The US Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) have been on a mission to shut down all crypto traders, brokers, and hedge funds that break the rules. While many institutional investors rely on hedge funds to be able to gain access to the crypto markets, it appears as if they aren’t all as squeaky clean as previously thought.
The SEC filed a cease and desist order, as well as issuing a $200,000 fine, to Crypto Asset Management LP (CAM) and to its founder Timothy Enneking for willfully violating securities law. The fund claimed to be the first regulated crypto asset fund in the United States, however it wasn’t ever registered as an investment company.
Beware of Timothys
While Timothy Enneking was arraigned by the SEC for violating securities law, Timothy Tilton Ayre was booked by FINRA for crypto fraud. Ayre sold HempCoin which he misrepresented as “the first minable coin backed by market securities” and scammed his clients out of thousands of dollars. Crypto investors might start becoming wary of hedge fund managers or brokers called Timothy following this wave of arrests.
SEC Taking a Firm Stance
The SEC has been taking a firm stance against fraudulent crypto activity in recent months. However, its firm stance on the crypto world doesn’t end at fraudulent traders and funds, it has also been very aggressive in its decision towards a Bitcoin ETF.
Last month the SEC declined nine separate applications for a BTC ETF alone, leaving crypto markets reeling in the aftermath. Europe provided investors with a glimmer of hope by denominating its incredibly popular XBT Provider Bitcoin ETN in USD, but the SEC quickly shut that party down due to irregularities in its content. It has also served a number of companies with cease and desist orders during the past two years.
Playing it Cool
Timothy Enneking decided to play it cool and has offered investors in the hedge fund buyback options. In addition to this, he also agreed to pay the $200,000 fine, but at the same time never admitted or denied the allegations against him. Enneking simply agreed to the SEC’s terms – often the best choice of action. However, Enneking said that his company had cooperated fully with the SEC since it flagged two sentences on the company’s website and he noted that no investors had been harmed.
As the crypto markets continue to experience high levels of volatility, more people will want to invest in them. However, this opens the door to more scams and more fraudulent funds will likely start appearing. This new asset class can be confusing for novices and nontechnical people to trade, as this demographic relies heavily upon funds and brokers in order to gain exposure to the markets. The SEC is simply regulating this space and keeping investors safe from fraudsters like the two Timothys mentioned above.