On Monday, the U.S. Securities and Exchange Commission charged New York crypto asset manager Titan Global Capital Management with misleading investors over its cryptocurrency product.
Titan has agreed to a cease-and-desist order by the regulatory agency, alongside censure and penalties of over $1 million.
Titan To Pay Over $1 Million To Settle SEC Charges
The latest in a series of recent enforcement actions initiated by the SEC under chairman Gary Gensler involves fintech investment adviser Titan.
In a Monday announcement, the securities watchdog indicated that the fintech firm made “conflicting disclosures to clients” about how it custodied cryptocurrency assets. According to the SEC, Titan made misleading claims on its website that were based on “hypothetical performance”. SEC senior enforcement officer Osman Nawaz opined in a statement:
“The Commission amended the marketing rule to allow for the use of hypothetical performance metrics but only if advisers comply with requirements reasonably designed to prevent fraud. […] This action serves as a warning for all advisers to ensure compliance.”
The SEC further argued that Titan promised investors “annualized” performance results as high as 2,700% for its Titan Crypto product but didn’t inform clients the returns were inferred from a hypothetical three-week period during which no trading transpired. Simply put: They were fabricated.
The regulator also claimed that Titan failed to adopt appropriate policies concerning employee personal trading in cryptocurrencies until October 2022.
The SEC has been more active in crypto law enforcement this year. In June, it sued both Coinbase and Binance for allegedly allowing its customers to trade tokens it deemed unregistered securities.
But today’s charges marked the first time a firm had supposedly broken the SEC’s amended marketing rule of December 2020, which urges investment advisers to ensure the accuracy of disclosures made to existing and prospective clients.
Titan, which is SEC-registered and a member of the Financial Industry Regulatory Authority, postulated in a statement:
“We fully cooperated with the SEC’s inquiry and are pleased to have reached a resolution of these issues. The SEC Order acknowledges Titan’s cooperation and remedial efforts since July 2022, including hiring a new Chief Legal and Chief Compliance Officer and additional legal and compliance staff. Titan continues to make significant investments to build and enhance its compliance program.”
The fintech firm cooperated with the SEC’s investigation and agreed to a cease-and-desist order. Titan has also agreed to pay a $850,000 civil penalty that will be distributed to affected customers and give back ill-gotten gains and interest of $192,454 — without admitting or denying the SEC’s findings.