Cryptocurrency wealth management is once again considered a security! Linus Financial settles with the SEC, refunds user funds

Recently, the U.S. Securities and Exchange Commission (SEC) reached a settlement with the U.S. company Linus Financial agreeing to resolve allegations that its Linus cryptocurrency lending products for retail investors involved unregistered securities. However, due to Linus taking prompt remedial actions, the SEC decided not to pursue civil penalties.

Linus Financial's lending products are considered "investment contracts"

The SEC stated that Linus Financial began offering and selling Linus Interest Accounts in the United States around March 2020. These accounts involve investors providing fiat currency, in return, Linus promises to convert these assets into the cryptocurrency USDC to provide periodic payments, and investors can withdraw their assets at any time. However, Linus has never filed a registration statement with the SEC regarding these accounts.

Some of these assets were transferred to liquidity pools on decentralized finance platforms, or directly lent to third-party institutional borrowers. As of March 25, 2022, there were about 500 active investors in these accounts, with total assets of $5.2 million earning interest. Other unregistered activities pointed out by the SEC include:

• Interest rates for Linus investors may vary, typically adjusted monthly. Rates fluctuate between 3.50% APY and 4.50% APY.
• Linus retains control of the assets and uses them for various income-generating activities.
• Linus promotes its accounts to U.S. investors through various channels such as its website, social media, and Google search ads.
• Linus markets these accounts as investment opportunities.

Linus Interest Accounts are considered securities in the form of investment contracts. Linus provided and sold these securities without registering with the SEC.

Linus Financial reaches settlement with the SEC

On March 25, 2022, following a settlement between the SEC and another cryptocurrency lending platform, Linus notified its investors of its cessation of operations and requested them to withdraw their funds by April 22, 2022. Subsequently, all investor funds have been withdrawn. Due to Linus's prompt remedial actions, the SEC decided not to pursue civil penalties.