• SEC announces settled charges against Galois Capital for custody failure and crypto assets being offered and sold as securities. 
• Galois Capital held crypto assets in trading platforms, including bankrupt FTX exchange, that is not a qualified custodian. 
• The firm settled charges without admitting or denying SEC charges for a $225,000 civil penalty, per SEC press release. 

Securities & Exchange Commission (SEC) published a press release announcing settled charges against a former registered investment advisor Galois Capital Management LLC. The US financial regulator charged the firm for custody failure and the offer and sale of crypto assets as securities. 

Galois Capital’s official X account tweeted about SEC’s actions and said that the firm had used Fireblocks, a non-qualified custodian and informed the regulator about the same in a filing. 

SEC files settled charges against Galois Capital 

SEC press release dated September 3 shows that the US financial regulator charged Galois Capital for failure to comply with requirements related to the safeguarding of client assets. The firm was held liable for “offering and selling crypto assets as securities.” 

SEC mentions that bankrupt FTX exchange is among the crypto trading platforms used as custodians by the firm. The regulator alleges that Galois misled investors about the redemption period and allowed some to obtain their funds within five business days while others waited excessively longer.

In the FTX collapse of November 2022, Galois Capital’s investors lost nearly half of their crypto assets and holding funds with a non-custodian, exposing  users to higher risk and resulting in higher losses. 

A civil penalty of $225,000 was imposed on Galois Capital. The funds will be used to settle the SEC charges and distributed to investors who were harmed in the process.