In re TradeStation Crypto

UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES ACT OF 1933 
Release No. 11269 / February 7, 2024 
 
ADMINISTRATIVE PROCEEDING 
File No.  3-21845 
 
In the Matter of 
 
TradeStation Crypto, Inc., 
 
Respondent. 
 
 
 
 
ORDER INSTITUTING CEASE-AND-DESIST 
PROCEEDINGS PURSUANT TO SECTION 8A 
OF THE SECURITIES ACT OF 1933, MAKING 
FINDINGS, AND IMPOSING A CEASE-AND-
DESIST ORDER  
  
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act 
of 1933 (“Securities Act”), against TradeStation Crypto, Inc. (“TradeStation” or “Respondent”).  
 
II. 
 
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose 
of these proceedings and any other proceedings brought by or on behalf of the Commission, or to 
which the Commission is a party, and without admitting or denying the findings herein, except as 
to the Commission’s jurisdiction over it and the subject matter of these proceedings, which are 
admitted, Respondent consents to the entry of this Order Instituting Cease-and-Desist Proceedings 
Pursuant to Section 8A of the Securities Act of 1933, Making Findings, and Imposing a Cease-
And-Desist Order (“Order”), as set forth below.   
 
III. 
 
 On the basis of this Order and Respondent’s Offer, the Commission finds that:  
 
Summary 
 
1. Since approximately November 2019, TradeStation has offered crypto asset 
accounts to investors to purchase and sell crypto assets. In or around August 2020, TradeStation 
began to offer and sell an interest feature on the crypto asset accounts (“Interest Feature”) in the 

 2 
United States. The Interest Feature allowed United States investors to tender to TradeStation 
certain crypto assets in exchange for TradeStation’s promise to pay a variable interest rate on the 
tendered assets. TradeStation then loaned investors’ crypto assets to institutional borrowers to 
generate revenue used to fund interest payments to Interest Feature investors. As of December 
2021, the Interest Feature had approximately 11,122 active users and $281 million in assets that 
were the basis of interest payments. On June 30, 2022, TradeStation voluntarily ceased offering 
and selling the Interest Feature to investors. 
 
2.  As described more fully below, TradeStation’s crypto asset accounts with the 
Interest Feature were offered and sold as securities in the form of investment contracts, and 
TradeStation offered and sold them without registering such offers and sales with the Commission 
as required by law. Specifically, Interest Feature investors tendered money, in the form of crypto 
assets, to TradeStation in exchange for a TradeStation promise to pay back investors with interest. 
TradeStation then took complete control over investors’ assets from their accounts and pooled 
them together, along with TradeStation assets. TradeStation then deployed those assets in revenue-
generating activities, as TradeStation marketed to investors that TradeStation would do. Moreover, 
TradeStation promoted the Interest Feature as an investment by which investors could earn 
“passive income” and “put [their] crypto assets to work for [them].” Additionally, TradeStation’s 
revenue-generating activities were at its sole discretion, and TradeStation was responsible for 
managing the risks involved. Accordingly, investors had a reasonable expectation that they would 
share profits from TradeStation’s revenue-generating activities as a result of TradeStation’s 
managerial and entrepreneurial efforts. 
 
3.  TradeStation offered and sold securities without a registration statement filed or in 
effect with the Commission and without qualifying for an exemption from registration. As a result, 
TradeStation violated Sections 5(a) and 5(c) of the Securities Act.  
 
Respondent 
 
 4. TradeStation Crypto, Inc. (“TradeStation”) is a Florida corporation formed in 
2018 with its principal place of business in Plantation, Florida. TradeStation provides crypto asset-
related financial products and services. It is a subsidiary of TradeStation Group, Inc., which is in 
turn a subsidiary of the Monex Group, Inc.  
 
Facts 
 
 5.  Since November 2019, TradeStation has operated a crypto asset business globally 
and in the United States through its public website, https://www.tradestation.com/crypto/ and 
through its mobile application, both of which were accessible at all relevant times from within the 
United States. The business initially included crypto asset trading services and later was expanded 
to include the Interest Feature. As of December 2021, TradeStation globally had 11,122 active 
users participating in the Interest Feature and $281 million in assets participating in the Interest 
Feature. Of these users and assets, $195 million and 8,472 users were of U.S. origin. 
  

