SEC issues first action against cryptocurrency hedge fund

September 12, 2018
Chris Wheal

The US Securities and Exchange Commission (SEC) on Tuesday enforced two actions thought to be first of their kind by the market regulator against digital asset firms.

SEC issues two orders against unregistered crypto offerings

According to documents filed on its website, the SEC issued cease and desist orders against Crypto Asset Management, a crypto hedge fund, and TokenLot, a self-styled “superstore” for initial coin offerings (ICO). Both firms also received fines.

Crypto Asset Management

The SEC filed an order finding that Crypto Asset Management had offered a fund that operated as an unregistered investment company, marketed falsely as “the first regulated crypto asset fund in the US”.

It was a first for the SEC, however – the regulator’s maiden enforcement action against a registration violation by a hedge fund manager focused on crypto assets.

California-based Crypto Asset Management and its owner Timothy Enneking was ordered to cease and desist all financial activities and to pay a fine of $200,000, which the fund agreed to without admitting to, or denying the charges against it.

“Investment advisers must be sure that the funds they offer adhere to the applicable registration obligations and must accurately represent their funds’ regulatory status to investors,” said C. Dabney O’Riordan, co-chief of the SEC’s Asset Management Unit.


In a separate filing, Birmingham, Michigan-based TokenLot and its owners Lenny Kugel and Eli Lewitt agreed to pay more than half a million dollars to settle SEC charges that they advertised and sold securities in the form of digital token offerings without registering as broker-dealers.

“Respondents actively and broadly solicited the general public to use the TokenLot ‘ICO Superstore’ platform to purchase digital tokens . . . through its website, social media postings and forums,” the SEC said.

As a result of these actions, respondents wilfully violated rules that prohibit use of mail or other interstate commerce instruments to induce the purchase of securities, and the sale of securities without registration.

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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