Bitcoin News and Finance Lawmakers Probe SEC and FINRA Over ‘Shady Approval’ of Prometheum Skip to main content

Lawmakers Probe SEC and FINRA Over ‘Shady Approval’ of Prometheum

Lawmakers Probe SEC's 'Shady Approval' of Prometheum With No Customer, No Operating History, and Ties to Chinese Government

U.S. lawmakers are probing the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) regarding the “shady approval” of Prometheum “as the first and only special purpose broker-dealer for digital assets.” They raised concerns about the timing and circumstances surrounding the approval, noting that Prometheum has no customers, operational history, and track record. In addition, the lawmakers stressed that the company has ties to the Chinese government.

SEC, FINRA Probed Over ‘Shady Approval’ of Prometheum

The U.S. House Financial Services Committee announced Tuesday that the committee’s chairman, Patrick McHenry (R-NC), has led Republican committee members in probing the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) regarding the “shady approval” of Prometheum.

Referencing the letters dated Aug. 9 that the lawmakers sent to SEC Chair Gary Gensler and FINRA President and CEO Robert Cook, the Twitter account for Financial Services GOP wrote:

Chairman Patrick McHenry led Republicans on the Financial Services Committee in letters to FINRA and SEC regarding the shady approval of Prometheum as the only special purpose broker-dealer for digital assets.

Congressman Scott Fitzgerald (R-WI), who also signed the letter, tweeted: “It’s concerning that SEC Chair Gensler’s first and only approval of a special purpose broker-dealer for digital assets was done for a company with strong ties to the CCP [Chinese Communist Party]. I joined [the Financial Services Committee] in demanding transparency around this decision.”

In their letter to the SEC, the lawmakers asked the regulator to “provide all documents and communications, between and among SEC employees, related or referring to Prometheum’s application to become a special purpose broker-dealer, as soon as possible but no later than 5:00 pm, August 22, 2023.”

The SEC created a new class of broker-dealers called special purpose brokers-dealers (SPBDs) in 2020 to allow for the custody of digital asset securities. FINRA approved the first SPBD, Prometheum Ember Capital LLC, in May 2023. Several other firms have applied for SPBD approval, but FINRA has not yet approved them. The lawmakers stressed: “The timing and circumstances surrounding the approval of Prometheum as the first SPBD raise serious questions.”

They added: “The approval comes as the Committee is considering addressing gaps in the regulation of digital assets … The legislation was ultimately released on June 2, 2023. The timing of the approval raises concerns that it was aimed at demonstrating that legislation is not needed because there is a workable regulatory framework for the custody of digital asset securities.”

The lawmakers detailed that Prometheum “has not yet served a single customer,” emphasizing: “It has also refused to make public the digital asset securities that Prometheum ATS would support on its platform … Furthermore, Prometheum is not currently able to perform clearing or settlement services, which would be required to operate as an alternative trading system.” They stressed:

It is unclear why FINRA would have chosen to approve a firm with no operating history and no track record of serving customers over all the applications that it has received.

Moreover, the lawmakers raised concerns that Prometheum “has ties to the Chinese government,” which they view as serious national security and data privacy concerns. U.S. Congressman Ritchie Torres has previously called for an investigation into the special purpose broker-dealer license given to Prometheum by the SEC.

What do you think about the SEC and FINRA approving Prometheum? Let us know in the comments section below.

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