OIS

The SEC accuses Galois Capital of violating custody rules and misleading investors

ChainCatcher news, the SEC has charged the cryptocurrency asset investment advisory firm Galois Capital Management LLC for failing to comply with client asset protection regulations and misleading investors about the redemption notice period. To settle the SEC's charges, Galois has agreed to pay a civil penalty of $225,000, which will be distributed to the harmed investors of its funds.The SEC's investigation found that since July 2022, Galois Capital failed to ensure that certain cryptocurrency assets held by its managed private funds were custodied by qualified custodians, violating the custody rules of the Investment Advisers Act. The company stored some assets on trading platforms of non-qualified custodians, including FTX, resulting in the loss of about half of its managed assets when FTX filed for bankruptcy in November 2022.Additionally, Galois Capital informed some investors that redemptions required a five-business-day notice, while actually allowing other investors to redeem with shorter notice, constituting misleading behavior. Corey Schuster, co-director of the SEC's Asset Management Division, emphasized that they will continue to hold advisors accountable for violating core investor protection obligations. Galois Capital has agreed to cease the violations and accept censure but did not admit or deny the findings of the SEC's investigation.
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