SEC Accuses Consensys of Operating Unlicensed Brokerage, Sues for Over $250 Million in Fees

The SEC has filed a lawsuit against Consensys for allegedly violating securities laws by operating as an unregistered broker through its MetaMask wallet's staking programs and MetaMask swaps service. MetaLawMan has commented on the case, comparing it to the complaint Consensys filed against the SEC. The SEC's lawsuit follows a complaint by Consensys against the SEC's classification of Ethereum as a security and overreaching regulatory actions.

In a recent turn of events, the Securities and Exchange Commission (SEC) has filed a lawsuit against Consensys Software Inc. for alleged violations of securities laws through its MetaMask Staking and MetaMask Swaps services [1]. This lawsuit marks yet another significant development in the ongoing regulatory scrutiny of the crypto industry.

Consensys, a leading Ethereum software company, has been charged with offering and selling unregistered securities through MetaMask Staking and operating as an unregistered broker through both MetaMask Staking and MetaMask Swaps [1]. The SEC claims that Consensys has facilitated the distribution of tens of thousands of unregistered securities on behalf of liquid staking providers Lido and Rocket Pool since January 2023 [1]. The company has collected significant fees while denying investors the necessary protections under federal securities laws [1].

The SEC's complaint further alleges that Consensys has been acting as a broker in the crypto asset securities market since October 2020 [1]. By soliciting investors, providing investment information, and handling transactions, Consensys has been engaging in activities that require registration as a broker-dealer [1].

Comparatively, Consensys had previously filed a complaint against the SEC in March 2023, challenging the SEC's classification of Ethereum as a security and expressing concerns over regulatory overreach [2]. This lawsuit could potentially influence the outcome of Consensys' earlier complaint.

The SEC's enforcement action against Consensys highlights the ongoing efforts to hold crypto companies accountable for their compliance with federal securities laws [1]. The investigation was led by Daphna Waxman, Amy Mayer, and Abigail [1].

[1] "SEC charges Consensys Software Inc. with unregistered securities offers, sales, and broker-dealer activities," SEC, July 20, 2024, https://www.sec.gov/news/press-release/2024-79.
[2] "Consensys sues SEC to challenge Ethereum classification as security," Reuters, March 28, 2023, https://www.reuters.com/business/finance/consensys-sues-sec-to-challenge-ethereum-classification-as-security-2023-03-28/.