On Friday, the US Securities and Exchange Commission (SEC) filed a fresh lawsuit against Consensys for violating the securities law. The SEC claimed that the Consensys team operated as an unregistered brokerage firm for crypto assets securities while offering swaps service on MetaMask.
The market regulators claimed that Consensys supported the buying and selling unregistered securities.
SEC Accuse Consensys for Operating as an Unregistered Broker
The SEC accused Consensys of operating as an unregistered broker while offering crypto staking services on MetaMask. Currently, MetaMask ranks as the most used Ethereum-based wallet.
A review of the MetaMask platform demonstrates that the wallet allows the user to store crypto assets acquired from other digital wallets. Also, the MetaMask platform will enable users to obtain digital assets on Swap services.
The regulators noted that Consensys raised over $250 million in fees charged in brokerage services. The regulators claimed that Consensys’ unregistered brokerage offering exposed the investor to the risk of financial losses.
The regulators noted that Consensys supported Lido and Rocket Pool’s investment in the staking program, which was against the law. In this case, the Consensys operated as an intermediary facilitating unregistered staking services.
SEC Drop Investigation on Consensys Ethereum 2.0
The regulators claimed that Consensys supported selling thousands of securities for Lido and Rocket Pool. The SEC noted that Consensys supported buying securities such as Polygon, Chiliz, Luna, Sandbox, and Mana.
The securities mentioned in the SEC report were earlier grouped as unregistered offering.The SEC argued that Consensys should face civil penalties and legal charges for breaching the securities law.
In response to the allegation, the Consensys team vehemently disagreed with the SEC. The Consensys team argued that the SEC has no right or legal power to extend its enforcement action on crypto products like MetaMask.
The Fort Worth software company profiles the SEC’s recent lawsuit as regulatory overreach. The Consensys explained that the lawsuit was a tactic used by the SEC to redefine existing legal requirements and extend its enforcement action.
Consensys to Challenge SEC in Court
Guided by the existing law, the Consensys team believes that the SEC has no authority to regulate software such as MetaMask. The Consensys team vowed to challenge the SEC in court in Texas.
The company stated that the SEC’s recent lawsuit against Consensys undermined the growth of Web3 projects.
In April, Consensys reacted to the SEC Well Notice warning about its MetaMask offering. The Consensys claimed that the SEC silently regulated Ether as security. In retaliation to the charges, Consensys filed charges against SEC for considering Ether as security from 2023.
The software company cited an internal order issued by the SEC head of enforcement, Gurbir Grewal, in March 2023 instructing the regulators to investigate projects on Ethereum 2.0.
The commission mandated the SEC to issue subpoenas to individuals or businesses trading ETH. Even though SEC Chair Gary Gensler has failed to clarify whether Ether is a security or commodity, the agency treats ETH as a security.
In June, the Consensys team confirmed that the SEC plans to abandon plans to investigate Ethereum 2.0. This implies that the SEC won’t extend its enforcement action on projects centered on the Ethereum network.
The software company celebrated the SEC move to end the one-year investigation on Ethereum 2.0. Months after the SEC abandoned plans to investigate Ether, the regulatory agency revived its enforcement action on crypto firms.
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