 3 
 6.  In or around August 2020, TradeStation began offering and selling its Interest 
Feature, including to U.S.-based investors, through which investors tendered certain crypto assets 
to TradeStation in exchange for TradeStation’s promise to provide a variable rate of return on the 
crypto assets. Investors tendered the crypto assets to TradeStation by depositing the crypto assets 
with TradeStation or by purchasing crypto assets through a TradeStation account. The tendered 
crypto assets were held by a third-party wallet management service provider in omnibus wallet 
accounts in TradeStation’s name and that TradeStation owned. Through the TradeStation Crypto, 
Inc. Customer Account Agreement and its “Crypto Interest” brochure, TradeStation informed 
investors that it would pool their crypto assets into wallets that TradeStation controlled and then 
lend the crypto assets to third-party institutional borrowers, which generated revenue to pay 
interest to investors. TradeStation screened and selected the interest-bearing opportunities to which 
investors’ crypto assets were committed. 
 
 7. The “Crypto Interest” brochure published on TradeStation’s website provided the 
following: 
 
“How does it work?  TradeStation Crypto rehypothecates and lends 
your and other clients’ crypto assets to institutional borrowers. This 
generates   revenues   for   TradeStation   Crypto   that supports   the 
payment   of   interest   to   you   on   your eligible crypto   account 
holdings.” 
 
“How  do I  participate? All  TradeStation  Crypto  customers  are 
automatically enrolled.  The  TradeStation  Crypto,  Inc.  Customer 
Account Agreement grants TradeStation Crypto the right to borrow, 
pledge,   repledge,   hypothecate, rehypothecate,   loan   or invest 
customers’  cryptocurrency holdings  in  their  TradeStation  Crypto 
account. Customers may elect to opt out of this authorization at any 
time by contacting Client Services.” 
 
 8.  The TradeStation Crypto, Inc. Customer Account Agreement provided the 
following:  
 
“Your   Digital   Assets   will   be   held   by   a   third-party   wallet 
management  service  provider  (‘Wallet  Management  Provider’)  in 
one or  more  omnibus  wallet  accounts  in [TradeStation]’s name 
(‘Omnibus  Wallet  Accounts’), and [TradeStation], not you or other 
[TradeStation] customers,  is  the  owner  of  those  Omnibus  Wallet 
Accounts.” 
 
“You acknowledge  and  agree  that  your  access  to  and  use  of the 
Services is at your own risk.” 
 
“As more fully explained in the section under the heading ‘Consent 
to   Pledge   or   Use   of Digital   Assets,’ this   Agreement   grants 

 4 
[TradeStation] the  right  to  borrow,  pledge,  repledge,  hypothecate, 
rehypothecate,   loan   or   invest   any   of   your   Digital   Assets. 
[TradeStation] may  lend  your  Digital  Assets  to  third  parties.  If  any 
such third-party borrowers use the loaned Digital Assets to facilitate 
short  selling,  it  could  put  downward  pressure  on  the  price  of  the 
loaned  Digital  Assets. [TradeStation] will  receive  compensation  in 
connection   with   its   use of   your   Digital   Assets,   including   in 
connection  with  any  loan  by [TradeStation] of  your  Digital  Assets. 
If [TradeStation] determines   to   share   with   you   any   of   the 
compensation  that  it  receives  in  connection  with  its  use  of  your 
Digital  Assets,  the  terms  of any  such  sharing  arrangement  will  be 
disclosed  to you  by  electronic  postings  or  delivery  or  other  means, 
and/or  reflected  in  your Account  statement  information.  While  it  is 
expected that in most  cases when [TradeStation] lends your Digital 
Assets  to  third parties,  such  third-party borrowers  would  deposit 
with [TradeStation] collateral  to  secure  the  repayment  obligation, 
collateral  may  not  be  required  in  all  circumstances and,  even  if 
required, may not cover the full value of the loan. If a loan of your 
Digital Assets is not repaid by the borrower or if your Digital Assets 
are not  returned  from  any  other  use  of  your  Digital  Assets,  then 
there  is  risk  that  such  Digital  Assets  could  be  lost and  may  not  be 
recoverable or replaced.” 
 
