple can 100% name their terms in the “settlement.” https://t.co/56mPtob0AZ
Following the dismissal by the SEC on Thursday, October 19, Fred Rispoli speculated that the SEC is most likely considering a “final settlement” with Ripple. “While the letter states the parties are conferring on a remedies briefing schedule, my guess is settlement amounts are flying back and forth between the lawyers as I type,” Rispoli added.
While agreeing with Rispoli’s stance, Jones added that Ripple has a “royal flush”. According to the seasoned author, this means that the payment company won’t be negotiating, as they “can literally name their terms.”
Furthermore, Jones highlighted in her post the exposure of the Hinman emails and how it takes the bargaining power from the SEC. “Ripple can 100% name their terms in the ‘settlement’,” she asserted in the post.
For context, the Hinman emails refer to documents linked to William Hinman, the former director of the SEC’s Division of Corporation Finance. These documents were made public earlier this year and revealed the former director’s statement that Bitcoin and Ethereum were not assets he considered securities.
The Ripple Vs. SEC Case Is Over, Attorney Claims
The recent developments in the tussle between Ripple and the SEC have continued to spark commentary and broad discussions from the crypto community. Pro-XRP lawyer Jeremy Hogan is the latest to share an insight into the long-running legal showdown.
“For all Intents and Purposes” the Ripple v. SEC case is over.
Yes, important hearings will be held in the coming months (deciding a judgment of up to $770 million is of course important).
But, YOUR time for hand wringing over this case is done. IMO.
In a series of posts on X, the attorney asserted that “‘for all Intents and Purposes’, the Ripple vs. SEC case is over.” While Hogan acknowledged the possibility of a settlement and the SEC’s intent to appeal, he does not believe that the financial regulator has a great chance of winning on appeal.
Going further, Hogan likened the odds of the commission winning an appeal to the NFL team New York Jets winning the Super Bowl. “The chance of the SEC winning is exactly 2.367%,” the pro-XRP lawyer added.
XRP price moves sideways on the daily timeframe | Source: XRPUSDT chart on TradingView
Featuured image from Unsplash, chart from TradingView
Grayscale files for new spot Bitcoin ETF on NYSE Arca
Major cryptocurrency investment firm Grayscale Investments has filed a new application with the U.S. Securities and Exchange Commission for a new spot Bitcoin exchange-traded fund (ETF). The new filing aligns with Grayscale’s ongoing effort to convert its Grayscale Bitcoin Trust into a spot Bitcoin ETF, according to a statement from the firm. The news comes weeks after Grayscale won an SEC lawsuit for its spot Bitcoin ETF review, with a court of appeals ordering the SEC to explain why it rejected Grayscale’s application in June 2023. The company also filed with the SEC to list an Ether futures ETF in September.
New York Attorney General sues Gemini, Genesis, DGC for allegedly defrauding investors
New York’s attorney general has filed a lawsuit against cryptocurrency firms Gemini, Genesis and Digital Currency Group (DCG) for allegedly defrauding more than 23,000 investors through the Gemini Earn investment program. The suit claims that Gemini assured investors that the program was a low-risk investment, while investigations carried out by the office of New York State Attorney General Letitia James found that Genesis’ financials “were risky.” The lawsuit also charges Genesis’ former CEO, Soichiro Moro, and its parent company’s CEO, Barry Silbert, with defrauding investors by attempting to conceal more than $1.1 billion in losses. In addition, the court case looks to ban Gemini, Genesis and DCG from operating in the financial investment industry in New York.
Former FTX engineering director faces up to 75 years in prison following guilty plea
Nishad Singh, the former engineering director at now-defunct crypto exchange FTX, faces up to 75 years in prison for charges related to defrauding users of the crypto exchange. He pleaded guilty to fraud charges as part of his cooperation agreement with the U.S. prosecutors. During his testimony this week, Singh said that when liquidity issues at FTX began in November 2022, he felt “suicidal for some days” while dealing with alleged inconsistencies between the exchange’s public statements and its activities behind the scenes. Singh also claimed that Bankman-Fried had the habit of deciding on purchases through Alameda Research by himself.
Binance shutting down European Visa debit card in December
Elon Musk, Mark Cuban team up to contest SEC trial strategies
Elon Musk, Mark Cuban and others have collaboratively submitted a shared amicus brief to the Supreme Court of the United States to raise concerns about the U.S. Securities and Exchange Commission’s (SEC) approach to conducting internal proceedings without the inclusion of juries. The context of this legal challenge centers around the SEC vs. Jarkesy case. George Jarkesy argues that the SEC’s internal adjudication process, which lacks a jury and is overseen by an administrative law judge appointed by the commission, contradicts his Seventh Amendment rights. Effectively resulting in a single entity fulfilling the roles of judge, jury and enforcer.
Winners and Losers
At the end of the week, Bitcoin (BTC) is at $29,590, Ether (ETH) at $1,607 and XRP at $0.52. The total market cap is at $1.12 trillion, according to CoinMarketCap.
Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are Bitcoin SV (BSV) at 59.00%, Stacks (STX) at 25.91% and MX TOKEN (MX) at 25.26%.
The top three altcoin losers of the week are Conflux (CFX) at -8.03%, Frax Share (FXS) and Sui (SUI) at -6.35%.
“Using publicly available information to learn is not stealing. Nor is it an invasion of privacy, conversion, negligence, unfair competition, or copyright infringement.”
“After extensive DAO forum discussion followed by community vote, the sunsetting of the Lido on Solana protocol was approved by Lido token holders and the process will begin shortly.”
