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The SEC has filed a complaint against Consensys Software Inc. in the United States District Court Eastern District of New York, alleging that the company has been acting as an unregistered broker and has offered unregistered securities through its MetaMask Swaps and MetaMask Staking platforms. This development is significant as it underscores the regulatory scrutiny in the crypto industry and the importance of compliance with federal laws.
Read on to learn more details about the SEC filing!
Consensys and MetaMask: An Overview
Consensys, founded in 2014 and incorporated in Delaware in 2020, has developed a suite of crypto asset-related services under the MetaMask Swaps, a digital platform for brokering transactions in crypto asset securities, and MetaMask Staking, which offers investment programs like Lido and Rocket Pool staking.
SEC’s Allegations of Unregistered Activities against Consensys
The SEC claims that since October 2020, Consensys has acted as an unregistered broker through its MetaMask Swaps service, facilitating over 36 million crypto asset transactions, including at least 5 million in crypto asset securities. Additionally, since January 2023, the company has allegedly offered and sold securities without registration through its MetaMask Staking platform, involving investment programs from Lido and Rocket Pool.
Details on MetaMask Swaps
MetaMask Swaps allow investors to exchange one crypto asset for another, pulling available rates from a group of third-party liquidity providers and recommending the best option. Consensys handles all transactions on behalf of the investor, collects transaction fees, and has brokered substantial amounts of transactions through this service.
The Role of MetaMask Staking
Through MetaMask Staking, Consensys offers investment programs like Lido and Rocket Pool. These programs pool ETH contributed by investors, stake it on the Ethereum blockchain, and issue new crypto assets (stETH and rETH) representing the investor’s interest in the staking pool and its rewards. These tokens are tradable on secondary markets, providing liquidity that direct staking does not.
Legal Violations and Implications
The SEC asserts that Consensys’ activities violate federal securities laws by failing to register as a broker and not registering the offer and sale of securities. The complaint highlights the need for transparency and investor protection, emphasizing that Consensys’ actions deprived investors of crucial protections afforded by registration.
Relief Sought by the SEC
The SEC is seeking a permanent injunction to prevent Consensys from continuing these activities, civil monetary penalties, and other relief deemed appropriate by the court. This case highlights the ongoing regulatory challenges in the crypto industry and the importance of compliance with federal securities laws.
In conclusion, the SEC’s complaint against Consensys marks a critical moment in the regulation of crypto asset services. As the industry evolves, companies must navigate the complex landscape to ensure compliance and protect investors.
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