BUY LIGHTCHAIN HERE 
It’s probably the most bizarre crypto story since FTX collapsed and Sam Bankman-Fried’s (SBF) entanglements with politics and the U.S. Securities and Exchange Commission (SEC) were revealed. In any case, the Prometheum story is the strangest thing to happen in this industry in a long time. Strangely, the story is flying under the radar so far and has received little attention.
So, what is it about? Last month, just two weeks before the SEC’s actions against Coinbase and Binance US, Prometheum received approval to become the first special purpose broker-dealer (SPBD) of its kind for securities with digital assets. In doing so, Prometheum became the first company to receive approval from the Financial Industry Regulatory Authority (FINRA) to provide custody of digital securities as a broker-dealer.
Commenting on the announcement, Prometheum co-CEO Dr. Aaron Kaplan said that cryptocurrencies, which are securities, are currently traded on platforms that do not offer the same customer protections required by U.S. federal securities laws.
Kaplan Receives Invitation To US Congress
Yesterday, Prometheum CEO Dr. Aaron Kaplan somehow managed to get a seat before the U.S. House Committee on Financial Services hearing on digital assets. And this is where the weirdness begins, as Matt Walsh, general partner at Castle Island Ventures notes in a lengthy Twitter thread.
As Walsh discusses, Kaplan apparently read off prepared notes during his hearing that were apparently coordinated with Democratic members of Congress and the SEC. The Prometheum CEO argued that he represents the “compliant path for crypto” and that there is no need for updated rules for cryptocurrencies because existing securities laws are sufficient.
Emblematic of Kaplan’s hearing is the end, when Republican Mike Flood hit the nail on the head. Flood explicitly laid out why Prometheum’s claims that their SPBD approval is evidence of regulatory ambiguity are complete nonsense.
Kaplan, meanwhile, claimed that the SEC has resolved all outstanding regulatory issues through enforcement actions since 2021 (when Prometheum itself was still demanding clarity) — while SEC chief Gensler would not even testify under oath to the same committee a few weeks ago about whether Ethereum (ETH) is a security.
#MUSTWATCH: @RepMikeFlood‘s expert take down of @PrometheumInc‘s Co-CEO, who has become the latest mouthpiece for @GaryGensler.
If almost all digital assets are “unregistered securities,” as Chair Gensler claims—how can you operate a broker-dealer for them? https://t.co/o4LjkR8AAb
— Financial Services GOP (@FinancialCmte) June 14, 2023
As Walsh writes, the Prometheum people argue that all L1s are securities and must be traded on Prometheum. What is curious, however, is that they have their own chain and their own token. They have already sold some of this token, among others to the Wanxiang Blockchain company … and here the oddities continue.
Connections To Buterin And Ethereum?
According to a Wall Street Journal article referenced by Walsh, Wanxiang is a Chinese Communist Party (CCP) affiliate. The story gets even more surprising when one ponders the similarity of the names Ethereum and Prometheum and looks for connections. Seán Murray writes via Twitter:
Everyone’s drawing the connection Prometheum had to Wanxiang as if it’s some rogue CCP entity but Wanxiang’s most famous employee is Vitalik Buterin, according to Wanxiang’s homepage.
Another interesting background story is one that Buterin himself once told. The Ethereum co-founder met Feng Xiao, the CEO of Wanxiang Blockchain and general partner at Fenbushi, in 2015. As an early crypto supporter, he bought $500,000 worth of Ethereum in September 2015, saving Ethereum from an “early death,” according to Buterin.
How Did Prometheum Get Its Crypto-Securities Licence?
Another interesting story to tell is how Prometheum obtained its crypto-securities license from FINRA despite not yet offering a single token (neither Bitcoin or Ethereum), as Kaplan also disclosed during the hearing before US Congress.
According to Adam Cochran, partner at CEHV, the answer is to be found with the team behind Prometheum. In late 2021 to early 2022, Prometheum hired former FINRA and SEC employees. After that, they suddenly received approvals. Still without operations, as Cochran remarks.
Also curious is the following about Prometheum: According to Pitchbook, they raised $48.19 million. Of that, they paid more than $1.5 million in sales commissions to a New Jersey-based firm called Network 1 Financial Securities.
The company, according to Cochran, is a “shady” broker with a Chinese subsidiary and a terrible compliance record of more than 20 regulatory or civil cases against them. Like Prometheum, Network 1 Financial is also a China-linked company. “But it gets better,” says Cochran:
That broker was the one behind the Ice Tea company that pivoted to a blockchain project in 2017 as a scam. As well as another offering that was a blockchain pivot that the SEC charged for fraud.
A PSYOP By The SEC Against Crypto Exchanges?
According to Matt Walsh, there is clear evidence that Prometheum and yesterday’s hearing of CEO Kaplan is a PSYOP by US Democrats and the SEC. A PSYOP is an operation designed to convey selected information to the masses in order to achieve specific goals and influence objective deliberations. Apparently the SEC intends to do just that, as Walsh explains:
Bizarre that this fringe player with no biz model is being held up as an example of compliance by the SEC when the actual businesses in the United States can’t get a fair shot. An SEC PSYOP to have the Dems oppose McHenry-Thompson market structure bill?
According to Cochran, there is definitely something fishy about the Prometheum story. While established US crypto exchanges like Coinbase and Kraken have undertaken massive efforts to be compliant, “this sketchy agency” got the green light and suddenly appeared out of nowhere as a congressional witness.
According to the expert, there are three possible explanations for this: first, Prometheum could have received “a sweet regulatory deal” in exchange for engaging as the SEC wants (just like with SBF). Second, the broker could use its connections with the SEC and FINRA to push through an agenda to have certain assets classified as securities.
Third, the Prometheum people could be “grifters” who have raised a lot of money from shady sources and have been twisting the worst and progressing for years to continue the scam.
“I don’t know which one it is, but something is rotten here. […] Plants, patsies, or opportunists – its unclear, but the fact Gensler is letting them run around with SEC approval is a red flag,” Cochran concludes.
The final cherry on top for the night.
When it sounded like the Prometheus guys were giving canned responses during testimony… they were passing notes…
Which totally fine and fair to do, unless the question at hand is are you being fed answers as a plant… https://t.co/a6E4RgJpSa
— Adam Cochran (adamscochran.eth) (@adamscochran) June 15, 2023
At press time, the entire crypto market has suffered another setback after yesterday’s interest rate decision by the Federal Reserve, falling below $1 trillion.