BTC price hits 2-month high amid bet Bitcoin will break $32K ‘soon’
On Oct. 20, data from Cointelegraph Markets Pro and TradingView captured new two-month Bitcoin highs of $30,233 on Bitstamp. BTC price showed continued strength during the Asia trading session on the same day, with a slight comedown taking the spot price back below $29,500.
With volatility still evident, market participants argued that a weekly candle close was needed in order to establish the rally’s true staying power. For Keith Alan, co-founder of monitoring resource Material Indicators, the 100-week moving average (MA) at $28,627 was of particular importance.
“This move is one to watch, but what I’m watching for right now is to see if this Weekly candle closes above the 100-Week MA and if next week’s candle can stay above it with no wicks below,” Alan wrote in part of an X post on the day. “Some might consider that a confirmation of a bull breakout, but this market is known for squeezes and fake outs so I’m looking for more confirmations. For me BTC will also need to take out prior resistance at $30.5k, $31.5k and ultimately $33k to call a bull breakout confirmed and validated.”
FUD of the Week
Fantom Foundation hot wallet hacked for $550K
The Fantom Foundation, the developer of the Fantom network, has been hacked for over $550,000 worth of cryptocurrency. The foundation confirmed the attack on X, claiming that most of the funds stolen belonged to other users and that 99% of the foundation’s funds remain safe. Blockchain security researchers initially reported that the attacker stole approximately $7 million in crypto. The Fantom Foundation later released an official statement saying that some of the wallets labeled “Fantom: Foundation wallet” were mislabeled by block explorers and that not all the stolen funds were from the foundation.
TrueCoin’s third-party vendor breach potentially leaks TUSD user data
TrueUSD (TUSD) announced a potential leak of certain Know Your Customer (KYC) and transaction history data after one of TrueCoin’s third-party vendors was compromised. The company was the operator of the TUSD stablecoin until July 13, 2023. The impact of the attack and the resultant data leak is yet to be identified, as the total number of users’ data was not revealed during the announcement. Data collected from such breaches — names, email addresses and phone numbers, among others — are typically used for phishing attacks. Attackers reach out to unwary investors by mimicking various crypto services, often promising high profits in short amounts of time.
Web3 game project allegedly hired actors to pose as executives in $1.6M exit scam
The development team for gaming project FinSoul carried out an alleged exit scam, siphoning away $1.6 million from investors through market manipulation, according to a recent report from blockchain security platform CertiK shared with Cointelegraph. The FinSoul team allegedly hired paid actors to pretend to be its executives, then raised funds for the sole purpose of developing a gaming platform. However, instead of actually creating the platform, the FinSoul team allegedly transferred $1.6 million in bridged Tether from investors to itself. Blockchain data indicates developers then laundered the funds through cryptocurrency mixer Tornado Cash.
Big Questions: What did Satoshi Nakamoto think about ZK-proofs?
What was once a passing interest of Bitcoin inventor Satoshi Nakamoto, zero-knowledge-proof technology is now a major part of the crypto world.
Ethereum restaking: Blockchain innovation or dangerous house of cards?
“Restaking” involves reusing staked Ether to earn fees and rewards. The restaked tokens can then help secure and validate other protocols. But many fear restaking could disrupt Ethereum’s chain itself.
Bitmain’s revenge, Hong Kong’s crypto rollercoaster: Asia Express
Bitmain allegedly fires staff for speaking out against salary cuts, Hong Kong investors lose faith in crypto after JPEX scandal, Bitget gets a new crypto credit card and more.
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Coinbase’s Chief Legal Officer, Paul Grewal has recently used the law to back the approval of a Spot Bitcoin Exchange Traded Fund (ETF) by the United States Securities and Exchange Commission (SEC), highlighting that the US regulator should fulfill its responsibilities.
Coinbase CLO Optimism On The Approval Of A Spot BTC ETF
In an interview on Friday, with CNBC’s Arjun Kharpal, Paul expressed his optimism about the approval of Bitcoin ETF applications by the SEC. The Coinbase CLO said that he is quite confident that the SEC will soon approve a spot Bitcoin ETF, backing his belief under the law.
“I’m quite hopeful that these [ETF] applications will be granted, if only because they should be granted under the law,” Paul stated.
Following the interview, Paul highlighted his beliefs in the early success of approval, noting that the firms that have stepped forward with well-structured ETF proposals for these products and services are crucial players in the financial service industry.
I think that the firms that have stepped forward with robust proposals for these products and services are among some of the biggest blue chips in financial services. So that, I think, suggests that we will see progress there in short order.
However, Paul did not give a time frame as to when the approval will happen since the final decision about the approval ultimately lies with the SEC. However, he is still confident that the US regulator is likely to approve a Bitcoin ETF in a short period due to recent developments.
Paul further backed his optimism following the SEC’s recent court setback when a judge from the US Court of Appeals stated that the US regulator had no grounds to deny Grayscale’s approval to convert its Grayscale Bitcoin (BTC) into a spot Bitcoin ETF, calling the SEC’s decision an arbitrary move.
“I think that, after the U.S. Court of Appeals made clear that the SEC could not reject these applications on an arbitrary or capricious basis, we’re going to see the commission fulfill its responsibilities. I’m quite confident of that,” Paul stated.
In addition, Paul also highlighted the SEC’s failure to file an appeal on the ruling indicating a potential approval of a spot BTC ETF soon within the stipulated timespan that was given to them by the court.
