Questions Asked About Prometheum, The SEC-Approved Crypto Exchange

Republicans have asked the SEC and DoJ to investigate "crypto exchange" Prometheum for lying in Congress and securities fraud.

Questions Asked About Prometheum, The SEC-Approved Crypto Exchange

Only a month ago, the crypto community was shocked to hear that a crypto exchange had somehow gained backing from the SEC, despite the regulator's harsh stance towards far larger and better-known companies such as Coinbase.

Questions were soon asked, by the grassroots crypto community and in Congress, and it wasn't long before the story started to unravel. Prometheum is a digital asset exchange that does not allow trading of BTC, ETH, or other popular assets. Its founder and co-CEO, Aaron Kaplan, testified to the House Financial Services Committee, stating that the SEC had provided all the guidance necessary for compliance, but was unable to answer basic questions about the exchange (such as which assets it would support, or how).

Kaplan's stance seemed curiously similar to the SEC's own, and the suggestion has been that the SEC waved the project through because it repeated Gensler's line—despite the fact that the result is a crypto exchange that cannot offer access to the most popular digital assets.

Moreover, the background and funding for the project are murky, to say the least. Alongside the suspicion that Prometheum may have received special treatment from the SEC, the company is now being scrutinized for its connections with large Chinese firms that have links to the Chinese Communist Party (CCP): Shanghai Wanxiang Blockchain Inc, and its subsidiary, digital asset manager HashKey.

A group of Republican lawmakers are demanding that the DoJ and SEC investigate Prometheum. In an open letter, Senator Thomas Tuberville wrote that Prometheum may have provided false testimony to Congress and violated US securities laws. While Kaplan stated that Prometheum had been developed independently since December 2019, financial records show the partnership with these CCP-linked entities persisted until October 2021.

The letter ends: "Making false statements to Congress is a crime. Submitting false or misleading statements in SEC filings constitutes securities fraud... We appreciate your prompt attention to our concerns and look forward to your replies."

In short, the SEC is going after Coinbase, which has taken an active approach to compliance despite the gaps in the current law, while green-lighting a firm that lied in its very filings.

The episode only highlights how dysfunctional the current situation for the crypto industry is in the US. Prometheum's high profile and subsequent troubles suggest there is something more sinister than mere incompetence or even honest malice towards crypto at work here, with active deception being used to further the SEC's agenda.

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