Crypto hedge fund fined for violating securities laws

The US Securities and Exchange Commission (SEC) has issued a cease-and-desist order and a $200,000 (£153,534) fine to a cryptocurrency hedge fund accused of violating securities laws.

It is thought to be the SEC’s first such action against a fund managing digital assets.

Reasonable steps

The agency says Crypto Asset Management and its founder, Timothy Enneking, did not register with the SEC and negligently misrepresented to investors that the fund, Crypto Asset Fund, was the “first regulated crypto asset fund in the US”.

“Respondents failed to take reasonable steps to ensure the accuracy of these statements before disseminating them to actual and potential investors,” the SEC says.

California-based Crypto Asset Management, which had $37 million (£28 million) in assets under management as of 31st December 2017, manages portfolios of cryptocurrencies and related assets for high-net-worth individuals and institutional investors. It managed to raise $3.6 million (£2.8 million) between 1st August and 1st December 2017 from 44 investors, primarily individuals, by marketing through its website, social media and traditional media interviews.

When contacted by the SEC, the fund halted its offering and reviewed its website and marketing materials. It also disclosed its previous misstatements to investors and made a rescission offering to each investor.

Enneking told CNBC that no investors were harmed and the firm cooperated fully with the agency. “We have been fully in compliance with the SEC since shortly after they let us know they had concerns about two passages on our website,” he said.