 9. The “Investment and Trading Disclosures Booklet – Cryptocurrencies” published 
on TradeStation’s website provided many of the same disclosures. 
 
 10. The interest rates offered to Interest Feature investors were subject to change 
generally on a monthly basis, but at TradeStation’s sole discretion. TradeStation set the rates based 
on, among other things, the specific crypto assets provided to TradeStation by the investor and the 
rate TradeStation could obtain from borrowers in the lending market for that asset. Interest accrued 
daily and was credited to investors’ accounts and compounded on a monthly basis.  
 
 11. Investors were able to withdraw, at any time, all or part of the assets lent to 
TradeStation, including interest earned, by providing a notice of instruction to TradeStation. 
 
 12. TradeStation retained control over the assets of investors who participated in the 
Interest Feature and lent those assets to third-party borrowers. This generated revenues for 
TradeStation Crypto that supported the payment of interest to investors who participated in the 
Interest Feature.  
 
 13. TradeStation marketed the Interest Feature to U.S. investors through general 
solicitations on TradeStation’s website, press releases, and on social media and elsewhere online. 
TradeStation promoted the Interest Feature as an investment and profit-making opportunity. For 
example, in TradeStation’s “Crypto Interest” brochure published on its website, TradeStation 
promoted the Interest Feature as an innovative way for customers to “make their assets work 

 5 
harder for them.” TradeStation’s website also touted the Interest Feature as a way to earn “Passive 
Income” and to “Put your crypto assets to work for you.” The website included an “Interest 
Calculator” that allowed an investor to calculate their potential Interest Feature profits. 
TradeStation also promoted the Interest Feature as an investment opportunity on Twitter. For 
example, in a March 15, 2021 tweet, TradeStation encouraged investors to “Learn. Invest and Earn 
up to 6% with TradeStation Crypto” with a video promoting the same message. In a July 15, 2021 
tweet, TradeStation advertised “Learn, Earn, and Trade Crypto!” and “Earn a sky-high 8%* per 
annum on USDC.”  
 
 14. At no point has TradeStation filed a registration statement with the Commission for 
the offer and sale of the Interest Feature. Nor did the offer and sale of the Interest Feature qualify 
for an exemption from registration under the Securities Act.  
 
 15. On or around June 30, 2022, TradeStation voluntarily ceased offering and selling 
the Interest Feature to investors, reduced the interest rate paid to existing Interest Feature investors 
on all assets to 0%, informed investors via email that their crypto asset accounts would no longer 
accrue interest starting on June 30, 2022, and stopped lending investor assets to third parties.  
 
Legal Analysis 
 
 16.  The Securities Act and the Securities Exchange Act of 1934 (“Exchange Act”) were 
designed to “eliminate serious abuses in a largely unregulated securities market.” United Housing 
Found., Inc. v. Forman, 421 U.S. 837, 849 (1975). They are focused, among other things, “on the 
capital market of the enterprise system: the sale of securities to raise capital for profit-making 
purposes . . . and the need for regulation to prevent fraud and to protect the interest of investors.” 
Id. 
 
