SEC clamps down on crypto exchange owner over false custody claims

The US Securities Exchange Commission has moved against a cryptocurrency firm for making false claims of regulated partnerships. 

The Securities Exchange Commission (SEC), the US Federal body that has taken the lead in the regulation of Initial Coin Offerings and in the States has announced that it is taking action to suspend operation of a Nevada-based company by the name of American Retail Group Inc. (ARG) effective from October 22nd. The suspension, which will last until November 2nd, was due to concern that the operation – which operates the Simex cryptocurrency exchange and project funding platform, after acquiring it back in May of this year  – was providing inaccurate and inadequate information about its operations.

What appears to have particularly irked the Commission are claims in press releases from ARG regarding regulatory approvals for crypto custody. The SEC press release says that Simex released statements on the 16th and 20th of August purporting that “company had partnered with an SEC qualified custodian for use with cryptocurrency transactions that would be ‘under SEC Regulations,’ and that the company was conducting a token offering that was ‘officially registered in accordance [with] SEC requirements.'”

The SEC, however, offers no such regulatory oversight at present.

“The SEC does not endorse or qualify custodians for cryptocurrency, and investors should use vigilance when considering an investment in an initial coin offering,” said Robert A. Cohen, Chief of the SEC Enforcement Division’s Cyber Unit, in its own press statement on the matter.

Under the federal securities laws, the SEC can suspend trading in a stock for 10 days and generally prohibit a broker-dealer from soliciting investors to buy or sell the stock again until certain reporting requirements are met. Thus shares in ARG Inc. will not be traded until the end of that period under Section 12(k) of the Exchange Act.

The Simex Exchange offers its own Simex Token (SMX), which provides a fee reduction on the site for traders and an option of Simex Group shares for investors.

“SMX Token can be exchanged at any time for the preferred share of SIMEX Corporation obtaining all the privileges inherent in the preferred stock.Whenever you buy SMX tokens we reserve equal amount of preffered [sic] shares for you.”

SMX still appears to be being offered via Simex, though Etherscan seems to indicate that trading volumes are exceptionally low.