If an approval of a Spot ETF is made, BTC could experience a major rally. A Bitcoin ETF serves as a means for investors to invest in BTC without having to make a direct purchase of the digital asset from an exchange.
One of the major cryptocurrency exchanges that will benefit a lot from any Bitcoin ETF approval is Coinbase. This is because the crypto exchange’s common stock is held in portfolios tailored to give investors exposure to cryptocurrencies.
JPMorgan On A Spot Bitcoin ETF Approval
Analysts from JPMorgan, have also expressed their optimism on a Bitcoin ETF approval, that the ETF product could be available to the public by this Christmas.
Due to recent developments following the approval of a Spot Bitcoin ETF, the financial giant believes that there is a high chance that an ETF could gain approval before January 10, 2024.
LBRY Inc., a cryptocurrency platform, announced its closure due to a court failure against the Securities and Exchange Commission (SEC). The SEC charged LBRY with making an unregistered securities offering by selling its native LBC tokens.
The fallout from this legal fight has prompted worries about unequal access to justice and regulatory overreach in the crypto business, which has disproportionately impacted smaller startups with minimal financial resources.
LBRY Inc. reported that the company was compelled to discontinue operations because of obligations owed to the SEC, legal team, and private creditors totaling several million dollars.
LBRY Inc. is winding down.
The LBRY network is unaffected.
Odysee and other assets will undergo a legal process to satisfy debts, but Odysee has a bright future ahead.
Thank you to everyone who fought with us for online freedom.
The SEC first sought a $22 million penalties, which was later lowered to $111,614. This lowered fine was a major financial blow for LBRY, making it impossible for the company to continue operations.
The scenario exemplifies the difficulties that crypto businesses can face when they are pursued by regulatory agencies, particularly smaller startups with minimal financial resources.
The SEC has been accused of regulatory overreach in pursuing LBRY, with critics suggesting that the agency should focus on big issues in the crypto business rather than minor instances of securities noncompliance.
However, this case highlights the SEC’s ability to control the cryptocurrency market through enforcement proceedings.
Ripple’s Contrasting Legal Victory
The downfall of LBRY contrasts sharply with Ripple’s recent court success in its ongoing struggle with the SEC. Ripple acquired funding from a multibillion-dollar corporation, allowing it to continue its legal battle.
Crypto total market cap currently at $1.10 trillion. Chart: TradingView.com
While LBRY Inc.’s controlled operations are ending, the LBRY blockchain, an open-source initiative, may continue to exist if sufficient user engagement is obtained. However, the business stated that decentralization may only succeed if active development and user participation are present.
With millions of registered users and a large volume of published material, the LBRY blockchain acted as a decentralized file-sharing network. Odysee, a decentralized social networking platform built on the LBRY blockchain, has a substantial user base. However, its future is now in doubt.
In a broader sense, the legal disputes in the crypto business are altering the securities law landscape. Both LBRY and Ripple have been accused with selling unregistered securities, but their outcomes have set developing precedents.
These results have prompted concerns about the SEC’s capacity to win legal battles against other crypto businesses.
As LBRY succumbs to regulatory pressure, it represents the obstacles encountered by smaller crypto businesses, as well as the broader issue of unequal access to justice in the cryptocurrency industry’s growing regulatory context.
In a series of posts made on his X (formerly Twitter) platform, Morgan stated that he “sincerely” wishes the Commission “all the worst” in the penalties phase of the litigation and hoped that the court awards the “smallest penalties possible.”
The penalty phase that Morgan is referring to is the period in which the SEC and Ripple are expected to meet and settle on the possible fine that Ripple has to pay regarding its institutional sales, which Judge Analisa Torres ruled constituted investment contracts. However, it is believed that Judge Torres might have to step in if both parties cannot agree on a remedy.
Meanwhile, the scheduled trial to hear the SEC’s case against Ripple and its founders has been following the Commission’s dismissal of its claims against Garlingouse and Larsen. The notion that the SEC can immediately proceed to appeal has also been refuted, as Judge Torres will need to give a final judgment (acknowledging the SEC’s dismissal and deciding on remedies for the violation with respect to the institutional sales).
In preceding tweets, Morgan had laid a foundation as to why the SEC deserves the worst and his lack of remorse for the Commission following all these losses it has gotten in its case against Ripple. He began by referring to when the SEC first filed its lawsuit against Ripple and its founders.
He noted how the Commission had sought an injunction to stop any future sale of XRP by Ripple and how this would have “ruined Rippled” and “deeply adversely affected the livelihood and lives” of Garlinghouse and Larsen if this injunction had been granted.
According to him, Ripple had done all this despite the fact that there was no allegation of fraud against Ripple and its executives, nor was there any evidence of investor harm. The regulator didn’t stop there as it also allegedly did “everything available to delay the matter and run up the defendants’ legal costs.”
Ripple’s co-founder, Chris Larsen, had voiced similar sentiments when he stated that the SEC had to be held accountable for its actions. He noted how the Commission had come after him and Garlinghouse with baseless claims and that it had actively demolished the country’s global standing as the “home for innovation.”
Featured image from Coingape, chart from Tradingview.com
Binance.US has garnered support from a major crypto lobbyist group in warding off an ongoing lawsuit from the U.S. Securities and Exchange Commission (SEC).
In a new amicus brief, the US Chamber of Digital Commerce argued that the agency’s claims against the exchange are misplaced, and that its actions are turning crypto businesses away from its borders.
Regulation By Enforcement
In the Thursday filing, the lobbyists echoed previous criticisms from industry leaders that the SEC is creating a hostile environment for crypto businesses through “regulation by enforcement.”
