On September 3, the United States Securities and Exchange Commission (SEC) brought charges and reached a settlement with hedge fund Galois Capital Management LLC regarding a private fund managed by the firm that primarily invested in cryptocurrencies.

The SEC's allegations revolve around Galois Capital's failure to comply with customer asset protection requirements, particularly for cryptocurrencies that the agency considers securities.

Agree

Galois Capital has agreed to pay a $225,000 civil penalty to resolve the charges, which will be distributed to affected investors.

Corey Schuster, Co-Director of the SEC's Asset Management Unit, stated:

“Failure to comply with the provisions of the Custody Act has placed Galois Capital at risk to investors, where the fund’s assets, including crypto assets, may be lost, misused or misappropriated.”

Schuster also emphasized that the SEC will continue to hold advisers accountable for breaches of core investor protection obligations.

The SEC found that since July 2022, Galois Capital violated the Custody provision of the Investment Advisers Act by failing to safeguard its assets with a qualified custodian.

The company held digital assets in online trading accounts on platforms like FTX, which are not qualified custodians. About half of the fund’s assets were lost when FTX collapsed in November 2022.

The SEC order also found that Galois Capital provided misleading information about the withdrawal notice period, claiming to require five business days' notice, when in fact it allowed some investors to withdraw their funds with less notice.

Galois Capital agreed to cease violations of the Advisers Act, accept a reprimand and pay a civil penalty without admitting or denying the SEC's findings.

Nearly $40 Million Lost in FTX Incident

On November 12, 2022, Kevin Zho, co-founder of Galois Capital, revealed that around $40 million in funds were stuck in FTX after the exchange froze customer withdrawals.

Four months after announcing the amount of funds stuck on FTX, Galois Capital closed its operations and sold its claims on FTX for around 16 cents on the dollar.

Following the shutdown, Galois Capital has come up with a payment plan that will see up to 90% of the unstuck funds on FTX returned to customers, while the remaining 10% will be held until the audit is complete.



https://tapchibitcoin.io/galois-capital-bi-sec-buoc-toi.html