Titan Global Capital Management USA LLC, a New York-based fintech investment adviser, hasagreedto pay over $1 million to settle charges brought by the U.S. Securities and Exchange Commission (SEC).
The charges pertain to misleading statements made by Titan about performance metrics and the custody of clients' crypto assets.
The settlement represents the first violation under a recently-amended SEC rule aimed at preventing fraud related to hypothetical metrics.
The SEC alleged that Titan misled investors through statements on its website, touting hypothetical returns from August 2021 to October 2022.
Titan's claims highlighted annualized crypto performance results as high as 2,700%, but the SEC revealed that these figures were extrapolated from a purely hypothetical three-week period.
This contradicted the SEC's new marketing rule, which permits the use of such metrics under specific requirements designed to prevent deceptive practices.
Although Titan neither admitted nor denied the SEC's findings, the company settled by agreeing to a cease-and-desist order and a censure. Additionally, Titan will pay a $850,000 civil penalty that will be distributed to affected clients, along with ill-gotten gains and interest amounting to over $192,000.
Regulators discovered that Titan made inconsistent statements to clients about its handling of custody for crypto assets and failed to establish proper policies for employee trading of crypto assets.
This settlement comes from the SEC's heightened scrutiny of investment advisers' compliance with custody rules regarding client crypto assets.
Titan's resolution with the SEC reflects the trend of firms opting for settlements to avoid lengthy litigation processes in the fintech space. The case underscores the need for transparency, accuracy, and adherence to regulatory guidelines in the fast-evolving landscape of fintech investments.