The SEC, short for the US Securities & Exchange Commission, has charged Titan with a couple of violations pertaining to cryptocurrencies and necessary disclosures. Titan is a FinTech Investment advisor based in New York, now charged with failing to take measures to ensure full disclosure to current and potential customers.
Reportedly, Titan is charged with using a hypothetical performance measure to mislead customers about its deliverables. This can be better explained by stating that using performance results of 3 months is invalid if that goes on to be the center of the marketing material for a year. Other violations found in the case are:
- Unauthorized use of signatures of clients
- Stating hedge clauses improperly
- Not adopting policies regarding crypto asset
Needless to say, these are in addition to misleading customers by showing wrong metrics in advertisements. Such an act was conducted by Titan from August 2021 to October 2022. The rules cover every investment advisor dealing with complex strategies for retail investors. Titan allegedly showed annualized performance as high as 2,700%, specifically for crypto trading.
The investigation was supervised by Osman Nawaz along with Armita Cohen. Osman, the Chief of the Complex Financial Instruments Unit in the Commission, has highlighted that it is the responsibility of advisors to make sure that their disclosures are accurately portrayed in advertisements. Osman has added that while it is okay to use hypothetical performance results, advisors must make sure that they still continue to comply with requirements for fraud prevention.
It is clear that Titan misled its customers; however, the extent of damage it has caused is not yet revealed. Affected customers are sure to be reimbursed in the days to come.
Titan has so far cooperated with the SEC during their investigation. The FinTech investment advisor has also granted its consent to the entry of the order issued by the Commission, confirming that there were violations of the Advisers Act.
Titan now has to pay $192,454 and $850,000 towards prejudgment interest and civil penalty, respectively. Civil penalty, in this case, will be distributed among clients who have been affected during this course.
There has been little to no effect on the global crypto market following this report. The market cap is valued at $1.05 trillion, with BTC leading the charge. The token was last seen exchanging hands at $26,051.87, a downfall of 11.81% in the last 7 days. Following this trend is ETH which now stands at $1,664.36, a slip of 9.54% in the last week.
The case between the SEC and Titan has been drafted on the basis of the Modernized Marketing Rule that was announced in late December 2020, specifically for investment advisors.
Titan has so far cooperated and agreed to compensate for the losses. It remains to be seen if anything else is brought up by the SEC in the future.