- Galois Capital settles with SEC, pays $225K for Custody Rule violations.
- SEC enforcement follows Galois Capital’s 50% asset loss post-FTX collapse.
- Galois misled investors on redemption terms, impacting asset withdrawals.
Galois Capital Management, an investment advising firm focusing on cryptocurrency, and the U.S. Securities and Exchange Commission (SEC) have settled. The SEC has imposed enforcement action on the firm for noncompliance with the Custody Rule under the Investment Advisers Act, primarily involving crypto assets, including the FTX trading platform, which collapsed in November 2022 due to unqualified custodians.
Read CRYPTONEWSLAND on
google news
Details of the Settlement
Without admitting or denying the charges, the agency reached a cease-and-desist order agreement with Galois Capital to avoid the said violations in the future. The firm is also to pay $225,000 in penalties to be reverted towards the investors who fell victim to their actions.
This settlement follows the SEC’s investigation, which revealed that Galois Capital misinformed investors concerning the safety of their assets and the conditions under which they could redeem investments.
Impact on Investors
The SEC noted that Galois Capital’s lack of regulatory standards or failure exposed investors to many risks, including potential loss or misuse of their assets.This was dramatically realized during the collapse of FTX, which saw Galois Capital lose almost half of the assets under management, negatively impacting firm operations and the clients’ financial position.
The firm was also engaged in a scenario where it misreported the period of notice on redemptions, thereby allowing some limited partners to effect the redemption of the asset with less than what the period required by standard measures.
Regulatory Response and Industry Reaction
Corey Schuster, co-chief of the SEC Enforcement Division’s Asset Management Unit, said the regulatory body is determined to enforce rules protecting investors’ rights. Reaction within the industry has been mixed.
Some have decried the SEC action as heavy-handed, particularly considering the nature of the collapse of FTX. Others in the community saw such actions as necessary to maintain market integrity and investor trust in an increasingly complex space of crypto assets.
Crypto News Land, also abbreviated as “CNL”, is an independent media entity – we are not affiliated with any company in the blockchain and cryptocurrency industry. We aim to provide fresh and relevant content that will help build up the crypto space since we believe in its potential to impact the world for the better. All of our news sources are credible and accurate as we know it, although we do not make any warranty as to the validity of their statements as well as their motive behind it. While we make sure to double-check the veracity of information from our sources, we do not make any assurances as to the timeliness and completeness of any information in our website as provided by our sources. Moreover, we disclaim any information on our website as investment or financial advice. We encourage all visitors to do your own research and consult with an expert in the relevant subject before making any investment or trading decision.
