Florida-Based Investment Company Settles Cryptocurrency-Related Securities Violations
On February 7th, 2024, the Securities and Exchange Commission (SEC) announced that a Florida-based investment company reached a settlement for cryptocurrency-related securities fraud violations. TradeStation—a brokerage company based in Broward County, Florida—will pay $1.5 million to resolve allegations that it improperly sold unregistered securities. Below, our Miami investment fraud lawyer discusses the allegations in more detail.
SEC Enforcement Action: Florida Investment Company Sold Unregistered Securities
TradeStation Crypto, Inc. is an investment entity with a main headquarters located in Plantation, Florida. The SEC is citing this firm for its failure to properly register in accordance with federal securities law. The matter is centered around a financial product that this company offered to investors starting in August of 2020. At that time, TradeStation introduced a cryptocurrency-related lending product with an interest feature. It was marketed to retail investors as a means to earn from their crypto assets. After a comprehensive evaluation, the SEC determined that the product in question was a securities offering. However, it was never registered as such. The SEC found that the conduct in question violates the registration requirements of the Securities Act of 1933.
TradeStation Will Pay a $1.5 Million Civil Penalty
As part of the settlement agreement reached with the SEC, TradeStation Crypto, Inc. has agreed to pay a $1.5 million civil financial penalty. In addition, the company agreed to a cease-and-desist order. It also announced that it will terminate all crypto-related services in the United States by February 22nd, 2024. TradeStation Crypto, Inc. did not admit to or deny any wrongdoing as part of this unregistered securities case.
Unregistered Securities Carry Significant Risks for Investors
Unregistered securities present substantial risks to investors. When a company offers securities without registering them with the SEC—or otherwise qualifying for an exemption under federal securities law—it means that many of the core safeguards that are designed to protect investors are being bypassed. Here are some of the risks associated with unregistered securities:
- Lack of Information: With securities are properly registered, detailed disclosures must be made. Key details are provided about the company’s financial health, its business operations, and other known risk factors. In contrast, unregistered securities do not provide such transparency. Investors have also limited information.
- Market Manipulation: Unregistered securities are susceptible to manipulation. Unlike securities that are available on public markets, these unregistered securities are not subject to the same trading rules and reporting requirements.
- Liquidity Issues: Unregistered securities often have no established secondary market. It is a big risk for investors. Why? It makes it difficult for investors to sell or trade their holdings. The lack of liquidity can trap investors in an investment longer than they wish.
- Heightened Fraud Risk: The absence of regulatory oversight increases the likelihood of fraud. Without the scrutiny of registration, companies can more easily misrepresent their financial status, business prospects, or the nature of the investment itself.
Contact Our Florida Securities Law Attorney Today
At Carlson & Associates, P.A., our Florida securities law attorneys invest the time, the resources, and the attention to detail to help investors secure the maximum compensation for their losses. If you have any questions about a securities fraud case, please do not hesitate to contact us today. With an office in Miami, we are ready to advocate for your rights and interests as an investor.
Source:
sec.gov/news/press-release/2024-16