“The trillion-dollar blockchain economy—is conspicuously avoiding the United States, finding the regulatory environment too opaque and too hostile to conduct business here,” the advocacy group wrote.
The SEC has already launched enforcement actions against dozens of major crypto firms which, as of this year, include industry giants like Kraken, Coinbase, and Binance.
Numerous pro-crypto politicians and industry leaders alike have claimed that crypto would flee the U.S. if the agency continued down this path. Crypto lender Nexo, for example, closed down its Earn program in the U.S. earlier this year after paying a $45 million fine to the SEC.
Unregistered Securities
The agency’s complaints usually focus on such firms issuing or listing supposedly unregistered securities products, which may include stablecoins, blockchain staking services, and crypto assets themselves.
In the case of Binance, the SEC alleged on June 5 that the exchange offered over a dozen securities for trade, including BNB, BUSD, SOL, ADA, MATIC, and others. Industry leaders like Coinbase, however, have argued that there exist no clear rules on how crypto interacts with securities law, and that the SEC is overstepping its authority in crypto.
The Chamber of Digital Commerce reflected the same view in its filing. It wrote:
“The gravamen of the SEC’s Complaint collapses the long-recognized distinction between the subject of an investment-contract security, which could be virtually any type of asset, and the “investment contract” itself, which may be a security subject to U.S. law and regulation.”
The lobbyist group likened the SEC’s mistake to accusing a grocery store of violating securities law by selling fruit, like oranges.
Ripple made a similar argument in its case against the SEC after the agency claimed the token Ripple had issued – XRP – was a security. Earlier this year, a court ruled against the agency, and the SEC has now dropped all related charges against Ripple.
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Following Ripple’s SEC win, XRP surged to $0.53. Big investors now control 29.5% of its supply.
Legal victories and increased holdings indicate potential for new XRP highs.
Both human analysts and AI, like ChatGPT, foresee regulatory clarity boosting XRP’s future value.
XRP Sharks and Whales Control Almost 30% of the Supply
Ripple and its native token – XRP – have splashed the waters in the cryptocurrency space once again after the company secured a third court victory in a row against the US Securities and Exchange Commission (SEC). The news triggered a price rally for the asset, which surged to approximately $0.53 (per CoinGecko) for the first time in two weeks.
According to the crypto behavior analytics platform – Santiment, XRP’s rise could be attributed to another factor: the recent accumulation spree from large investors. Specifically, sharks and whales (those holding between 10K and 10M tokens) have increased their overall possessions to the highest level since the end of July.
🐳📈 #XRPLedger enjoyed its first jump above $0.53 in 10 days despite most #altcoins continuing to decline. The rise can largely be attributed to the ‘smart money’ tiers, holding between 10K to 10M $XRP, accumulating rapidly. They hold 29.5% of the supply. https://t.co/KULxMtMGRLpic.twitter.com/LTzFcrwG3f
They own 29.5% of XRP’s circulating supply or almost 16 billion assets. Calculated in current rates, the amount equals over $8 billion. As CryptoPotato previously reported, those investors held less than 27% of the existing supply at the beginning of the month.
How High XRP Could Go?
Analysts and experts have recently laid out numerous bullish forecasts, envisioning XRP to reach a new all-time high in the near future. Their bets now seem even more plausible, considering Ripple’s latest win against the SEC.
Some individuals, including the popular cryptocurrency analyst going by the name “KALEO,” are optimistic that Ripple’s native token will continue rising in the future due to a possible decisive victory in the legal battle.
The AI-powered language model – ChatGPT – also estimated that regulatory clarity could be among the vital elements to boost XRP’s valuation and eventually prompt a bull run for the asset.
Readers willing to find out how the coin might perform during the last quarter of 2023 could take a look at our dedicated video below:
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Data from Lookonchain, a blockchain analytics platform, on October 20, shows that one Ethereum (ETH) whale is actively moving coins to Kraken, a crypto exchange, and appears to be selling. The unidentified whale deposited 35,176 ETH, worth over $56.5 million when writing, and withdrew $10 million in USDT hours later. USDT is the world’s most liquid stablecoin, tracking the value of the USD.
Ethereum Whale Selling On Kraken
Still, it is not immediately clear whether the whale ended up selling the whole stash and only choosing to withdraw $10 million. What’s evident is that the unknown whale has been actively accumulating Ethereum for some years before deciding to take profit.
Looking at market trends, the whale appears to be taking profit and exiting. Often, when coins are moved to centralized crypto exchanges, market participants interpret the event as net bearish. This can impact sentiment, even forcing prices lower, especially if the broader crypto market is falling.
Deposits to Kraken| Source: Lookonchain on X
According to Lookonchain, the whale accumulated 35,176 ETH on Kraken at an average price of around $415. When the address chose to liquidate, its realized profit was approximately $41.8 million. Ethereum prices have more than quadrupled the average entry price at spot rates, meaning the whale remains “in green” despite recent market gyrations.
Ethereum whale accumulating| Source: Lookonchain on X
Since prices have been primarily dicey, moving horizontally and occasionally posting sharp falls, the whale might have chosen to exit. Even so, it could not be ascertained what motivated the ETH holder to sell when sentiment is overly improving across the crypto scene.
Presently, Ethereum traders are bullish, expecting prices to increase in the sessions ahead. Notably, as of October 20, prices were relatively firm and rising. To illustrate, Ethereum is up roughly 3%, and bulls are soaking selling pressure. At the same time, the coin is up 5% from October 2023 lows.
