SEC Settlement Impacts Galois Capital’s Managed Assets
The US Securities and Exchange Commission (SEC) recently reached a settlement with Galois Capital, a crypto hedge fund. The SEC accused Galois of failing to meet essential requirements for protecting customer assets, which the agency classified as “securities.”
SEC Allegations Against Galois Capital
- In July 2022, Galois Capital purportedly failed to ensure that specific crypto assets held by the private fund were secured by a qualified custodian, violating the Investment Advisers Act’s Custody Rule.
- The SEC mentioned that Galois Capital stored these assets in online trading accounts on platforms like FTX Trading, which were not recognized as “qualified custodians.”
- Following FTX’s collapse in November 2022, Galois Capital lost about half of the assets under its management.
Resolution and Penalties
- The SEC also claimed that Galois misled investors regarding the notice required for redemptions.
- Investors received inconsistent information about the redemption process, creating an uneven playing field among fund participants.
- Galois Capital agreed to pay a civil penalty of $225,000 as part of the settlement, allocated to investors who suffered losses due to the firm’s actions.
- The company also consented to an order to cease any future violations of the Advisers Act, without admitting or denying the SEC’s findings.
Conclusion
It is crucial for crypto hedge funds and investment firms to adhere to regulatory requirements and protect customer assets. The recent settlement between the SEC and Galois Capital highlights the importance of compliance and transparency in the cryptocurrency industry. Investors should be cautious when selecting investment opportunities and ensure that the firms they engage with follow regulatory guidelines to safeguard their assets.
Hot Take: Compliance is Key in the Crypto Industry
As a crypto enthusiast, staying informed about regulatory developments and compliance standards is essential for making sound investment decisions. Remember that investing in cryptocurrencies carries risks, and it is crucial to choose reputable firms that prioritize regulatory compliance to protect your investments.
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