 17.  Under Section 2(a)(1) of the Securities Act, a security includes “an investment 
contract.” See 15 U.S.C. § 77b. Based on the facts set forth above, the Interest Feature constitutes 
the offer and sale of investment contracts. See SEC v. W.J. Howey Co., 328 U.S. 293, 301 (1946). 
Investors in the Interest Feature tendered money, in the form of crypto assets, to TradeStation to 
participate in the Interest Feature. TradeStation then pooled the Interest Feature investors’ crypto 
assets and used those assets for lending activities that would generate revenue for TradeStation that 
supported returns to the Interest Feature investors. The returns earned by each Interest Feature 
investor were a function of the pooling of the loaned crypto assets and the ways in which 
TradeStation deployed those loaned assets. In this way, each investor’s fortune was tied to the 
fortunes of the other investors. In addition, because TradeStation earned revenue for itself through 
its deployment of the loaned assets, the Interest Feature investors’ fortunes were also linked to 
those of TradeStation. Through its public statements and the economic structure of the accounts 
with the Interest Feature that TradeStation created, TradeStation invited Interest Feature investors 
to reasonably expect that they would earn profits derived from TradeStation’s efforts to manage the 
loaned crypto assets profitably. TradeStation retained ownership and control over the loaned crypto 
assets, and determined how much to hold and lend. TradeStation’s lending activities were at its 
own discretion, and TradeStation managed the risks involved. 
 

 6 
 18.  TradeStation did not file a registration statement with the Commission for the offers 
and sales of the Interest Feature, nor did its offers and sales of the Interest Feature qualify for an 
exemption from registration under the Securities Act.  
 
 19.  As a result of the conduct described above, TradeStation violated Section 5(a) of 
the Securities Act, which prohibits, unless a registration statement is in effect as to a security, any 
person, directly or indirectly, from making use of any means or instruments of transportation or 
communication in interstate commerce or of the mails to sell such security through the use or 
medium of any prospectus or otherwise; or to carry or cause to be carried through the mails or in 
interstate commerce, by any means or instruments of transportation, any such security for the 
purpose of sale or for delivery after sale. 
 
 20.  As a result of the conduct described above, TradeStation also violated Section 5(c) 
of the Securities Act, which prohibits any person, directly or indirectly, from making use of any 
means or instruments of transportation or communication in interstate commerce or of the mails to 
offer to sell or offer to buy through the use or medium of any prospectus or otherwise any security, 
unless a registration statement has been filed as to such security.  
 
Respondent’s Cooperation and Remedial Efforts 
 
 21. As described above, on June 30, 2022, TradeStation voluntarily ceased interest 
payments on existing crypto asset account balances, ceased offering the Interest Feature to new and 
existing U.S. investors and removed references to the Interest Feature or the ability to earn interest 
from its website.  
 
 22.  In determining to accept the Offer, the Commission considered remedial acts 
undertaken by Respondent and cooperation afforded the Commission staff.  
 
IV. 
 
 In view of the foregoing, the Commission deems it appropriate, and in the public interest, 
to impose the sanctions agreed to in Respondent’s Offer. 
 
 Accordingly, it is hereby ORDERED that: 
 
 A. Pursuant to Section 8A of the Securities Act, Respondent cease and desist from 
committing or causing any violations and any future violations of Sections 5(a) and 5(c) of the 
Securities Act. 
  
B. Respondent shall, within 10 days of the entry of this Order, pay a civil money 
penalty in the amount of $1,500,000.00 to the Securities and Exchange Commission for transfer to 
the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If 
timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717.   
 
Payment must be made in one of the following ways:   

 7 
 
(1) Respondent may transmit payment electronically to the Commission, which 
will provide detailed ACH transfer/Fedwire instructions upon request;  
 
(2) Respondent may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
 
(3) Respondent may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to:  
 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 
Payments by check or money order must be accompanied by a cover letter identifying 
TradeStation Crypto, Inc. as a Respondent in these proceedings, and the file number of these 
proceedings; a copy of the cover letter and check or money order must be sent to Stacy Bogert, 
Division of Enforcement, Securities and Exchange Commission, 100 F St., NE, Washington, DC 
20549.  
 
 C. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 
treated as penalties paid to the government for all purposes, including all tax purposes. To preserve 
the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it 
shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of 
compensatory damages by the amount of any part of Respondent’s payment of a civil penalty in 
this action (“Penalty Offset”). If the court in any Related Investor Action grants such a Penalty 
Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting the 
Penalty Offset, notify the Commission’s counsel in this action and pay the amount of the Penalty 
Offset to the Securities and Exchange Commission. Such a payment shall not be deemed an 
additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 
in this proceeding. For purposes of this paragraph, a “Related Investor Action” means a private 
damages action brought against Respondent by or on behalf of one or more investors based on 
substantially the same facts as alleged in the Order instituted by the Commission in this 
proceeding. 
 
