US Regulator Slaps $512,500 Fine on Goldman Sachs, Says Bank Failed to Identify Potential Market Manipulation

February 10, 2024 The Daily Hodl

FINRA Says 70% of All Crypto Communications Contain Regulatory Violations

January 24, 2024 The Daily Hodl

Blockchain Assoc. requests info on Prometheum over ‘suspicious’ approval

June 16, 2023 Coin Telegraph

A FOIA request with the SEC regarding Prometheum has been filed, while others found former FINRA and SEC staffers among the firm's ranks.

United States crypto lobby group Blockchain Association has filed a request with the U.S. Securities and Exchange Commission, seeking information about the formerly little-known crypto company Prometheum.

The company became the center of the crypto industry's attention this week when its CEO Aaron Kaplan testified at a House hearing and gave its support of regulating crypto under securities laws and the SEC, a position that’s starkly opposite to other vocal proponents of the industry.

On June 15, Blockchain Association counsel Marissa Coppel said the group filed a Freedom of Information Act (FOIA) request to the SEC seeking documents and communications related to Prometheum.

In a series of tweets, Coppel said she was “suspicious” Prometheum was approved as a special purpose broker-dealer (SPBD) for digital assets “in the midst of aggressive SEC enforcement.”

Coppel was also skeptical at how Kaplan was able to provide testimony at a Congressional hearing on regulations for the industry.

2/ The CEO somehow gets a seat in front of Congress and argues that Prometheum represents the compliant path for digital assets.

And they've paid $1.5+ million in sales commissions to a Chinese-affiliated entity with quite the regulatory track record.

Hmmm
— Marisa Tashman Coppel (@MTCoppel) June 15, 2023

FOIA requests are submissions by members of the public to U.S. federal agencies that can ask for records on any topic, in this case, the SEC’s information on Prometheum.

At the June 13 House hearing Kaplan said his firm did not receive any “additional exemptive relief from the SEC” when questioned by Representative Mike Flood.

For those that didn’t stick around until the end of the @FinancialCmte hearing today, this exchange between @USRepMikeFlood and @PrometheumInc CEO Aaron Kaplan is an absolute must-watch.

Flood explicitly lays out why Prometheum’s claims that their SPBD approval is evidence of a… pic.twitter.com/yCDDKHiLea
— Alexander Grieve (@AlexanderGrieve) June 13, 2023

Former SEC and FINRA staff

Meanwhile, others have raised suspicion over the background of the Prometheum team, noting that some are former SEC and Financial Industry Regulatory Authority (FINRA) staffers.

Prometheum’s chief compliance officer, Joseph Zangri, was an SEC enforcement attorney in the mid-to-late 1990s. In addition, the company’s chief regulatory officer, Rosemarie Fanelli joined the company in May 2021 after a nearly 14-year stint in senior roles at FINRA — a self-regulatory organization for the U.S. securities industry.

The co-founders and co-CEOs of Prometheum — Aaron and Benjamin Kaplan — also have a small degree of separation from former SEC staff. The Kaplans are attorneys at the law firm Gusrae Kaplan which states it was established “by a former Chief Attorney of the SEC’s Division of Enforcement.”

Who look alot like these guys: https://t.co/MPQjKH0GbL pic.twitter.com/bcu4sgcv7s
— Matt Walsh (@MattWalshInBos) June 14, 2023

Gusrae Kaplan co-founder, Martin H. Kaplan, is also a Prometheum chairman.

It is not out of the ordinary for crypto companies to hire former regulatory staffers, however.

Following a lawsuit from the SEC, Binance.US hired former SEC enforcement co-director George Canellos as a lawyer. The newly appointed chief legal officer of stablecoin issuer Circle has a resume spanning many government roles including the U.S. Treasury and the Commodity Futures Trading Commission.

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‘Who the hell’ is Prometheum and what did it say to Congress about SEC compliance?

June 15, 2023 Coin Telegraph

aaron kaplan

A testimony given at a United States House of Representatives hearing by the blockchain firm’s co-founder, Aaron Kaplan, has drawn the attention of those in the crypto space.

The relatively under-the-radar crypto company Prometheum has been thrust into the spotlight after a recent testimony from its co-founder before a United States House Committee, discussing crypto regulatory clarity.

On June 13, Prometheum co-founder and co-CEO Aaron Kaplan appeared before the U.S. House at a hearing to discuss providing regulatory clarity to the crypto industry.

Contrary to recent commentary from crypto industry players such as Coinbase, Kaplan’s testimony appears to be supportive of regulating crypto under current securities laws — a view also shared by the Securities and Exchange Commission.