Traders Bullish, Will ETH Clear $2,000?
Ethereum price charts show that the immediate resistance level in the medium term is at around $1,750, recorded in early October. On the flip side, support is at $1,530. A bullish breakout at the back of rising volumes pushing the coin above the resistance level may trigger more demand, propelling it toward the psychological $2,000 level.
In early October, the United States Securities and Exchange Commission (SEC) approved several Ethereum Futures Exchange-Traded Funds (ETFs), including VanEck Ethereum Strategy ETF (EFUT) and ProShares Ether Strategy ETF (EETH). Analysts interpreted this decision as a boost for ETH since it allowed institutions to have a regulated way of investing in Ethereum without necessarily having to buy and store the coins by themselves.
The U.S. Securities and Exchange Commission (SEC) has slapped Thor Technologies and its CEO, David Chin, with a $1.05m fine for promoting securities without the required license.
The SEC found Thor Technologies and its CEO, David Chin, guilty in absentia of promoting securities without a license. The regulator fined the company $1.05m.
However, such a decision is made if the defendant does not provide the necessary documents on time or ignores the hearing. According to the regulator, from March to May 2018, the company distributed project tokens to clients. The total amount raised was $2.6m.
The SEC believes Thor Technologies and Chin promoted these assets by positioning them as investments. This makes them securities under the Howey test.
“The court granted default judgment for the SEC on all charges. The court permanently enjoined Thor and Chin from violating the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933 and from participating in any crypto asset securities offering.”
SEC filing
In this regard, the regulator ordered the company to pay compensation and cover legal costs for $903,193. In addition, Thor Technologies and Chin must pay a fine of $150,000 each.
In December, the SEC charged Thor Technologies, CEO David Chin, and former CTO Matthew Moravec with an unregistered $2.6 million securities offering. The SEC charged Thor Technologies and Chin with violating the Securities Act. She demanded an injunction against the activities, a return of funds to investors, pre-judgment interest, and a fine.
Prominent pro-XRP lawyer John Deaton has launched a scathing critique of the US Securities and Exchange Commission (SEC) in light of the regulatory body’s actions against blockchain company LBRY Inc. Deaton, renowned for representing XRP holders in the Ripple-SEC lawsuit, marked the regulatory body’s conduct as an exhibit of overreach.
“The LBRY case should be taught in law schools across the country,” Deaton asserted on X (formerly Twitter), emphasizing its significance not just in applying “the Howey Test to modern-day blockchain technologies and crypto,” but also as a “specific highlight [of] SEC overreach.”
Pro-XRP Lawyer Deaton Slams SEC
Elaborating further on his stance, Deaton criticized the SEC’s choice to pursue LBRY Inc., a relatively smaller entity, despite there being larger, more questionable activities to scrutinize within the crypto sector. He remarked that the regulatory body “picked a small American Company based out of New Hampshire, threatened to bankrupt it during the investigation, and then proceeded to bankrupt it – in a case where no fraud or misrepresentation occurred.”
Meanwhile, the US Securities and Exchange Commission (SEC) has seemingly turned a blind eye to the real scammers in the crypto ecosystem. Deaton cites “FTX, Celsius Network, Voyager, Luna, Genesis, [other] pump and dumps” as potential targets for the US agency that it could have investigated and stopped to protect US retail investors. Instead, all of these companies caused a massive amount of damage.
Deaton’s tweet came in response to an announcement by LBRY Inc. Marked by a tone of resignation, they unveiled their decision to cease operations amidst unsustainable debts and continuous challenges posed by the SEC. The firm was initially slapped with a $22 million fine, which was later mitigated to $111,000 by the SEC, in cognizance of LBRY’s financial duress.
Following this, the company withdrew its appeal against the SEC and commenced its wind-down procedures, with all executives, employees, and board members tendering their resignations.
Commenting on the LBRY case’s broader implications, Deaton highlighted the expenditure of “millions of dollars” resulting in a $130,000 fine, painting a picture of inefficiency and failure on the part of the SEC.
His condemnation didn’t just pertain to the financial aspects but extended towards the regulatory approach and discernment exercised by the SEC in choosing its battles within the crypto landscape:
After millions of dollars were wasted, the SEC got a $130K fine. This case alone proves the SEC is a broken, failed and inept agency.
Remarkably, the conclusion of LBRY’s journey has elicited a mixture of disappointment and resilience from the crypto community. Despite the unfolding adversities, community members have conveyed their willingness to sustain LBRY’s open-source blockchain network, Odysee, showcasing the persistent spirit of the decentralized ethos.
At press time, XRP was trading at $ and eyed a daily above the 200-day EMA ($0.5172)
BlackRock, the world’s largest asset manager, has amended its prospectus for the spot Bitcoin Exchange-Traded Fund (ETF) with the stringent United States Securities and Exchange (SEC), according to a report on October 18.
Specific changes made on their iShares Bitcoin Trust submitted by the asset manager include acknowledging the intense competition in the race for approval. The applicant said there was no assurance that their product would find instant market acceptance and scale due to competition should it be endorsed. They also explained its pricing structure and reporting mechanism.
Changes to its prospectus come roughly a month after BlackRock re-submitted its application in July 2023. Then, the applicant divulged the monitoring agreement they had sealed with Nasdaq and Coinbase Custody. BlackRock now joins Ark Invest and Fidelity, who also had to make changes for clarity.
As it is, Fidelity is the other notable applicant. The financial institution has been pro-Bitcoin over the years. In 2020, Fidelity added the option for corporate clients to invest in Bitcoin through their 401(k) retirement plans.
