The U.S. Securities and Exchange Commission (SEC) filed suit against Consensys Software Inc. in the U.S. District Court for the Eastern District of New York. There are two altcoin at the center of the case. The company is alleged to be acting as an unregistered broker and offering unregistered securities through its MetaMask Swap and MetaMask Staking platforms. This development underlines the regulatory control in the cryptocurrency market and emphasizes the importance of acting in compliance with federal laws.

Consensys and MetaMask: Overview

Founded in 2014 and registered in Delaware in 2020, Consensys has developed a number of services related to BTC and altcoin. These include MetaMask Swap, a digital platform for trading crypto asset securities, and MetaMask Staking, which offers investment programs such as Lido and Rocket Pool staking.

The SEC alleges that since October 2020, Consensys acted as an unregistered broker through its MetaMask Swap service and facilitated more than 36 million cryptoasset transactions, including at least 5 million cryptoasset securities. Additionally, his company faces accusations that it has offered and sold unregistered securities on the MetaMask Staking platform through the investment programs of Lido and Rocket Pool since January 2023.

MetaMask’s staking role

MetaMask Swap allows investors to exchange one crypto asset for another. The platform recommends the best option by pulling current rates from a group of third-party liquidity providers. Consensys processes all transactions on behalf of the investor, collects transaction fees, and has processed a significant amount of transactions through this service.

MetaMask offers investment programs such as Consensys, Lido and Rocket Pool through Staking. These programs pool the ETH investors deposit, stake it on the Ethereum blockchain, and issue new crypto assets (stETH and rETH) that represent the investor’s stake and rewards in the staking pool. These tokens can be traded on secondary markets, offering liquidity that direct staking does not provide.

Altcoin prices fell

The SEC alleges that Consensys‘ operations violated federal securities laws because it failed to register as a broker-dealer and to register the offer and sale of securities. The complaint highlights the importance of transparency and investor protection, highlighting that registration deprives investors of critical protections.

The SEC is seeking a permanent injunction, monetary penalties, and other relief deemed appropriate by the court to prevent Consensys from continuing these activities. This case highlights the ongoing challenges in regulating crypto services and the importance of complying with federal securities laws. As a result of the developments, Lido’s token LDO lost 23% in value, falling from $2.4 to $1.8, while Rocket Pool’s token RPL lost 8% in value, falling from $20 to $18.5.

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