- Galois Capital agreed to pay the SEC $225,000 for two violations; one was related to the custody of digital assets, where they used Fireblocks as the custodian.
- The case raises questions about the industry’s best practices and regulatory compliance in relation to security measures as the market evolves.
- The settlement has been met with mixed feelings, some observing it as a practical decision on Galois and others condemning the SEC on how it regulates the crypto market.
Florida-headquartered Galois Capital Management – a crypto investment advisory firm – has agreed to pay penalties after being accused of infractions by the U. S. Securities and Exchange Commission (SEC) . It was concerning custody of digital assets and the SEC accused Galois Capital of violating custody rules by entrusting its digital assets to Fireblocks, which was not a qualified custodian. The settlement includes Galois Capital paying a fine of $225,000, but the firm refused to either accept or deny the statements of the SEC.
SEC Allegations and Settlement Details
The SEC case against Galois Capital focused on its relationship with Fireblocks as a custodian. According to the SEC, it failed to meet the legal requirements of a qualified custodian—the SEC also noted that this decision violated the custody rules to protect investors. Furthermore, the SEC accused Galois Capital of being deliberately deceptive and frequently changing its redemption policy. The defendant, Galois Capital, has accepted the settlement since paying the fine is cheaper than going to trial.
Galois Capital has defended its use of Fireblocks, despite a settlement, citing its perceived safety and suitability for storing crypto assets. This decision reflects a broader debate within the cryptocurrency industry about adequate security and compliance in the evolving regulatory landscape.
Legal Experts and the Crypto Community Reaction
The settlement has sparked various reactions from legal experts and the crypto community. Bill Hughes, a lawyer at Ethereum developer ConsenSys, noted the high costs associated with SEC investigations, implying that settling for $225,000 might be a practical decision for Galois Capital.
Meanwhile, cryptocurrency expert Adam Cochran called the SEC’s action “wild,” highlighting ongoing criticisms that the agency failed to prevent the FTX debacle. Legal expert Max Schatzow also suggested that the SEC’s actions could appear “vindictive,” reflecting tensions between regulators and the crypto industry.
SEC’s Stance on Investor Protection
The SEC, however, maintains the primary goal of protecting investors. As highlighted by Corey Schuster from the SEC, investment advisers should follow rules meant to protect the investors ‘money.’ The case of Galois Capital also demonstrates that crypto-oriented companies are still struggling and facing several issues with compliance with the requirements of the regulators, as the SEC remains tight on enforcing compliance with the legal norms.
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