This year, Fidelity introduced a Bitcoin trading platform for individual investors. In June 2023, Fidelity refiled paperwork with the SEC for its Wise Origin Bitcoin Trust. However, Fidelity also had to revise its application, stating the risks associated with the complex Bitcoin derivative product.
Is A BTC And Crypto Rally Inevitable?
The crypto community is upbeat and expects the SEC to approve multiple spot Bitcoin ETF applications submitted by the top brass in traditional finance in the next few months, probably in 2024. However, the exact timing remains tentative, a cause of anxiety in the community.
A spot Bitcoin ETF will directly track Bitcoin prices, allowing investors to trade its listed shares on a regulated exchange. Subsequently, this would make it much easier for clients, especially institutions, to gain exposure to Bitcoin without necessarily buying and storing coins. A former BlackRock executive predicted the Bitcoin market to attract at least $150 billion in three years once the SEC authorizes one or several products.
On October 19, Bitcoin prices briefly rallied above $28,500, aligning with gains of October 16. Still, whether the spike could be tied to BlackRock amending its prospectus or the general optimism in the broader crypto and Bitcoin community is unclear.
The false news of the SEC approving the first Bitcoin ETF early this week forced prices higher. The coin soared above $30,000 at its peaks before cooling off to spot rates.
Tesla CEO Elon Musk and Dallas Mavericks owner Mark Cuban have teamed up to voice their opposition against Securities and Exchange Commission (SEC) Chair Gary Gensler.
Crypto YouTube channel Crypto Banter explained in an Oct. 19 livestream that, in an amicus brief filed this week, Musk and Cuban supported an overhaul of the SEC’s current use of administrative law judges in enforcement actions. The existing system allows the SEC to both bring cases and preside over them, denying defendants the right to a jury trial.
Musk has a contentious history with the SEC. In 2018, he settled a lawsuit brought by the agency over his tweet about potentially taking Tesla private. As part of the settlement, Musk agreed to have his Tesla-related tweets pre-approved by the company.
Earlier this year, Musk criticized the SEC, saying “I do not respect the SEC. I do not respect them.” Cuban also settled a high-profile insider trading case with the SEC in 2008.
The amicus brief states that Musk and Cuban “have an acute interest in SEC enforcement actions [and] in the protection of due process” in such cases. The brief argues that the current SEC administrative proceeding system is unconstitutional.
Musk and Cuban are the latest high-profile figures in the business and tech space to challenge Gensler’s leadership. The SEC chair has drawn criticism from the crypto industry over his hesitance to approve a Bitcoin ETF.
Earlier this week, Galaxy Digital CEO Mike Novogratz predicted the SEC would approve a Bitcoin ETF in 2023, stating that “Gensler needs a win” given the mounting pressure.
The Musk-Cuban amicus brief signals continued pushback against Gensler’s SEC from the tech and crypto community. Their high profiles could lend momentum to efforts to reform the SEC’s enforcement procedures.
In six appearances this season, QB Jalen Milroe has completed 85 of 132 passes for 1,397 yards. He leads the SEC, ranking fourth nationally with a remarkable 16.44 yards per completion.
Handling the tough yards for the Alabama ground game this season is Jase McClellan. An impressive 70.5 percent of his rushing yards have been gained after contact this season, averaging 3.33 yards after contact per carry.
Alabama’s defense has been formidable, limiting opponents to just 112 points this season. The defense is allowing a mere 16.0 points per game, ranking 12th nationally and second in the SEC.
Away: Tennessee Volunteers
Joe Milton heads into the Alabama game with a remarkable streak of 10 consecutive games, throwing at least one touchdown pass. He’s been particularly potent, with multiple touchdown passes in four out of six games this season. Furthermore, Milton is tied for ninth in the SEC for rushing touchdowns, a feat that places him at third among quarterbacks in the conference.
The Vols feature a stellar running back trio, consisting of Sr. Jabari Small, Jr. Jaylen Wright, and So. Dylan Sampson. As a team, Tennessee stands atop the SEC for rushing yards per game, averaging an impressive 231.3 yards, which also ranks sixth in the FBS. Their yards per carry at 5.9 leads the SEC and stands fifth nationally.
On the defensive front, the Vols have surrendered the fewest touchdowns in the league, totaling only 11. Opponents have struggled to find the end zone, managing only two touchdowns against UT in the last seven quarters, with the last three quarters resulting in zero TDs.
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Freedom Holding CEO Timur Turlov speaks during a press interview in Moscow, Russia, Oct. 10, 2019.
Maxim Shemetov | Reuters
Freedom Holding, a Nasdaq-traded Kazakh financial firm that’s been the target of prominent short sellers, is being investigated by federal prosecutors and Securities and Exchange Commission counsel over compliance issues, insider stock moves, and an offshore affiliate tied to sanctioned individuals, CNBC has learned.
The SEC’s Boston regional office has been probing Freedom for months, according to documents seen by CNBC and people familiar with the matter. The company, headquartered in Almaty, Kazakhstan, has a $5 billion market cap and is controlled and majority-owned by 35-year-old billionaire CEO Timur Turlov, a former Russian citizen.
The U.S. Attorney’s Office for Massachusetts is also making preliminary inquiries into Freedom, documents seen by CNBC show. Such inquiries often occur after a civil probe unearths evidence of possible crimes.
Freedom shares fell as much as 9.3% Friday morning after CNBC’s report.