 
 By the Commission. 
 
 
 
Vanessa A. Countryman 
Secretary 

UNITED STATES OF AMERICA 

Before the 

SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES ACT OF 1933 

Release No. 11269 / February 7, 2024 

 

ADMINISTRATIVE PROCEEDING 

File No.  3-21845 

 

In the Matter of 

 

TradeStation Crypto, Inc., 

 

Respondent. 

 

 

 

 

ORDER INSTITUTING CEASE-AND-DESIST 

PROCEEDINGS PURSUANT TO SECTION 8A 

OF THE SECURITIES ACT OF 1933, MAKING 

FINDINGS, AND IMPOSING A CEASE-AND-

DESIST ORDER  

  

I. 

 

 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-

and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act 

of 1933 (“Securities Act”), against TradeStation Crypto, Inc. (“TradeStation” or “Respondent”).  

 

II. 

 

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose 

of these proceedings and any other proceedings brought by or on behalf of the Commission, or to 

which the Commission is a party, and without admitting or denying the findings herein, except as 

to the Commission’s jurisdiction over it and the subject matter of these proceedings, which are 

admitted, Respondent consents to the entry of this Order Instituting Cease-and-Desist Proceedings 

Pursuant to Section 8A of the Securities Act of 1933, Making Findings, and Imposing a Cease-

And-Desist Order (“Order”), as set forth below.   

 

III. 

 

 On the basis of this Order and Respondent’s Offer, the Commission finds that:  

 

Summary 

 

1. Since approximately November 2019, TradeStation has offered crypto asset 

accounts to investors to purchase and sell crypto assets. In or around August 2020, TradeStation 

began to offer and sell an interest feature on the crypto asset accounts (“Interest Feature”) in the 



 2 

United States. The Interest Feature allowed United States investors to tender to TradeStation 

certain crypto assets in exchange for TradeStation’s promise to pay a variable interest rate on the 

tendered assets. TradeStation then loaned investors’ crypto assets to institutional borrowers to 

generate revenue used to fund interest payments to Interest Feature investors. As of December 

2021, the Interest Feature had approximately 11,122 active users and $281 million in assets that 

were the basis of interest payments. On June 30, 2022, TradeStation voluntarily ceased offering 

and selling the Interest Feature to investors. 

 

2.  As described more fully below, TradeStation’s crypto asset accounts with the 

Interest Feature were offered and sold as securities in the form of investment contracts, and 

TradeStation offered and sold them without registering such offers and sales with the Commission 

as required by law. Specifically, Interest Feature investors tendered money, in the form of crypto 

assets, to TradeStation in exchange for a TradeStation promise to pay back investors with interest. 

TradeStation then took complete control over investors’ assets from their accounts and pooled 

them together, along with TradeStation assets. TradeStation then deployed those assets in revenue-

generating activities, as TradeStation marketed to investors that TradeStation would do. Moreover, 

TradeStation promoted the Interest Feature as an investment by which investors could earn 

“passive income” and “put [their] crypto assets to work for [them].” Additionally, TradeStation’s 

revenue-generating activities were at its sole discretion, and TradeStation was responsible for 

managing the risks involved. Accordingly, investors had a reasonable expectation that they would 

share profits from TradeStation’s revenue-generating activities as a result of TradeStation’s 

managerial and entrepreneurial efforts. 

 

3.  TradeStation offered and sold securities without a registration statement filed or in 

effect with the Commission and without qualifying for an exemption from registration. As a result, 

TradeStation violated Sections 5(a) and 5(c) of the Securities Act.  

 

Respondent 

 

 4. TradeStation Crypto, Inc. (“TradeStation”) is a Florida corporation formed in 

2018 with its principal place of business in Plantation, Florida. TradeStation provides crypto asset-

related financial products and services. It is a subsidiary of TradeStation Group, Inc., which is in 

turn a subsidiary of the Monex Group, Inc.  

