In a cease-and-desist order filed on Tuesday, Crypto Asset Management agreed to pay a US$200,000 penalty without admitting or denying the claims made against it.
While the US Securities and Exchange Commission (SEC) hasn’t shied away from investigations into cryptocurrencies and the technology behind it, on Tuesday (September 11) the organization announced its first action against a company that claimed to handle cryptocurrency investments.
According to a press release issued by the agency, Crypto Asset Management (CAM) fictitiously claimed to by “the first regulated crypto asset fund” in the US while never registering as an investment company.
In a cease-and-desist order filed on Tuesday, it was agreed by the SEC and CAM’s founder, Timothy Enneking, that he would pay the US$200,000 penalty without admitting or denying the SEC’s findings.
The SEC determined that, between August and December 2017, Enneking raised more than US$3.6 million from 44 investors in 15 different states and falsely claimed the fund was regulated by the SEC.
During the last four months of 2017, CAM invested, held and traded assets the SEC considered investment securities valued more than 40 percent of CAM’s total assets. By the end of the year, the fund had roughly US$37 million in assets under management. While the SEC said CAM was technically considered an investment company, it did not “meet statutory exemptions or exclusions from the definition of an investment company.”
“[CAM] failed to take reasonable steps to ensure the accuracy of these statements before disseminating them to actual and potential investors,” the order reads.
It was also revealed that Enneking and CAM didn’t have an existing relationship with its investors. Rather, promotion of CAM’s offering came through its website, social media and traditional media outlets.
Once being contacted by SEC, CAM terminated its public offering and provided buybacks to the investors, the regulator said in its press release.
“Investment advisers must be sure that the funds they offer adhere to the applicable registration obligations and must accurately represent their funds’ regulatory status to investors.” C. Dabney O’Riordan, co-chief of the asset management unit at the SEC, said in the release.
CAM was formed in March 2017 with its primary business located in La Jolla, California. Crypto Asset Management GP acts as CAM’s general partner and holds one percent of limited partner interests. Enneking is the sole founder of CAM and holds 99 percent of the limited partner assets. According to the order, Enneking has never been registered with the SEC in any way.
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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.