The U.S. Securities and Exchange Commission has settled charges with Galois Capital Management, a crypto-focused investment adviser based in Florida, over its alleged failure to comply with custody rules.
The SEC took issue with the fact that the firm used Fireblocks, a non-qualified custodian.
The agency alleged that the firm has a misleading redemption policy.
Galois Capital Management has agreed to pay a relatively modest $255,000 without admitting or denying the findings.
“We’re glad to put this matter behind us,” the firm said in a statement.
“Settling and paying a $225k fine. For comparison, $225k is probably a fraction of the monthly outside counsel expense of dealing with a SEC investigation in full swing,” Bill Hughes, lawyer at Ethereum developer ConsenSys, wrote on the X social media network.
After settling with the SEC, the firm also defended its use of the non-qualified custodian. “Although Fireblocks was not a qualified custodian, we believed they were the best solution for our needs and, in our opinion, the safest way to secure crypto for our investors at the time,” it said.
According to prominent cryptocurrency expert Adam Cochran, the fact that the agency sued the fund for storing FTX funds is “wild.”
The SEC has been repeatedly accused of preventing the FTX debacle, which is known as one of the biggest financial frauds in history.
Legal expert Max Schatzow says that sometimes the SEC staff shows it is “vindictive,” and recent enforcement action against Galois Capital Management can be viewed” as one of those instances.
The SEC’s Corey Schuster has stressed that those investors who disregard investor protection rules will be held accountable.
Yuri Molchan
Denys Serhiichuk