The overlapping SEC and DOJ probes are scrutinizing the firm’s internal controls and offshore operations, as well as Turlov’s claims that Freedom can get its largely Russian client base access to hot U.S. IPOs, according to the documents and sources.
Turlov and Freedom are aware of the SEC probe, which has been going on for months, a person familiar with the matter told CNBC. The Justice Department’s involvement with these issues is more recent, documents show. Probes of this kind can take years and may not lead to criminal or civil charges. So far, there have been no formal charges or allegations of wrongdoing.
Turlov didn’t respond to CNBC’s interview request, but in an interview that was published by a Kazakh outlet Thursday, he acknowledged that “almost all global regulators came to us this summer.”
Freedom declined to comment.
An SEC spokesperson told CNBC that it doesn’t comment on the existence or nonexistence of an investigation.
A Justice Department spokesperson declined to comment.
The SEC has been aware of potential securities violations at Freedom since at least 2022. Some of the issues that caught investigators’attention —including allegations related to sanctions violations, IPO access and stock trading — were alsoraised in an August report from short seller Hindenburg Research, which claimed that Freedom “still does business in the Russian market, and that the company has openly flouted sanctions along with anti-money laundering (AML) and know-your-customer (KYC) rules.”
The SEC intensified its scrutiny after the Hindenburg report and an analysis published in April by short seller Citron Research, sources familiar with the matter told CNBC.
Freedom’s website describes the company as a provider of investment banking and brokerage services to Central Asia and Eastern Europe. Its website lists two addresses in the U.S., one in New York and the other at a Las Vegas co-working and virtual office space.
The company leases a 15,250-square-foot office in the Trump Building in New York’s Financial District, according to filings. The two floors house Freedom’s existing U.S. operations, including a brokerage firm registered with the Financial Industry Regulatory Authority. Freedom says in filings it has nearly 3,700 employees and 370,000 brokerage customers.
The Trump Building at 40 Wall St. in New York.
Jin Lee | Bloomberg | Getty Images
Turlov founded Freedom in 2010, and by 2013 he had expanded the business from Moscow to the EU. The company said it divested its Russian businessin February, almost a year after Russia launched its invasion of Ukraine. Turlov, a former citizen of Saint Kitts and Nevis in the Caribbean as well as Russia, owns 71% of Freedom shares, worth roughly $3.6 billion.
The Hindenburg report, in part, alleged that Freedom helped sanctioned individuals gain access to the U.S. financial system through a Belizean holding company, also owned by Turlov, that helped funnel and obfuscate transactions. In SEC filings, Freedom acknowledged it does business with sanctioned individuals through the Belize affiliate, but denies those individuals have access to U.S., U.K. or EU financial systems through Freedom.
The Belizean entity, incorporated in 2014, is now named Freedom Securities Trading Belize, or FST Belize.
“FST Belize, we have the same sanctions compliance as in the entire holding,” Turlov said in an August interview with a publication in Kazakhstan. “There is no reason for sanctions, if there is no involvement of U.S. representatives in the operation.”
FST Belizeholds Kazakh licenses that let it operate a securities trading platform and process international payments and money transfers, according to the company. In 2021, the Kazakh government added the subsidiary to a list of companies “with signs of illegal activity.”
In response, Freedom said it “fully complies” with local laws and regulations wherever it operates.
Anotherpoint of inquiry by U.S. authorities is the trading activity of Freedom stock, which was uplisted to the Nasdaq in 2019 under the ticker FRHC after previously trading over the counter.
Historically, negative reports from established short sellers will hurt a company’s stock. Freedom shares dipped about 8% the two trading days that followed Hindenburg’s report. They quickly rebounded, including a 25% jump on Aug. 18, with no apparent explanation.
Hindenburg alleged that Freedom and Turlov protected the company’s stock from wild swings by ensuring that clients held the shares in their brokerage accounts, reducing the risk of volatility.
At least five law firms have said they’re investigating claims on behalf of investors for potential violations of securities law since the Hindenburg report.
Citron compared Freedom to Sam Bankman-Fried’s failed and allegedly fraudulent trading firm, Alameda Research. The investment firm said Turlov’s ties to Russia and its continued brokerage operations in the country made the company a prime candidate for an SEC investigation.
Freedom Holding’s main offices are in Esentai Tower, the tallest building in Kazakhstan’s financial hub, the city of Almaty. Other tenants in the Skidmore, Owings & Merrill-designed building include the Ritz-Carlton Almaty and Ernst & Young’s Kazakhstan operations.
Andrey Rudakov | Bloomberg | Getty Images
Freedom has faced prior regulatory challenges.
In July, the company’s European subsidiary paid a 50,000 euro fine to the Cypriot securities regulator over failures in its money laundering and anti-terrorist financing controls.
And last year, Freedom’s former U.S. auditor, WSRP, was replaced by Deloitte Kazakhstan, after the U.S. audit regulator found that three of Freedom’s auditors at WSRP failed to follow proper standards of review. Freedom’s auditors were sanctioned and barred for what the regulatorsaid was a failure to assess the true nature of the company’s relationship with its Belize entity.
Those auditors are eligible to reapply for reinstatement. But WSRP stepped down as Freedom’s auditor. Deloitte Kazakhstan helped Freedom restate the prior auditor’s erroneous filings to the SEC and regain compliance with exchange rules, filings show.
Deloitte’s Kazakh office is just a few blocks away from Freedom’s headquarters, on the outskirts of Kazakhstan’s largest city and financial hub. Freedom is the only SEC-registered U.S. company that Deloitte Kazakhstan audits, according to Public Company Accounting Oversight Board records.
