- The SEC has charged Consensys with operating as an unregistered broker and selling unregistered securities through MetaMask Swaps since 2020
- Consensys has allegedly accrued over $250 million in fees from facilitating crypto transactions and offering staking services without proper registration
- The charges come weeks after the SEC confirmed to Consensys that ETH is not considered a security
The Securities and Exchange Commission (SEC) on Friday followed through with charges against MetaMask maker Consensys on Friday following the issuance of a Wells notice two months ago. The complaint alleges that Consensys has been functioning as an unregistered broker and engaging in the unregistered sale of securities through its MetaMask Swaps service since 2020, accruing over $250 million in fees by facilitating crypto asset transactions and offering staking services without the necessary registration. The move comes just weeks after the SEC confirmed to Consensys that ETH is not a security.
SEC Takes ‘Broker’ Route Again
The SEC’s battle with Consensys started in April when it issued a Wells notice to Consensys, indicating impending action regarding MetaMask Swaps and MetaMask Staking. MetaMask allows users to stake ETH and trade cryptocurrencies via decentralized exchanges using its “swaps” feature, which launched in October 2020.
In response to the Wells notice, Consensys filed a counter-suit in Texas, aiming to obtain a ruling that the SEC could not sue them over these services and to assert that ETH is not a security. On June 18, Consensys announced that the SEC would not pursue a lawsuit to classify ETH as a security, but the agency did not rule out other actions, and it has been true to its word with the current lawsuit over MetaMask Swaps and MetaMask Staking.
MetaMask is Latest Target
Since January 2023, Consensys has facilitated the sale of tens of thousands of stETH and rETH, liquid staking tokens representing staked ETH, on behalf of Lido and Rocket Pool. The SEC claims that these staking programs constitute investment contracts, with their sale depriving investors of essential protections. The regulatory body is seeking a permanent injunction, civil penalties, and other equitable relief against Consensys for these purported violations of federal securities laws.
The SEC charges Consensys with unauthorized sales of securities through MetaMask Staking and failing to register as a broker-dealer while offering crypto trades and staking services. The agency asserts that Consensys has acted as an underwriter for these securities, participating in their distribution.
The SEC’s lawsuit highlights the regulatory body’s ongoing efforts to enforce compliance in the cryptocurrency industry. Recent actions have targeted several unregistered crypto security brokers, with settled cases involving Bittrex, ShapeShift, and BarnBridge DAO, and ongoing cases against Coinbase, Kraken, Binance, Uniswap, and Robinhood Crypto.
This case underscores the SEC’s commitment to ensuring that crypto exchanges and services comply with securities regulations, particularly regarding broker registration and the offering of staking services.
