Attorney General Alan Wilson, along with a taskforce of state securities regulators and the U.S. Securities and Exchange Commission (the “SEC”), announced today a $3 million settlement in principle with TradeStation Crypto, Inc. (“TradeStation”) over its unregistered digital asset interest earning program. The settlement resolves allegations that TradeStation violated state and federal securities laws by offering and selling securities without proper registration or disclosure to investors.
The settlement stems from a comprehensive investigation led by state securities regulators in Alabama, California, Mississippi, North Carolina, Ohio, South Carolina, Washington, and Wisconsin and coordinated under the auspices of the North American Securities Administrators Association (“NASAA”) Enforcement Section Committee.
“State securities regulators recognize the value new technology brings to financial markets. Complying with existing laws and regulations promotes competitive capital markets and continued investor protection,” said Attorney General Wilson. “We continue to investigate other digital asset financial services companies that may have failed to comply with South Carolina law. Firms that need to register and deal with past unregistered activity should contact the Attorney General’s Office.”
TradeStation, a Florida corporation formed in 2018, provides digital asset-related financial services to retail and institutional customers in the United States, including investing and trading services. From around August 2020 to June 2022, TradeStation offered and sold unregistered securities in the form of a digital asset interest-earning program to United States investors, including South Carolina investors. Under this program, investors passively earned interest on digital assets by loaning digital assets to TradeStation. TradeStation maintained total discretion over the revenue-generating activities utilized to earn returns for investors.
TradeStation is alleged to have failed to comply with state registration requirements and, as a result, investors were sold unregistered securities in violation of state laws and additionally were deprived of critical information and disclosures necessary to understand the potential risks of TradeStation’s digital asset interest-earning program.
TradeStation agreed to pay $1.5 million in penalties to 51 United States jurisdictions and $1.5 million to the SEC. The 51 United States jurisdictions will share equally in their half of the settlement. TradeStation has also agreed to cease offering, selling, or renewing its digital asset interest earning program until such activities are compliant with applicable state and federal securities laws.
The Attorney General’s Office would like to thank the SEC and the other seven state securities regulators of the task force working group, specifically the state securities regulators in Alabama, California, Mississippi, North Carolina, Ohio, Washington, and Wisconsin, for their coordinated efforts and contributions to this multistate investigation.
The Securities Division can be reached by calling 803-734-9916 or by email to agsecurities@scag.gov. Investors can submit a complaint or learn more about the Securities Division by visiting the Attorney General’s Office website at https://www.scag.gov/inside-the-office/legal-services-division/securities/.
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