Congressman Torres Urges Probe into SEC’s Deal with Prometheum

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Key takeaways:

  • There may be an investigation into the US SEC’s “haphazard and heavy-handed approach to digital assets.”
  • Torres wrote two letters, one to the Government Accountability Office’s Comptroller and the other to the SEC’s Inspector.

In response to the US Securities Exchange Commission’s (SEC) “haphazard and heavy-handed approach to digital assets” or, more particularly, its relationship with the cryptocurrency platform Prometheum, Congressman Ritchie Torres has requested two separate independent probes.

US Representative Ritchie Torres issued letters of inquiry to the Government Accountability Office’s Comptroller General Gene Dodaro and the SEC’s Inspector General Deborah Jeffrey on July 13. Torres tweets letters that he has published, and they read as follows:

“The SEC refuses to bring even the barest amount of clarity to the application of securities law to digital assets. Its preferred means of communicating is neither rule nor guidance but enforcement.” 

Torres highlights the SEC’s decision in May to provide Prometheum, a platform for digital assets founded in 2017 by two US financial attorneys, with a Special Broker Purpose Dealer (SPBD) license. As stated by Torres:

“Prometheum appears to be nothing more than a Potemkin platform, operating as a timely talking point for crypto critics rather than a true trading platform for crypto customers.”

The SEC’s failure to establish “a workable process for registering” digital asset platforms and “the unusual backdoor deal” for Prometheum are both subjects of his call for an investigation. 

Torres wrote two letters, one to the Government Accountability Office’s Comptroller General Gene Dodaro and the other to the SEC’s Inspector General Deborah Jeffrey.

Torres referred to the SEC as “an overzealous traffic agent” who arbitrarily issues fines to drivers for exceeding the speed limit while keeping everyone in the dark about it, noting that “regulation by enforcement is no way to regulate.”

Torres’ request for a probe is not the first to call for Prometheum to be looked into; the company recently gained notoriety in the crypto community. After the company’s co-founder, Aaron Kaplan, appeared before Congress in June, the business was thrown into the public eye. The issue seems to be Kaplan’s broad endorsement of the SEC’s regulatory approach under the applicable securities statutes.

After the hearing, rumors concerning Prometheum began circulating on Twitter, focusing on the company’s potential connections to Chinese financiers. The Blockchain Association requested information about the business from the SEC on June 15. Six American congressmen demanded in July that the SEC look into Prometheum’s “ties to the Chinese Communist Party.”

In June, Gary Gensler, the head of the SEC, was charged with market manipulation by Citadel Securities and Citadel Market Maker. It is alleged that he used Vanguard Group and BlackRock to short stocks with a concentration on cryptocurrencies, such as AMC Theatres and GameStop.

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