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Prometheum Testimony Raises Doubts: Crypto Community Questions Credibility Amid Regulatory Clarity Hearing

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Prometheum Testimony Raises Doubts: Crypto Community Questions Credibility Amid Regulatory Clarity Hearing

The crypto community is abuzz with discussions on social media about the recent United States House Committee hearing held on June 13, 2023, which delved into regulatory clarity within the crypto industry. Notably, the co-CEO of an obscure cryptocurrency broker named Prometheum expressed support for the existing regulatory framework of the U.S. Securities and Exchange Commission (SEC) and its securities laws. Yet, the crypto community remains skeptical of Prometheum’s credibility, as the company remains relatively unknown and doubts have emerged regarding the co-CEO’s testimony.

Who is Prometheum? Firm’s Endorsement of SEC Regulations Met With Controversy, Skepticism

Who is Prometheum? That is the question being asked by crypto advocates on social media in the wake of the statement made by co-CEO Aaron Kaplan during the recent United States House Committee hearing. The executive from Prometheum emphasized the company’s endorsement of the existing regulations and securities laws established by the SEC. Kaplan asserted that the SEC is “the most capable financial markets regulatory agency in the world.” He also highlighted that the current framework is “clearly laid out,” adding that businesses seeking new crypto securities laws are “simply not willing to comply.”

For those that didn’t stick around until the end of the @FinancialCmte hearing today, this exchange between @USRepMikeFlood and @PrometheumInc CEO Aaron Kaplan is an absolute must-watch.

Flood explicitly lays out why Prometheum’s claims that their SPBD approval is evidence of a… pic.twitter.com/yCDDKHiLea

— Alexander Grieve (@AlexanderGrieve) June 13, 2023

The company reiterated its viewpoint through a tweet, stating, “Prometheum’s stance is clear: There is a path forward for digital assets in the U.S. through the current regulatory frameworks set up by federal securities laws.” However, Kaplan faced questioning from U.S. representative Mike Flood, who read comments from a letter penned by the company in April 2021. The letter sought greater clarity on crypto assets. Flood also inquired whether the firm provided clients with the opportunity to acquire bitcoin (BTC) and ethereum (ETH), to which Kaplan responded by saying “no.”

The Prometheum saga was described by Castle Island VC executive Matt Walsh as extraordinarily strange. Walsh added, “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.” Although Prometheum was established in 2017 by Benjamin and Aaron Kaplan, the company remains an enigma to the wider crypto community. “Who the hell are these Prometheum guys?” questioned Charles Hoskinson, founder of Cardano, while others voiced even harsher criticism.

“This is hillarious, I didn’t realize Prometheum doesn’t actually trade anything people want,” Omid Malekan tweeted. “But even if it did, who would use it? [This a] perfect example of a parasitic (and pathetic) startup that doesn’t think it can compete on the merits of its products, so it hides behind regulatory moats and licenses. This is a classic Tradfi strategy, and one reason why so much of our banking system is stuck in the dark ages.”

Prometheum Investigation Jumps Into Hyperdrive

Adam Cochran, a partner at Cinneamhain Ventures, uncovered several Prometheum executives who had affiliations with regulatory bodies and financial incumbents such as the SEC, FINRA, NYSE, and CBOE. Cochran highlighted that Prometheum utilized Regulation A to issue a token back in 2017, yet it has not yet introduced a product. The Cinneamhain executive alleged that the company “scrubbed their social media from prior to 2019,” despite archived data showing that their Genesis block was intended to launch in 2019. “But even to date, it acknowledges it can’t clear or settle transactions and therefore, even though it is registered it cannot operate,” Cochran added.

Cochran further explained that in 2021 and early 2022, Prometheum brought on board former staff members from FINRA and the SEC, “with no clear product.” Additionally, he highlighted that Prometheum purportedly secured funds by partnering with Wanxiang, an alleged affiliate of the CCP, raising $48 million despite having no product to show for it. It was reported that the company made a payment of $1.5 million to Network 1 Financial Securities, a firm with a history of “20 regulatory or civil actions against them,” Cochran stated. Furthermore, he disclosed that Network 1 had ties to the team behind the Long Island Blockchain scam.

Cochran maintains that the Prometheum narrative implies one of three scenarios. He suggests that it is conceivable that they may be individuals strategically placed as “plants” to benefit from a favorable regulatory arrangement from “engaging in the way the SEC wanted to.” Alternatively, they could be leveraging their connections with the SEC and FINRA to establish themselves as the sole approved entity “to capture the market.” Finally, Cochran posits the possibility that “these guys are grifters who raised a ton of money from sketchy sources and for years have been twisting worst and progress to continue to ride the grift.” He added:

I don’t know which one it is, but something is rotten here.

Regardless of the circumstances, the Prometheum narrative has captured the interest of the crypto community, prompting many to delve into the firm’s affiliations and history. In October 2022, the company made public its launch of an SEC-registered marketplace for digital asset securities through its subsidiary, Prometheum Ember. According to the web portal, institutional traders can register, establish a custodial account, link it to their trading account, and commence trading activities. Notably, the website refrains from showing the institutions utilizing their services, so it is unclear who uses Prometheum.

What are your thoughts on Prometheum’s involvement in the regulatory clarity hearing and the skepticism surrounding its credibility? Share your thoughts and opinions about this subject in the comments section below.

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