TechFlow news — On September 3, according to an official announcement, the U.S. Securities and Exchange Commission (SEC) has fined Florida-based cryptocurrency investment adviser Galois Capital Management LLC $225,000. The SEC charged the firm with failing to comply with client asset custody requirements and misleading investors regarding redemption notice periods.
The SEC investigation found that since July 2022, Galois Capital failed to ensure that certain crypto assets held by its privately offered funds were maintained by qualified custodians, violating the custody rule under the Investment Advisers Act. The firm stored some assets on trading platforms—including FTX—that were not qualified custodians, resulting in the loss of approximately half of its managed assets when FTX collapsed in November 2022.
In addition, Galois Capital told certain investors that redemptions required five business days’ notice, while in practice allowing other investors to redeem on shorter notice, constituting a misleading practice. Corey Schuster, Co-Head of the SEC’s Asset Management Unit, emphasized that the agency will continue to hold advisers accountable for breaching core investor protection obligations. Galois Capital has agreed to cease its violations and accept a censure, without admitting or denying the SEC’s findings. The penalty will be distributed to harmed investors.
