SEC Files Lawsuit Against Consensys for Securities Violations

The US Securities and Exchanges Commission (SEC) has brought a lawsuit against Consensys, the parent company of MetaMask, for providing staking and brokerage services around unregistered securities contracts.

This suit was filed on 28 June, stating, “Consensys violated the federal securities laws by failing to register as a broker and failing to register the offer and sale of certain securities, thereby depriving investors of crucial protections that those laws afford.”

It also mentions how Consensys has collected hundreds of millions of dollars in fees over the past four years through its alleged illegal MetaMask operations while knowingly putting investors at risk. “Since October 2020, Consensys has acted as an unregistered broker of crypto asset securities through its MetaMask Swaps service.”

About MetaMask’s staking services, the SEC indicates, “Since January 2023, Consensys has engaged in the unregistered offer and sale of securities in the form of crypto asset staking programs, and acted as an unregistered broker, through its MetaMask Staking service. By its conduct as an unregistered broker, Consensys has collected over $250 million in fees.”

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The staking implementation in question is MetaMask’s integration of Lido’s and Rocket Pool’s Ether liquid staking services. The SEC considers the liquid staking services on Lido and Rocket Pool as unregistered securities offerings because “investors make an investment of ETH in a common enterprise with a reasonable expectation of profits from the managerial efforts of Lido and Rocket Pool, respectively.”

Since these liquid staking applications are not registered with the SEC, and MetaMask integrates them into its application, the SEC feels it has legal standing to go after Consensys. Consensys received a Wells Notice in April regarding acting as a broker/dealer of illegal securities. It reverted to the regulator with a suit that same month, claiming, “The SEC has been pursuing an anti-crypto agenda led by ad hoc enforcement action. This is just the latest example of its regulatory overreach — a transparent attempt to redefine well-established legal standards and expand the SEC’s jurisdiction via lawsuit.”

Consensys was expecting the SEC to sue it.

Image by Sergei Tokmakov, Esq. https://Terms.Law from Pixabay

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