SEC Sues MetaMask Developer Consensys as It Expands Legal Crusade Against Crypto Industry

The Securities and Exchange Commission filed its latest lawsuit against the crypto industry on Friday, this time targeting Consensys, a blockchain company focused on the Ethereum network best known for its MetaMask wallet product.

Echoing similar complaints filed against other crypto companies, such as Coinbase And KrakenThe SEC alleges that Consensys violated federal securities laws by failing to register as a broker-dealer while providing securities services, ultimately collecting more than $250 million in fees.

While the charges echo past actions, the lawsuit is notable for the controversy surrounding the escalating legal battle. In April, after receiving notice from Wells — a formal letter indicating that the SEC was considering legal action — Consensys took preemptive action deposit its own lawsuit against the agency, pleading for clarification on whether Ethereum is a security.

Just 10 days ago, Consensys announced that it had received a letter from the SEC, informing it that the agency had closed its investigation into Ethereum 2.0, with Consensys arguing that this meant Ethereum did not fall under the jurisdiction of the SEC. the agency, a subject of great importance for players in the cryptocurrency sector. In the lawsuit filed Friday, the SEC did not name Ethereum as one of the unregistered securities offered by Consensys.

“Consensys has forcefully entered the U.S. securities markets while depriving investors of the protections afforded by the federal securities laws,” Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said in a statement. Press release.

Ethereum 2.0

Founded by Ethereum developer Joseph Lubin, Consensys stands out from other recent SEC lawsuit subjects. Rather than operating as an exchange like Coinbase or Kraken, Consensys develops software including MetaMask, a digital wallet that allows users to hold and move cryptocurrencies, as well as stake Ethereum, a process that involves earning a yield.

In its 59 pages trialThe SEC alleges that Consensys violated securities laws by allowing the “exchange” of crypto assets through MetaMask, as well as offering staking services, assuming the role of an unregistered broker-dealer in both scenarios.

The SEC says Consensys brokered more than 36 million crypto-asset transactions, including at least 5 million involving what the agency considers securities. The SEC has previously brought similar staking-related charges against Kraken and Coinbase, Kraken regulation for $30 million and Coinbase disputes the charges.

“Regulatory excess”

Despite the new charges, many in the cryptocurrency industry will likely view the new complaint as a victory, as it does not mention Ethereum as a security. Fortune reported that the SEC had been investigating Ethereum’s security status through a series of subpoenas to related companies, leading to the preemptive prosecution of Consensys. However, the political waters appear to have shifted with the passage of a cryptocurrency regulation bill in the House of Representatives in May, with the SEC’s signal approval for Ethereum ETFs immediately afterward – a move that observers had previously considered unlikely.

While the lawsuit isn’t a major legal breakthrough for the SEC, it does represent a new front in a multipronged campaign against many of the industry’s leading companies. The agency filed the complaint against Consensys in the U.S. District Court for the Eastern District of New York.

A spokesperson for Consensys, who noted that the company’s lawsuit against the SEC in Texas was ongoing, said in a statement that the company “fully expected that the SEC would follow through on its threat to claim that our MetaMask software interface must register as a securities broker. The SEC is pursuing an anti-crypto agenda led by ad hoc enforcement actions. This is just the latest example of its regulatory overreach.

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