This Prometheum storyline has got to be the strangest thing I have seen in awhile in this industry. Has anyone actually looked into this? Beyond bizarre…
— Matt Walsh (@MattWalshInBos) June 14, 2023

Attention was also brought to Kaplan’s testimony on social media, including a widely shared June 14 Twitter thread from Castle Island Ventures partner Matt Walsh, who shared what he claims are “bizarre” facts about the company and its co-founder.

The thread has also prompted many — including Cardano and Ethereum co-founder Charles Hoskinson — to ask just who Kaplan and Prometheum are, and why they appear to be unheard of before.

Who the hell are these Prometheum guys? https://t.co/PHuqVGStlS
— Charles Hoskinson (@IOHK_Charles) June 14, 2023

The Wall Street-based Prometheum was founded in 2017 by Aaron and Benjamin Kaplan, co-CEOs of the firm. The pair are also listed as attorneys at the financial services-focused law firm Gusrae Kaplan.

Subsidiaries of the company are notable for their registrations with the SEC and approvals from the Financial Industry Regulatory Authority.

In May, subsidiary Prometheum Ember Capital was the first firm to offer custody of digital assets as a qualified custodian after receiving FINRA approval to operate as a special purpose broker-dealer for digital assets.

In October 2022, its subsidiary Prometheum Ember ATS launched its SEC-registered alternative trading system offering digital asset trading, clearing, settlement, and custody.

What did Kaplan say?

In his prepared testimony, Kaplan argued that multiple frameworks provided by the SEC have “clearly laid out” a “compliant path forward for crypto in the United States.”

He even provided a glowing review of the regulator, calling it “the most capable financial markets regulatory agency in the world.”

Prometheum's stance is clear: There is a path forward for digital assets in the U.S. through the current regulatory frameworks set up by federal securities laws. Hear Aaron Kaplan's testimony in front of the House Financial Committee here: https://t.co/qqVd0ryqe2 #digitalassets
— Prometheum (@PrometheumInc) June 14, 2023

Kaplan claimed crypto exchanges and custodians “are required to be regulated by the SEC” and slammed those not currently regulated as being “reckless, unlawful platforms.”

He went on to say existing securities laws and regulations apply to cryptocurrencies and those who argue for new crypto-specific laws are “simply not willing to comply.” He added new laws are “not in the best interest of the investing public or the blockchain industry.”

However, some have criticized the crypto firm, saying Prometheum doesn’t have much to show product-wise despite its years in business and regulator approvals.

During the hearing, Kaplan was asked by Representative Mike Flood if Prometheum offered trading for Bitcoin (BTC) or Ether (ETH), which together make up nearly 65% of the $1 trillion crypto market cap, according to CoinGecko.

Kaplan responded to both questions by saying it did not.

For those that didn’t stick around until the end of the @FinancialCmte hearing today, this exchange between @USRepMikeFlood and @PrometheumInc CEO Aaron Kaplan is an absolute must-watch.

Flood explicitly lays out why Prometheum’s claims that their SPBD approval is evidence of a… pic.twitter.com/yCDDKHiLea
— Alexander Grieve (@AlexanderGrieve) June 13, 2023

'Bizzare' claims

Meanwhile, theories about the company are are swirling on social media, with some alleging the firm's links to the Chinese Communist Party, pointing to 2019 SEC filings from Prometheum stating HashKey and Shanghai Wanxiang Blockchain are “strategic partners and joint venturers.”

Others have pointed to Prometheum’s team that includes former SEC and FINRA staffers.

Cointelegraph contacted Prometheum to ask for a comment surrounding some of these claims.

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Crypto-Friendly Trading Giant Robinhood To Pay Up to $10,200,000 to US Regulators Over 2020 Platform Outages

April 8, 2023 The Daily Hodl

FINRA may hire employees terminated from crypto firms: Report

June 15, 2022 Coin Telegraph

Business

“Anybody who is getting laid off from a crypto platform and wants to work for FINRA, give me a call," said president and CEO Robert Cook.

The United States Financial Industry Regulatory Authority, or FINRA, reportedly plans to “bulk up” its capability to monitor crypto — a move that could include scooping up employees recently terminated from crypto companies.

According to a Tuesday Reuters report, FINRA president and CEO Robert Cook encouraged crypto workers who expect to be on the chopping block to reach out to the financial regulator as part of its efforts to increase resources related to the space. Major crypto exchanges in the United States including Coinbase and Gemini have announced plans to cut staff amid extreme market volatility, likely resulting in the loss of thousands of jobs.

"We are already having to be engaged in the space and we think that as a result it's appropriate for us to bulk up our capabilities there," said Cook. “Anybody who is getting laid off from a crypto platform and wants to work for FINRA, give me a call.”

Roughly 3,600 people currently work at FINRA, according to its website. Many firms registered with the financial regulator can trade stocks or crypto on their clients’ behalf. Cook reportedly said FINRA was working on developing digital asset verification techniques as well as cross-market surveillance on some blockchains.

