SEC and NASAA hit TradeStation with $3M fine over crypto products

TradeStation Crypto has agreed to settle charges with the Securities and Exchange Commission (SEC) for failing to register a crypto lending product that offered investors the opportunity to earn interest on their deposits.

The SEC announced on Wednesday that the digital asset-focused subsidiary of Monex Group’s TradeStation will pay a $1.5 million penalty to resolve the charges without admitting or denying the findings.

Founded in 1982 and acquired by Japanese finance group Monex in 2011, TradeStation ventured into the cryptocurrency market in 2020 by offering deposit accounts that allowed customers to earn interest. By 2021, the platform boasted 11,122 active users globally engaging with the interest feature. However, the SEC determined that TradeStation’s crypto lending product constituted a security, which did not qualify for a registration exemption. Consequently, the Florida-based platform ceased offering this service on June 30, 2022, following the SEC’s directive.

“This case highlights the importance of ensuring that investors benefit from the disclosure requirements provided by the federal securities laws, regardless of the label applied to the offering,” said  Stacy Bogert, associate director of the SEC’s division of enforcement.

In addition to settling with the SEC, TradeStation also agreed to pay a $1.5 million penalty to settle a separate investigation by the North American Securities Administrators Association (NASAA. The probe was conducted by a task force of eight state securities regulators and focused on TradeStation’s crypto interest-earning program over the past year.

“While we understand that investing in crypto asset securities may be alluring, investors must take the time to investigate a cryptocurrency-related investment before they hand over their money,” said New Jersey’s Bureau of Securities.

Earlier this year, TradeStation announced that it would terminate its crypto-related products and services in the U.S. on February 22, although the firm did not admit to any wrongdoing in the process.

Tailor-made for crypto traders, TradeStation used global integrations to create a wide pool of liquidity sources that enable better price discovery and transparency. The company further promoted its crypto desk to help traders avoid lengthy transactions on traditional exchanges, as well as avoid fees charged by other platforms for instant large volume trades.

The crypto-focused offshoot leverages the brokerage industry expertise of its parent, Japanese financial services giant Monex Group, to address what it perceives to be key concerns and certain weaknesses in the current cryptocurrency ecosystem.

TradeStation Crypto also provides a dedicated platform to ‎facilitate cryptocurrency trading for institutional ‎investors. In addition to personalized support, the offering secures a one-stop platform for ‎market data aggregation, execution strategy, and back-testing environment, as well as ‎smart order routing and advanced execution algos.‎