The Securities and Exchange Commission has settled charges against Linus Financial, Inc. for failing to register the offers and sales of its retail crypto lending product, the Linus Interest Accounts. The SEC decided against having Linus pay penalties as the company took “prompt remedial actions” and cooperated with the investigation.
Without admitting or denying the SEC’s findings, Linus Financial agreed to a cease-and-desist order prohibiting it from violating the registration provisions of the Securities Act of 1933.
The SEC states that in 2020, Linus began to offer Linus Interest Accounts that allowed US investors to commit dollars to the account, with Linus converting the funds to crypto, which generated interest for investors. The SEC claims that these accounts were sold as securities but were not registered, nor did they qualify for an exemption from registration.
In March of 2022, after the SEC revealed charges targeting a similar product, Linus halted the offering for new investors while asking existing investors to remove their funds within weeks. The SEC reports that all funds were withdrawn.
Stacy Bogert, Associate Director of the SEC’s Division of Enforcement, issued a statement indicating the SEC will hold companies accountable when they fail to comply with securities laws.
“But we also want to encourage companies to cooperate and take prompt corrective action when problems arise. Today’s settlement provides a valuable message to other market participants about the importance of cooperation and remediation,” said Bogert.
It is atypical that the SEC does not require monetary penalties when there is a settlement.
