SEC Files Lawsuit Against Consensys for Unregistered Broker Activities and Securities Offerings

by Pooja Chauhan · 28/06/2024

The SEC sues Consensys Software Inc., alleging unregistered broker activities through Metamask Swaps and unregistered securities offerings via Metamask Staking. Discover the details of the legal battle.

United States, Bollywood Fever: The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Consensys Software Inc., accusing the blockchain firm of violating federal securities laws by failing to register as a broker and engaging in unregistered securities offerings. The SEC’s complaint focuses on Consensys’s operations through its Metamask Swaps and Metamask Staking services.

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Consensys Faces SEC Lawsuit Over Unregistered Broker Activities

The SEC alleges that Consensys has acted as an unregistered broker since 2020 through its Metamask Swaps platform, which facilitates crypto asset transactions for retail investors. According to the complaint, Consensys solicits investors, provides investment advice, routes investor orders, and handles customer assets without the necessary registration, collecting over $250 million in fees in the process.

Unregistered Securities Offerings via Metamask Staking

Additionally, the SEC claims that since 2023, Consensys has offered and sold unregistered securities through its Metamask Staking service. This involves investment contracts with Lido and Rocket Pool staking programs. The SEC contends that these activities deprived investors of essential protections provided by federal securities laws, including transparency and disclosure of conflicts of interest.

SEC Seeks Injunction and Penalties

The SEC is pursuing a permanent injunction against Consensys to halt any further infractions. They are also seeking civil monetary penalties and any additional relief deemed essential for investor protection. This development follows Consensys filing a lawsuit against the SEC. Consensys argues that Gurbir Grewal, the SEC Division of Enforcement director, authorized the investigation into Ethereum 2.0 in 2023.

This legal battle underscores the ongoing regulatory scrutiny in the rapidly evolving blockchain and cryptocurrency space, highlighting the importance of compliance with federal securities laws.