 

Facts 

 

 5.  Since November 2019, TradeStation has operated a crypto asset business globally 

and in the United States through its public website, https://www.tradestation.com/crypto/ and 

through its mobile application, both of which were accessible at all relevant times from within the 

United States. The business initially included crypto asset trading services and later was expanded 

to include the Interest Feature. As of December 2021, TradeStation globally had 11,122 active 

users participating in the Interest Feature and $281 million in assets participating in the Interest 

Feature. Of these users and assets, $195 million and 8,472 users were of U.S. origin. 

  



 3 

 6.  In or around August 2020, TradeStation began offering and selling its Interest 

Feature, including to U.S.-based investors, through which investors tendered certain crypto assets 

to TradeStation in exchange for TradeStation’s promise to provide a variable rate of return on the 

crypto assets. Investors tendered the crypto assets to TradeStation by depositing the crypto assets 

with TradeStation or by purchasing crypto assets through a TradeStation account. The tendered 

crypto assets were held by a third-party wallet management service provider in omnibus wallet 

accounts in TradeStation’s name and that TradeStation owned. Through the TradeStation Crypto, 

Inc. Customer Account Agreement and its “Crypto Interest” brochure, TradeStation informed 

investors that it would pool their crypto assets into wallets that TradeStation controlled and then 

lend the crypto assets to third-party institutional borrowers, which generated revenue to pay 

interest to investors. TradeStation screened and selected the interest-bearing opportunities to which 

investors’ crypto assets were committed. 

 

 7. The “Crypto Interest” brochure published on TradeStation’s website provided the 

following: 

 

“How does it work?  TradeStation Crypto rehypothecates and lends 

your and other clients’ crypto assets to institutional borrowers. This 

generates revenues for TradeStation Crypto that supports the 

payment of interest to you on your eligible crypto account 

holdings.” 

 

“How do I participate? All TradeStation Crypto customers are 

automatically enrolled. The TradeStation Crypto, Inc. Customer 

Account Agreement grants TradeStation Crypto the right to borrow, 

pledge, repledge, hypothecate, rehypothecate, loan or invest 

customers’ cryptocurrency holdings in their TradeStation Crypto 

account. Customers may elect to opt out of this authorization at any 

time by contacting Client Services.” 

 

 8.  The TradeStation Crypto, Inc. Customer Account Agreement provided the 

following:  

 

“Your Digital Assets will be held by a third-party wallet 

management service provider (‘Wallet Management Provider’) in 

one or more omnibus wallet accounts in [TradeStation]’s name 

(‘Omnibus Wallet Accounts’), and [TradeStation], not you or other 

[TradeStation] customers, is the owner of those Omnibus Wallet 

Accounts.” 

 

“You acknowledge and agree that your access to and use of the 

Services is at your own risk.” 

 

“As more fully explained in the section under the heading ‘Consent 

to Pledge or Use of Digital Assets,’ this Agreement grants 



 4 

[TradeStation] the right to borrow, pledge, repledge, hypothecate, 

rehypothecate, loan or invest any of your Digital Assets. 

[TradeStation] may lend your Digital Assets to third parties. If any 

such third-party borrowers use the loaned Digital Assets to facilitate 

short selling, it could put downward pressure on the price of the 

loaned Digital Assets. [TradeStation] will receive compensation in 

connection with its use of your Digital Assets, including in 

connection with any loan by [TradeStation] of your Digital Assets. 

If [TradeStation] determines to share with you any of the 

compensation that it receives in connection with its use of your 

Digital Assets, the terms of any such sharing arrangement will be 

disclosed to you by electronic postings or delivery or other means, 

and/or reflected in your Account statement information. While it is 

expected that in most cases when [TradeStation] lends your Digital 

Assets to third parties, such third-party borrowers would deposit 

with [TradeStation] collateral to secure the repayment obligation, 

collateral may not be required in all circumstances and, even if 

required, may not cover the full value of the loan. If a loan of your 

Digital Assets is not repaid by the borrower or if your Digital Assets 

are not returned from any other use of your Digital Assets, then 

there is risk that such Digital Assets could be lost and may not be 

recoverable or replaced.” 

