Prepare to be stunned by the most scandalous revelation in the world of cryptocurrencies. Move over FTX and Sam Bankman-Fried, because the bizarre Prometheum story is about to shake the industry to its core. Surprisingly, this mind-boggling tale has gone largely unnoticed, escaping the attention it truly deserves.
So, what’s the story all about? Just weeks before the SEC took action against Coinbase and Binance US, Prometheum achieved a groundbreaking milestone. They became the first special purpose broker-dealer (SPBD) for securities floodwith digital assets, receiving approval from the prestigious Financial Industry Regulatory Authority (FINRA) to provide custody of digital securities.
Prometheum’s co-CEO, Dr. Aaron Kaplan, emphasized the lack of customer protections offered by current trading platforms for cryptocurrencies, which are essentially securities under US federal laws.
But here’s where things take a bizarre turn. Dr. Aaron Kaplan, the CEO of Prometheum, managed to secure a seat before the U.S. House Committee on Financial Services hearing on digital assets. However, as Matt Walsh, a general partner at Castle Island Ventures, points out in an extensive Twitter thread, the events that unfolded during the hearing are downright weird.
This Prometheum storyline has got to be the strangest thing I have seen in awhile in this industry. Has anyone actually looked into this? Beyond bizarre…
— Matt Walsh (@MattWalshInBos) June 14, 2023
It appears that Kaplan read off prepared notes that were seemingly coordinated with Democratic members of Congress and the SEC. In his testimony, Kaplan argued that Prometheum represents the “compliant path for crypto” and that there’s no need for updated regulations because existing securities laws are sufficient.
However, during the hearing, Republican Mike Flood called out Prometheum’s claims of regulatory ambiguity as complete nonsense. Flood explicitly highlighted that Prometheum’s SPBD approval doesn’t validate their stance.
ICYMI: How can a broker-dealer register if they don’t know which assets are a security and which are not? America needs a digital assets framework.
Watch my exchange during Tuesday’s hearing. ???? pic.twitter.com/hWO6RdYc81
— Rep. Mike Flood (@USRepMikeFlood) June 14, 2023
To add to the intrigue, it turns out that Prometheum has its own chain and token. They even sold some of this token to Wanxiang Blockchain, a company connected to the Chinese Communist Party (CCP) according to the Wall Street Journal.
But wait, there’s more. How did Prometheum manage to obtain a crypto-securities license from FINRA without offering any tokens, not even Bitcoin or Ethereum? Adam Cochran, a partner at CEHV, suggests that the answer lies in the team behind Prometheum. They hired former FINRA and SEC employees, and suddenly approvals started rolling in. It’s worth noting that Prometheum raised over $48 million and paid hefty sales commissions to a New Jersey-based firm called Network 1 Financial Securities.
Here’s the kicker—Network 1 Financial Securities is a “shady” broker with a Chinese subsidiary and a terrible compliance record with over 20 regulatory or civil cases against them. What’s more, this broker was previously involved in a blockchain scam and faced fraud charges brought by the SEC.
Now, brace yourself for the most controversial claim. Matt Walsh suggests that the entire Prometheum saga and CEO Kaplan’s hearing are part of a PSYOP orchestrated by US Democrats and the SEC. A PSYOP, or psychological operation, is an operation designed to manipulate public opinion and influence decision-making. Walsh implies that the SEC is using Prometheum as a pawn to oppose the McHenry-Thompson market structure bill, presenting it as a compliant player while other legitimate US crypto exchanges struggle for fair treatment.
Cochran echoes this sentiment, suggesting that something fishy is at play. He presents three possible explanations: Prometheum could have struck a favorable regulatory deal in exchange for cooperation with the SEC, they could be using their connections to push an agenda of classifying certain assets as securities, or they might simply be scam artists who have managed to raise significant funds from dubious sources.
Whatever the truth may be, one thing is clear—there’s a disturbing element to Prometheum’s rise to prominence, and SEC Chairman Gensler’s approval of their activities raises serious concerns. Are they plants, patsies, or opportunists? The answer remains unclear, but one fact stands out: Something rotten is afoot, and the crypto industry should proceed with caution.
The final cherry on top for the night.
When it sounded like the Prometheus guys were giving canned responses during testimony… they were passing notes…
Which totally fine and fair to do, unless the question at hand is are you being fed answers as a plant… https://t.co/a6E4RgJpSa
— Adam Cochran (adamscochran.eth) (@adamscochran) June 15, 2023