The case against Titan Global Capital Management is the first brought under the U.S. regulator’s 2020 revised marketing rule. It also touches on compliance issues.
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Fintech investment adviser Titan Global Capital Management has agreed to a cease-and-desist order by the United States Securities and Exchange Commission (SEC), along with censure and penalties after the agency pressed charges related to advertising and compliance failures.
According to the SEC, the New York-based firm made misleading claims on its website that were based on “hypothetical performance” in violation of the SEC’s amended marketing rule of December 2020. This was the first case of charges made under that rule. SEC senior enforcement officer Osman Nawaz said in a statement:
“The Commission amended the marketing rule to allow for the use of hypothetical performance metrics but only if advisers comply with requirements reasonably designed to prevent fraud. […] This action serves as a warning for all advisers to ensure compliance.”
Titan claimed “annualized” performance based on three weeks of data could lead to returns of up to 2,700% on its Titan Crypto product, which debuted in August 2021. The SEC found that the firm also made unclear statements about crypto asset custody and other policies and failed to adopt appropriate policies on employee trading in the period leading up to October 2022.
Related: Titan launches actively managed crypto portfolio for US investors
Titan is registered by the SEC and is a member of the Financial Industry Regulatory Authority. The firm self-reported some of the issues and cooperated with the investigation before agreeing to the SEC order, without admitting or denying the SEC findings. The SEC action also included $192,454 in disgorgement of ill-gotten gains with interest and a fine of $850,000 that will be distributed to affected customers.
1/ SEC’s case against Titan suggests continued enforcement focus on ALL crypto market participants, including those that have affirmatively registered with and are regulated by the SEC.https://t.co/fOtWcDpmll
— Justin Browder (@jlb410) August 21, 2023
The SEC has made tightened enforcement for crypto investment advisers a regulatory goal. It announced the new focus in a February statement from the Division of Examinations. It has also proposed changes to custody rules that could negatively impact cryptocurrency firms.
Titan said in a statement, “We fully cooperated with the SEC’s inquiry and are pleased to have reached a resolution of these issues. The SEC Order acknowledges Titan’s cooperation and remedial efforts since July 2022, including hiring a new Chief Legal and Chief Compliance Officer and additional legal and compliance staff. Titan continues to make significant investments to build and enhance its compliance program.”
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This article was updated on Aug. 21 at 18:30 UTC to include Titan’s statement.
