Securities and Exchange Commission chairman Gary Gensler’s cryptocurrency regulations are an uneven mess; digital coin exchanges are approved by the committee for going public, only to be fined later for selling cryptocurrencies that the agency doesn’t like. Securities laws aren’t clear if he has the obligatory legal authority to weigh in as he did, but that hasn’t stopped Gensler from filing a slew of cases.
There’s an honest argument that Gensler’s regulatory agenda is dangerous as well, and never just for the same old aggressive enforcement reasons that would block the possibly revolutionary crypto blockchain technology. It is also since the SEC, often called Wall Street’s best cop, has been looking like a bunch of key cops currently.
Consider the strange case of an organization called Prometheum, which critics say slipped through some very large SEC slots to change into something within the $1 trillion crypto business.
Prometheum co-founder Aaron Kaplan made some news last week. He won first place within the House Financial Services Committee’s cryptography hearing to indicate off a serious achievement by his little-known team. Yes, Gensler almost hates cryptocurrencies and said the identical thing. But apparently he really likes the corporate, a lot in order that his SEC has awarded Prometheum the status of the primary “dedicated digital asset broker-dealer.”
![Former FTX CEO Sam Bankman-Fried](https://nypost.com/wp-content/uploads/sites/2/2023/06/2023-01-04T201628Z_1256457958_RC28JY9DPMVK_RTRMADP_3_FINTECH-CRYPTO-FTX-BANKRUPTCY-ROBINHOOD.jpg?w=1024)
It’s an enormous deal. Recall, before the disgraced founding father of FTX, Sam Bankman-Fried, was arrested, he was the king of cryptocurrencies and sought such a designation from Gensler. US discount broker Robinhood also wanted one since it allows customers to purchase and sell cryptocurrencies without fear of SEC reprisals. Within the case of Robinhood, some crypto-typists consider they got a stiff hand from the SEC because Bankman-Fried, a serious donor to the Democratic Party, was Gensler’s favorite child until the SBF blew up, after all, under Gary’s nose.
U.S.-based exchange Coinbase was also looking for something just like Prometheum but was turned down, possibly since the SEC was poised to attack, because it did two weeks ago, accusing the exchange of “unlawfully facilitating the buying and selling of crypto assets.”
That said, it could possibly be argued that Robinhood, and even Coinbase, must have the upper hand within the competition for Prometheum’s status. Each survived the IPO disclosure process by the SEC and are listed on Nasdaq. These are well-known entities in regulatory circles.
Private property
What are the qualifications of Prometheum? It is just not a public company; it’s privately owned by Kaplan, his family and others. Robinhood employs 2,300 people, Coinbase 3,500. Prometheum is claimed to employ around 25 people. It appears to be based in an inconspicuous Wall Street office, which, for the uninitiated, isn’t any longer where the massive banks now reside.
Goldman Sachs and JPMorgan partnered with Robinhood and Coinbase.
Certainly one of Prometheum’s underwriters is an organization called Network 1 Financial, whose offices are believed to be in Red Bank, Latest Jersey, a luxury shopping center (the corporate didn’t reply to a request for comment). Network 1, based on FINRA records, has 18 so-called “regulatory incidents” leading to fines of roughly $250,000, based on my reading of case summaries, during the last three many years.
Prometheum’s filings show no violations, but a March 28, 2019 SEC disclosure says the corporate has ties (also often called “strategic partners and three way partnership partners”) with a Chinese company called “HashKey.”
![Aaron Kaplan Founder and Co-CEO at Prometheum](https://nypost.com/wp-content/uploads/sites/2/2023/06/pvza5rswmsssixncdiab.jpg?w=170)
Now follow me here. Someone named “Dr. Feng Xiao” is the president of HashKey and vice chairman and CEO of China Wanxiang Holding Co. Ltd.
Senator Tommy Tuberville (R-Ala.) in a letter to Gensler said, “The Wanxiang Group has a protracted history of close ties to the CCP,” the Chinese Communist Party. And it still is. The company is now run by someone named Lu Weiding, who noted in the corporate’s press release that “there can be … . . at all times take heed to the Party and follow the Party.”
Tuberville says Prometheum’s ties to China raise the identical concerns that Republicans have raised about Chinese-owned short video app TikTok, or, he says, “serious concerns about investor protection, data privacy, and national security.” He added that the SEC must end its “readiness to proceed allowing CCP-related entities to operate in the US.”
Kaplan, in a lengthy statement to The Post, said his Chinese partners not play a job in the event of Promethium technology; its ties to the Chinese have been checked without condemnation by two US government agencies “Wanxiang and its affiliates would not have access to any Prometheum code. . . customer data”, etc., “Prometheum is proud to be a born, bred and controlled American company”.
Meanwhile, Gensler’s people declined my request for comment, however the CEO recently gave an interview on CNBC and gave Prometheum an “attaboy” for coming to the SEC and searching for proper registration while agreeing to not trade cryptocurrencies that he believes violate the law.
Gensler may like Prometheum, but on social media, cryptos are skeptical. They cannot seem to grasp why the SEC likes these guys a lot or what the corporate is definitely doing. Its CEO boasts that its platform will only trade SEC-sanctioned digital assets, meaning those assets which have been registered with the SEC. But so far as I do know, none of the key cryptocurrencies in circulation retain this designation, definitely not Bitcoin or Etherium, the 2 hottest digital currencies.
Whatever is under the hood, let’s hope Gensler didn’t miss one other FTX.