The US Securities and Exchange Commission (SEC) made an announcement on Thursday, revealing that it has resolved charges against Linus Financial, a Nashville-based fintech company, related to the sale of an unregistered cryptocurrency lending product. Notably, the SEC chose not to levy fines or penalties against Linus Financial due to the company’s prompt cooperation and immediate actions taken to rectify the issues.
The saga began in March 2020 when Linus Financial introduced its crypto lending product, known as Linus Interest Accounts, to the United States market. These interest accounts allowed US investors to invest their funds with Linus Financial, with the promise of earning interest on their deposits.
What followed was a process in which Linus Financial converted these deposits into cryptocurrencies, pooled them with contributions from other investors, and strategically managed these pooled funds to generate profits. These profits were subsequently utilized to pay interest to investors and to benefit Linus Financial as a company.
In the official press release, the SEC stated, “The Linus Interest Accounts were offered and sold as securities, and that the offers and sales did not qualify for an exemption from SEC registration. Therefore, Linus Financial was required to register its offers and sales of the Linus Interest Accounts.”
As a result of the SEC’s determination, Linus Financial took decisive action. On March 25, 2022, the company ceased offering its Linus Interest Accounts to new investors and promptly instructed existing investors to withdraw their funds by the end of April 2022. Consequently, all investors in these accounts have successfully withdrawn their investments.
Stacy Bogert, Associate Director of the SEC’s Division of Enforcement, emphasized the SEC’s commitment to holding companies accountable for violations of securities laws. However, she also highlighted the importance of encouraging cooperation and swift corrective measures when issues arise. Bogert stated, “Today’s settlement provides a valuable message to other market participants about the importance of cooperation and remediation.”
In its settlement with the SEC, Linus Financial agreed to a cease-and-desist order, without admitting or denying the SEC’s findings. Additionally, the order prohibits Linus Financial from violating the registration provisions of the Securities Act of 1933.
This resolution serves as a testament to the SEC’s role in safeguarding the interests of investors and ensuring that companies adhere to regulatory standards, while also promoting a climate of responsiveness and rectification in the cryptocurrency and fintech sectors.