 

 9. The “Investment and Trading Disclosures Booklet – Cryptocurrencies” published 

on TradeStation’s website provided many of the same disclosures. 

 

 10. The interest rates offered to Interest Feature investors were subject to change 

generally on a monthly basis, but at TradeStation’s sole discretion. TradeStation set the rates based 

on, among other things, the specific crypto assets provided to TradeStation by the investor and the 

rate TradeStation could obtain from borrowers in the lending market for that asset. Interest accrued 

daily and was credited to investors’ accounts and compounded on a monthly basis.  

 

 11. Investors were able to withdraw, at any time, all or part of the assets lent to 

TradeStation, including interest earned, by providing a notice of instruction to TradeStation. 

 

 12. TradeStation retained control over the assets of investors who participated in the 

Interest Feature and lent those assets to third-party borrowers. This generated revenues for 

TradeStation Crypto that supported the payment of interest to investors who participated in the 

Interest Feature.  

 

 13. TradeStation marketed the Interest Feature to U.S. investors through general 

solicitations on TradeStation’s website, press releases, and on social media and elsewhere online. 

TradeStation promoted the Interest Feature as an investment and profit-making opportunity. For 

example, in TradeStation’s “Crypto Interest” brochure published on its website, TradeStation 

promoted the Interest Feature as an innovative way for customers to “make their assets work 



 5 

harder for them.” TradeStation’s website also touted the Interest Feature as a way to earn “Passive 

Income” and to “Put your crypto assets to work for you.” The website included an “Interest 

Calculator” that allowed an investor to calculate their potential Interest Feature profits. 

TradeStation also promoted the Interest Feature as an investment opportunity on Twitter. For 

example, in a March 15, 2021 tweet, TradeStation encouraged investors to “Learn. Invest and Earn 

up to 6% with TradeStation Crypto” with a video promoting the same message. In a July 15, 2021 

tweet, TradeStation advertised “Learn, Earn, and Trade Crypto!” and “Earn a sky-high 8%* per 

annum on USDC.”  

 

 14. At no point has TradeStation filed a registration statement with the Commission for 

the offer and sale of the Interest Feature. Nor did the offer and sale of the Interest Feature qualify 

for an exemption from registration under the Securities Act.  

 

 15. On or around June 30, 2022, TradeStation voluntarily ceased offering and selling 

the Interest Feature to investors, reduced the interest rate paid to existing Interest Feature investors 

on all assets to 0%, informed investors via email that their crypto asset accounts would no longer 

accrue interest starting on June 30, 2022, and stopped lending investor assets to third parties.  

 

Legal Analysis 

 

 16.  The Securities Act and the Securities Exchange Act of 1934 (“Exchange Act”) were 

designed to “eliminate serious abuses in a largely unregulated securities market.” United Housing 

Found., Inc. v. Forman, 421 U.S. 837, 849 (1975). They are focused, among other things, “on the 

capital market of the enterprise system: the sale of securities to raise capital for profit-making 

purposes . . . and the need for regulation to prevent fraud and to protect the interest of investors.” 

Id. 

 

 17.  Under Section 2(a)(1) of the Securities Act, a security includes “an investment 

contract.” See 15 U.S.C. § 77b. Based on the facts set forth above, the Interest Feature constitutes 

the offer and sale of investment contracts. See SEC v. W.J. Howey Co., 328 U.S. 293, 301 (1946). 

