SEC Orders Crypto Investment Firm Titan To Cease And Desist Over Misleading Performance Metrics

The U.S. Securities and Exchange Commission (SEC) once again enforced its regulatory power over the cryptocurrency industry when it ordered the crypto investment firm Titan to cease and desist after it allegedly misrepresented the "hypothetical performance of investments" and committed other violations.

Titan Global Capital Management USA, an investment adviser registered with the SEC, agreed to pay $1.04 million to settle the charges filed by the commission, including the violation that it utilized misleading hypothetical performance metrics on its website.

"Without admitting or denying the SEC's findings, Titan agreed to a cease-and-desist order, a censure, and to pay $192,454 in disgorgement, prejudgment interest and an $850,000 civil penalty that will be distributed to affected clients," the SEC revealed in its press release.

Titan is the first case for violating the SEC's amended marketing rule of December 2020 by putting misleading claims on its official website that were based on "hypothetical performance," particularly when it said that three weeks of data revealed that "annualized" performance would lead to staggering returns of up to 2,700% on the crypto product it launched in 2021.

Aside from this, the major Wall Street regulator also uncovered that Titan made unclear statements about crypto asset custody and several other policies, including failure to adopt appropriate employee trading policies, which are included in the commission's charge against the company for three compliance failures.

"When offering and marketing complex strategies, investment advisers must ensure the accuracy of disclosures made to existing and prospective investors. The Commission amended the marketing rule to allow for the use of hypothetical performance metrics but only if advisers comply with requirements reasonably designed to prevent fraud," SEC's Chief of Enforcement's Complex Financial Instruments Unit Osman Nawaz said.

"Titan's advertisements and disclosures painted a misleading picture of certain of its strategies for investors. This action serves as a warning for all advisers to ensure compliance," Nawaz added.

The crypto investment firm said in its latest post that "Titan announced a settlement with the U.S. Securities and Exchange Commission ("SEC") that primarily covers certain legacy marketing and disclosure issues involving Titan's cryptocurrency strategy between August 2021 and October 2022."

"Although Titan reached a settlement with the SEC, Titan neither admits nor denies any wrongdoing. We fully cooperated with the SEC's inquiry and are pleased to have reached a resolution of these issues," it further said.

"The SEC Order acknowledges Titan's cooperation and remedial efforts since July 2022, including hiring a new Chief Legal and Chief Compliance Officer and additional legal and compliance staff. Titan continues to make significant investments to build and enhance its compliance program," the company added.

Titan is a member of the Financial Industry Regulatory Authority and is registered with the SEC.