The SEC complaint states that Galois Capital Management failed to use a “qualified custodian service” to store crypto assets since July 2022. This violates asset custody rules under the Investment Adviser Act. Galois Capital stored crypto assets in accounts on trading platforms like FTX Trading. About half of the fund’s assets under management from early to mid-November 2022 were lost in the collapse of the FTX crypto exchange.
The regulator alleges that Galois Capital failed to comply with requirements to protect client funds, which were offered as unregistered securities. The agency maintains that Galois Capital misled investors about the maturity period.
Galois Capital did not admit or deny the regulator’s accusations, agreeing to pay an administrative fine of $225,000. These funds will be distributed among the affected investors of the private fund.
“By failing to maintain proper custody of assets, Galois Capital exposed investors to the risk of losing money, having it misappropriated, or having it stolen. We will continue to hold accountable advisers who violate their obligations to protect investors,” the SEC said.
In April, the SEC filed a lawsuit against Geosyn Mining, accusing it of defrauding investors of $5.6 million and embezzling the funds that were intended to buy mining machines. The regulator recently accused the OpenSea trading platform of trading unregistered securities.
Source: Bits
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