MetaMask and Consensys in Trouble, SEC Files Lawsuit
The US Securities and Exchange Commission (SEC) has filed a lawsuit against Consensys, the parent company of MetaMask. According to a June 28 complaint, the company has been operating as an unregistered broker since 2020, offering unregistered securities through MetaMask Swaps.
Over 250 Million Earned Without Proper Paperwork
The SEC stilt that Consensys collected more than $250 million in fees by brokering crypto asset transactions and offering staking services without proper registration. As a result, investors have missed out on important protections.
The SEC is seeking permanent injunctive relief, civil penalties, and other appropriate remedies against Consensys for these alleged violations of national securities laws.
Since January 2023 offers Consensys is launching unregistered crypto asset programs via MetaMask Staking. By acting as an unregistered broker, Consensys has collected over $250 million in fees.
Furthermore, the regulator alleges that by facilitating investments in Lido and Rocket Pool’s staking programs, Consensys acted as an intermediary in unregistered transactions.
The SEC alleges that Consensys offered and sold tens of thousands of securities for Lido and Rocket Pool, acting as an underwriter of those securities and participating in key distribution points.
SEC Wages Anti-Crypto War
In April, Consensys sued the SEC after receiving a Wells Notice from the regulator. The company challenged potential attempts to classify Ether (ETH) and related staking services as securities. Consensys stated that it expected prosecution by the SEC:
“The SEC is pursuing an anti-crypto agenda through arbitrary enforcement actions. This is the latest example of their regulatory overreach – an attempt to redefine well-established legal norms and expand the SEC’s jurisdiction through litigation.”
According to Consensys, the SEC does not have the authority to regulate software interfaces such as MetaMask. “We will vigorously pursue our case in Texas to obtain a ruling on this matter,” the company said in a statement.
SEC focuses on strike
The SEC’s complaint classifies Lido and Rocket Pool staking programs as investment contracts. Investors in these programs invest Ether in a joint venture with a reasonable expectation of profit. Neither company has filed a registration document with the SEC.
“The Lido and Rocket Pool staking programs are offered and sold as investment contracts and are therefore securities. Investors are making an investment of ETH in a joint venture with a reasonable expectation of profit from the management efforts of Lido and Rocket Pool.”
The SEC alleges that by facilitating these staking programs through MetaMask, Consensys acted as an unregistered broker and underwriter.
Upon staking, users lock up cryptocurrencies in a digital wallet to support the security and operation of a blockchain network. Validators confirm transactions and create new blocks, for which they receive rewards. These rewards provide stakers with passive income.