Investors in the Interest Feature tendered money, in the form of crypto assets, to TradeStation to 

participate in the Interest Feature. TradeStation then pooled the Interest Feature investors’ crypto 

assets and used those assets for lending activities that would generate revenue for TradeStation that 

supported returns to the Interest Feature investors. The returns earned by each Interest Feature 

investor were a function of the pooling of the loaned crypto assets and the ways in which 

TradeStation deployed those loaned assets. In this way, each investor’s fortune was tied to the 

fortunes of the other investors. In addition, because TradeStation earned revenue for itself through 

its deployment of the loaned assets, the Interest Feature investors’ fortunes were also linked to 

those of TradeStation. Through its public statements and the economic structure of the accounts 

with the Interest Feature that TradeStation created, TradeStation invited Interest Feature investors 

to reasonably expect that they would earn profits derived from TradeStation’s efforts to manage the 

loaned crypto assets profitably. TradeStation retained ownership and control over the loaned crypto 

assets, and determined how much to hold and lend. TradeStation’s lending activities were at its 

own discretion, and TradeStation managed the risks involved. 

 



 6 

 18.  TradeStation did not file a registration statement with the Commission for the offers 

and sales of the Interest Feature, nor did its offers and sales of the Interest Feature qualify for an 

exemption from registration under the Securities Act.  

 

 19.  As a result of the conduct described above, TradeStation violated Section 5(a) of 

the Securities Act, which prohibits, unless a registration statement is in effect as to a security, any 

person, directly or indirectly, from making use of any means or instruments of transportation or 

communication in interstate commerce or of the mails to sell such security through the use or 

medium of any prospectus or otherwise; or to carry or cause to be carried through the mails or in 

interstate commerce, by any means or instruments of transportation, any such security for the 

purpose of sale or for delivery after sale. 

 

 20.  As a result of the conduct described above, TradeStation also violated Section 5(c) 

of the Securities Act, which prohibits any person, directly or indirectly, from making use of any 

means or instruments of transportation or communication in interstate commerce or of the mails to 

offer to sell or offer to buy through the use or medium of any prospectus or otherwise any security, 

unless a registration statement has been filed as to such security.  

 

Respondent’s Cooperation and Remedial Efforts 

 

 21. As described above, on June 30, 2022, TradeStation voluntarily ceased interest 

payments on existing crypto asset account balances, ceased offering the Interest Feature to new and 

existing U.S. investors and removed references to the Interest Feature or the ability to earn interest 

from its website.  

 

 22.  In determining to accept the Offer, the Commission considered remedial acts 

undertaken by Respondent and cooperation afforded the Commission staff.  

 

IV. 

 

 In view of the foregoing, the Commission deems it appropriate, and in the public interest, 

to impose the sanctions agreed to in Respondent’s Offer. 

 

 Accordingly, it is hereby ORDERED that: 

 

 A. Pursuant to Section 8A of the Securities Act, Respondent cease and desist from 

committing or causing any violations and any future violations of Sections 5(a) and 5(c) of the 

Securities Act. 

  

B. Respondent shall, within 10 days of the entry of this Order, pay a civil money 

penalty in the amount of $1,500,000.00 to the Securities and Exchange Commission for transfer to 

the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If 

timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717.   

 

Payment must be made in one of the following ways:   



 7 

 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;  

 

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to:  

 

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

 

Payments by check or money order must be accompanied by a cover letter identifying 

TradeStation Crypto, Inc. as a Respondent in these proceedings, and the file number of these 

proceedings; a copy of the cover letter and check or money order must be sent to Stacy Bogert, 

Division of Enforcement, Securities and Exchange Commission, 100 F St., NE, Washington, DC 

20549.  

 

 C. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 

treated as penalties paid to the government for all purposes, including all tax purposes. To preserve 

the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it 

shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of 

compensatory damages by the amount of any part of Respondent’s payment of a civil penalty in 

this action (“Penalty Offset”). If the court in any Related Investor Action grants such a Penalty 

Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting the 

Penalty Offset, notify the Commission’s counsel in this action and pay the amount of the Penalty 

Offset to the Securities and Exchange Commission. Such a payment shall not be deemed an 

additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 

in this proceeding. For purposes of this paragraph, a “Related Investor Action” means a private 

damages action brought against Respondent by or on behalf of one or more investors based on 

substantially the same facts as alleged in the Order instituted by the Commission in this 

proceeding. 

 

 

 By the Commission. 

 

 

 

Vanessa A. Countryman 

Secretary