SEC Settles with Galois Capital Over Custody Rule Violations with $255K Fine

The SEC has settled with cryptocurrency firm Galois Capital over allegations of violating custody rules by using Fireblocks, considered an inadequate custodian. Galois will pay a $255,000 fine but denies any wrongdoing.

SEC Reaches Settlement with Galois Capital Over Custody Regulation Breach

The U.S. Securities and Exchange Commission (SEC) has settled with cryptocurrency firm Galois Capital following accusations that the company violated custody regulations by utilizing Fireblocks, a custodian that the SEC deemed inadequate. Additionally, the SEC raised concerns about Galois’ redemption policy, calling it potentially deceptive.

Under the terms of the settlement, Galois Capital will pay a $255,000 fine without admitting or denying the allegations brought forth by the regulatory body. The settlement effectively concludes the investigation, allowing Galois to move past the issue.

In response, Galois Capital defended its decision to use Fireblocks, explaining that it was the most secure option available for safeguarding clients’ cryptocurrency assets at the time. The company expressed relief that the settlement allowed them to move forward.

Minimal Penalty, Maximum Impact

Prominent voices within the crypto industry have been weighing in on the case. Bill Hughes, an attorney at ConsenSys, noted via social media that the penalty was relatively minor, suggesting that the costs of a full SEC investigation could have been far more burdensome.

Hughes also pointed out that this settlement might signal a broader trend of regulatory pressure on custodial practices within the cryptocurrency industry. In this case, Galois’ choice to work with Fireblocks—a platform widely regarded for its security—did not satisfy the SEC’s standards.

Crypto analyst Adam Cochran expressed surprise at the SEC’s actions, given the agency’s previous criticism for not taking more proactive steps in preventing the collapse of FTX, one of the largest financial scandals in the crypto world. Cochran suggested that this settlement could signal more intense regulatory scrutiny moving forward, particularly around custody services and redemption practices.

A Moving Target for Crypto Firms

The SEC’s settlement with Galois Capital highlights the increasing complexity of regulatory compliance for crypto firms. As the industry matures, regulations are evolving rapidly, with particular focus on safeguarding client funds.

While Galois Capital can now put the matter behind it, this case serves as a reminder to other cryptocurrency businesses to carefully evaluate their custodianship and redemption policies to avoid similar issues.

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