Some crypto firms based outside the U.S. including Crypto.com — headquartered in Singapore — have announced similar staff cuts during the market downturn. CEO Kris Marszalek said on June 10 that the exchange would be letting 260 employees go in an effort to “ensure continued and sustainable growth for the long term.” However, Binance CEO Changpeng Zhao announced on Wednesday that the major crypto exchange had 2000 open positions for which it was hiring.

Robinhood Raises Almost $2 Billion in IPO, Falls Short of Expected $35 Billion Valuation

July 29, 2021 Bitcoin.com

Facing $70M in fines from regulators, Robinhood files for IPO

July 1, 2021 Coin Telegraph

Facing M in fines from regulators, Robinhood files for IPO

Coin Telegraph

The U.S. Financial Industry Regulatory Authority delivered its biggest financial penalty against the trading app on Wednesday, and Robinhood still reportedly faces scrutiny from the SEC regarding its business practices.

Stock and cryptocurrency trading app Robinhood has filed an application with the U.S. Securities and Exchange Commission for an initial public offering.

In a Form S-1 registration statement filed Thursday with the SEC, Robinhood said it intended to move forward with an initial public offering its Class A common stock. If approved, the company said it plans to trade using the ticker “HOOD” on the Nasdaq and raise $100 million in the debut.

The trading app had said it was planning to go public last month but postponed the offering to July. The firm has been the subject of an investigation from the U.S. Financial Industry Regulatory Authority, or FINRA, and is reportedly under scrutiny from the SEC as well.

The IPO announcement comes just one day after FINRA ordered Robinhood to pay roughly $70 million in fines related to its alleged “systemic supervisory failures” and restitution to customers it had allegedly caused “widespread and significant harm.”

This story is developing and will be updated.

FINRA orders Robinhood to pay $70M due in part to ‘significant harm’ platform caused users

June 30, 2021 Coin Telegraph

<div>FINRA orders Robinhood to pay M due in part to 'significant harm' platform caused users</div>

bitcoin regulation

Regulators said the trading app should pay restitution to users like the 20-year-old who committed suicide after an erroneous negative balance appeared in his account.

The U.S. Financial Industry Regulatory Authority is penalizing Robinhood to the tune of roughly $70 million based on the results of an investigation into the stock and cryptocurrency trading app.

In a Wednesday announcement, the Financial Industry Regulatory Authority, or FINRA, said it had ordered Robinhood to pay $57 million in fines to the regulatory body as well as provide roughly $12.6 million in restitution to certain customers. FINRA alleged the trading platform caused “widespread and significant harm” to thousands of users and exhibited “systemic supervisory failures” starting as early as September 2016.

“The fine imposed in this matter, the highest ever levied by FINRA, reflects the scope and seriousness of Robinhood’s violations, including FINRA’s finding that Robinhood communicated false and misleading information to millions of its customers,” said the head of FINRA’s department of enforcement Jessica Hopper.

The false information to which FINRA referred includes allegations Robinhood misrepresented margin trades, users’ cash holdings in the app accounts, the risk of loss in options transactions, how much buying power users had, and information regarding margin calls. According to the regulatory body, “Robinhood neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.”

Regulators said the firm was responsible for paying $7 million in restitution to customers who reported seeing inaccurate negative cash balances in their accounts. The body referenced Alexander Kearns, a 20-year-old Robinhood user who committed suicide in June 2020 after an erroneous negative balance of more than $730,000 appeared in his account. In addition, FINRA ordered the trading platform to pay more than $5 million to users affected by Robinhood’s outages between 2018 and 2020, alleging that many users had lost up to tens of thousands of dollars in trades the platform was unable to execute during significant market volatility.

The penalties paid to FINRA directly seem to be based on Robinhood’s company policies and apparent failure to provide a clear picture of market data for customers. The regulatory body said between January 2018 and December 2020 the trading platform failed to report thousands of user complaints to FINRA following all the aforementioned issues. In addition, Robinhood’s process to approve customers for options trading relied on algorithms rather than “firm principals.” FINRA said this method had resulted in the approval of thousands of users who did not meet the company’s eligibility criteria or whose accounts should have otherwise been flagged.

The results of the FINRA investigation come as Robinhood is planning to move forward with an initial public offering, or IPO. However, the firm is currently under scrutiny from the U.S. Securities and Exchange Commission, reportedly resulting in the delay of the company going public. Robinhood initially planned to launch its IPO this month but has reportedly postponed the offering to July.

Digital Asset Marketplace Apifiny Prime Granted FINRA Broker-Dealer License Approval

April 30, 2021 Bitcoin.com

finra