A view from Almaty’s Esentai Tower, where Freedom’s head offices are. The offices of Deloitte Kazakhstan, Freedom’s latest auditor, can be seen in the distance, near the building with a green illuminated sign.
Wwd | Penske Media | Getty Images
“First thing to consider is that the company has been audited by the largest big-4 auditor, Deloitte,” Turlov said, in his response to Hindenburg’s report.
Deloitte and Roman Sattarov, the Deloitte partner overseeing Freedom’s audit, didn’t respond to CNBC’s request for comment.
Freedom is still trying to expand in the U.S. In February, the company agreed to pay $400 million, primarily in stock, for middle-market investment bank Maxim Group. Maxim has worked on IPOs for many smaller companies and has been part of bigger deals, such as PIMCO Access Income Fund’s $866 million offering in 2022.
Turlov isn’t letting the U.S. probes keep him away. He traveledto New York last month.
“This week talking to our US office, partners and regulators,” he wrote in a Sept. 25 post on X, the social media platform formerly known as Twitter.
A spokesperson for Turlov said he was “definitely not meeting with regulators.”
In Turlov’s interview published Thursday in Kazakhstan, he didn’t say which U.S. regulators approached the company, but said it all stemmed from Hindenburg’s report, which he called “misinformation.”
Catherine Herridge reports on the Labor Day travel rush, the manhunt for an escaped convicted murderer in Pennsylvania, and a preview of Week 1 of college football.
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U.S real estate investment trusts today manage $4.5 trillion in real estate worldwide. Many groups on Wall Street offer these tax-friendly funds to retail investors.
KKR’s real estate business is one of the big players in the REIT game. The private equity firm manages multiple REIT funds. The KKR Real Estate Select Trust, which currently manages $1.5 billion in assets, paid a dividend of 5.4% to its investors in July 2023.
But the benefits extend beyond returns.
“When you look at the after tax equivalent of that yield, it is very compelling.” said Billy Butcher, CEO of KKR’s global real estate business. “The depreciation from our properties has covered 100% of the income generated by our properties, and there’s no tax on that dividend,” he said in an interview with CNBC.
Larger funds sometimes contain a diversified pool of assets. Categories may include office, student housing, casino, timberlands, radio and cell towers, server farms, self-storage properties, billboards, and much more.
“Back in the 1960s, there were three or four different types [of REITs], said Sher Hafeez, a managing director at Jones Lang LaSalle, a real estate services firm. “Now, I can count at least 20 different types.”
Top performing REIT sub-sectors in recent years include data centers, self-storage properties, residential housing and tower REITs. Residential housing delivered a return of 16% from 2010 to 2020, according to a S&P Global Investments report.
The investor-friendly tax rules can also increase the pace of large-scale development.
“Having REITs there as a potential exit helps the market, and helps the availability of financing,” said Michael Pestronk, CEO and co-founder of Post Brothers, a Philadelphia-based housing developer.
Some funds like Invitation Homes and American Homes 4 Rent were founded in the yearslong slowdown in U.S. home construction. At the time, REITs bought and managed commercial-scale properties, which could include products like master-planned communities or traditional apartment complexes.
In recent years, publicly traded trusts have targeted single-family rental market, and today, these REITs have grown tremendously — enough to build new neighborhoods in their entirety.
Watch the video above to learn the fundamentals of real estate investment trusts.
Wells Fargo has agreed to pay a $35 million civil penalty to settle charges of overcharging more than 10,900 customers for advisory fees.
Financial advisers from Wells Fargo and its earlier firms made handwritten or typed changes on clients’ advisory agreements to show reduced fees when their investment accounts were opened, the Securities and Exchange Commission said in a recent news release. But employees failed to honor the agreements by not setting them up in the billing system after negotiations, according to the SEC.
Certain customers who opened accounts before 2014 though the end of December 2022 were overcharged for advisory fees, which totaled more $27 million, the SEC stated.
Wells Fargo is based in San Francisco but has its largest employment base in Charlotte, with about 27,000 workers here. The penalty is the latest in a series of fines, penalties and settlements that the beleaguered bank has faced in recent years.
“For years, Wells Fargo and its predecessor firms negotiated reduced advisory fees with thousands of clients, but failed to honor them, overcharging those clients millions of dollars as a result,” Gurbir Grewal, director of the SEC’s Enforcement Division, stated in the news release. “Today’s enforcement action underscores the need for firms growing their businesses through acquisition to ensure that their growth does not come at the expense of client protection.”
SEC Investigators also said Wells Fargo failed to have written compliance policies and procedures to determine if billing systems had accurate data to prevent overbilling.
Wells Fargo paid $40 million, including interest, to compensate account holders overcharged by advisers.
According to the news release, the bank also agreed to pay a $35 million penalty and didn’t admit or deny the SEC charges, but consented to findings about the firm violating sections of an investment advisers act, and agreed to a cease-and-desist order and censure.
Wells Fargo will pay a $35 million penalty to settle SEC charges that it charged excessive advisory fees. File photo
Other Wells Fargo penalties
The SEC announcement is one of several financial scandals involving Wells Fargo,
The bank has faced a series of regulatory sanctions since its 2016 fake accounts scandal, when it was discovered hundreds of thousands of Wells Fargo workers opened millions of accounts for customers without their permission in order to meet sales goals for over a decade.
And following an investigation, a $145 million settlement was reached last September after the U.S. Labor Department looked into concerns about Wells Fargo’s contributions to its 401 (k) plan.
