US says Galois Capital crypto advisory firm resolves charges related to custody failures

(MENAFN) The US Securities and Exchange Commission (SEC) announced on Tuesday that Galois Capital Management LLC, a crypto advisory firm based in Florida, has settled charges related to custody failures. The SEC found that Galois Capital, which was previously a registered investment adviser for a private fund focused on crypto assets, did not meet the required standards for safeguarding client assets. This includes failing to properly manage crypto assets being offered and sold as securities.

The SEC's investigation revealed that Galois Capital also misled investors about the notice period necessary for fund redemptions, further compromising the transparency and integrity of its operations. To resolve these charges, Galois Capital has agreed to pay a civil penalty of USD225,000. This penalty will be distributed to the investors harmed by the firm's misconduct.

According to the SEC, Galois Capital failed to adhere to the Custody Rule under the Investment Advisers Act starting in July 2022. This rule mandates that client assets, including crypto assets, must be held with a qualified custodian to ensure their safety. The failure to comply exposed investors to significant risks, including the potential for loss, misuse, or misappropriation of fund assets.

Corey Schuster, co-chief of the SEC Enforcement Division’s Asset Management Unit, emphasized that Galois Capital's lack of adherence to the Custody Rule put investors' assets at risk. The SEC's action highlights the importance of strict compliance with regulatory requirements to protect investors and maintain market integrity.

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