Regulation
SEC Sues MetaMask Developer Consensys As It Extends Legal Crusade Against Cryptocurrency Industry
The Securities and Exchange Commission filed its latest lawsuit against the cryptocurrency industry on Friday, this time targeting Consensys, a blockchain company focused on the Ethereum network best known for its MetaMask wallet.
Echoing similar complaints filed against other cryptocurrency companies, such as Monetary base AND KrakenThe SEC alleges that Consensys violated federal securities laws by failing to register as a broker-dealer while offering securities services, ultimately collecting more than $250 million in commissions.
While the allegations echo past actions, the lawsuit is notable for the controversy surrounding the escalating legal battle. In April, after receiving a Wells Notice, a formal letter that the SEC intends to subpoena, Consensys preemptively archived its lawsuit against the agency, arguing that clarity needs to be clarified on the question of whether Ethereum is a security.
Just 10 days ago, Consensys announced that it had received a letter from the SEC, notifying the company that the agency had closed its so-called investigation into Ethereum 2.0, with Consensys claiming that this meant that Ethereum did not fall under the SEC’s jurisdiction. agency, a topic of great consequence for participants in the cryptocurrency industry. In Friday’s lawsuit, the SEC did not name Ethereum as one of the unregistered securities offered by Consensys.
“Consensys has inserted itself directly into U.S. stock markets, while depriving investors of the protections afforded by the federal securities laws,” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement, in a Press release.
Ethereum 2.0
Founded by one of Ethereum’s developers, Joseph Lubin, Consensys differs from other recent subjects of SEC lawsuits. Instead of functioning like an exchange like Monetary base or Kraken, Consensys develops software, including MetaMask, a digital wallet that allows users to hold and move cryptocurrencies, as well as stake on Ethereum, a process that involves earning a return.
In its 59 pages causeThe SEC alleges that Consensys violated securities laws by allowing cryptocurrency “exchange” through MetaMask, as well as offering staking services, acting as an unregistered broker in both scenarios.
The SEC alleges that Consensys brokered more than 36 million cryptocurrency transactions, including at least 5 million involving what the agency believes to be securities. The SEC has previously leveled similar staking-related charges against Kraken and Coinbase, with Kraken settling for $30 million and Coinbase opposes the charges.
“Overregulation”
Despite the new allegations, many in the cryptocurrency industry will likely see the new complaint as a victory, because it does not name Ethereum as a stock. Previously, Fortune reported that the SEC was investigating the security status of Ethereum through a series of subpoenas to related companies, leading to Consensys’ pretrial lawsuit. However, the political waters seemed to be changing with the ride of a cryptocurrency regulation bill in the House of Representatives in May, with the SEC reporting approval for Ethereum ETFs soon after – a decision that onlookers had previously considered unlikely.
While the lawsuit will not break any new ground for the SEC, it does represent a new front in a multi-pronged campaign against many of the industry’s top firms. The agency filed the Consensys complaint in the U.S. District Court for the Eastern District of New York.
A spokesperson for Consensys, who noted that the company’s lawsuit against the SEC in Texas is ongoing, said in a statement that the company “fully expected the SEC to follow through on its threat to say that our interface MetaMask software must register as a securities broker. The SEC has pursued an anti-crypto agenda driven by ad hoc enforcement actions. This is just the latest example of its overregulation.”
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