SEC Files Lawsuit Against Crypto Firm Consensys

The US Securities and Exchange Commission has sued cryptocurrency firm Consensys as it continues an industry-wide crackdown in an attempt to apply existing financial rules to the largely unregulated space.

The lawsuit, filed in Brooklyn, New York federal court, alleges Fort Worth, Texas-based Consensys “engaged in the offer and sale of securities” through its crypto staking programmes, which allow users to lock up tokens for a certain period of time in exchange for a yield.

The company also “acted as an unregistered broker” through its digital asset wallet MetaMask, the SEC said in its court filing.

“Consensys violated the federal securities laws by failing to register as a broker and failing to register the offer and sale of certain securities,” the lawsuit alleges.

‘Unregistered broker’

The SEC added that 10-year-old Consensys has collected more than $250 million (£198m) in fees through “its conduct as an unregistered broker”.

The popular MetaMask self-custodial crypto wallet allows crypto owners to store their assets as well as buy, send and swap digital assets.

“This is just the latest example of the SEC’s regulatory overreach — a transparent attempt to redefine well-established legal standards and expand the SEC’s jurisdiction via lawsuit,” Consensys said in a statement.

“We are confident in our position that the SEC has not been granted authority to regulate software interfaces like MetaMask.”

In April Consensys tried to pre-empt SEC action by suing the agency in a Texas court alleging overreach by the agency.

‘Unlawful regulation’

It said the lawsuit followed three subpoenas last year as well as a Wells notice informing the company of a planned enforcement action.

The company said in its lawsuit that the SEC was trying to “unlawfully regulate” Ether, the second-largest cryptocurrency, through enforcement actions.

On 19 June Consensys said it had received notice that the SEC was dropping its investigation, but said it would continue the Texas case in order to establish legally that the SEC does not have legal authority to regulate software inteerfaces build on the Ethereum blockchain.

“We will continue to press our case in Texas as well as defend this new case in New York,” Consensys said.