Lawmakers ask enforcement agencies to look into Prometheum


July 11, 2023


Olumide Adesina

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Republican legislators have requested that Promethium, a provider of digital assets, be looked into by the Justice Department and the Securities and Exchange Commission. Last month, Democratic witness Aaron Kaplan, co-CEO of Prometheum, testified before a House committee during hearings on cryptocurrency.

Promethium recently received SEC approval as an alternative trading system, and Kaplan testified in June that he wanted to build a cryptocurrency trading platform that would operate under existing securities laws. This message is consistent with the SEC's approach since the beginning of its crackdown. This view runs counter to many in the digital asset industry, who argue that blockchain-based assets should not be subject to the same investment rules as other companies. Since Kaplan's arrival, the company has come under even tighter scrutiny.

“It is a crime to make false statements before Congress. "Providing false or misleading information in SEC filings constitutes securities fraud," Republicans in the House and Senate wrote.

Relationship between Promethium and Hashkeys under investigation

At a public hearing last month, Republicans questioned Kaplan about Promethium's business activities, including investments from China. They now want to investigate whether Promethium misrepresented its ties to foreign investors in statements it made to the SEC and Congress.

Senator Tommy Tuberville (R-Alabama) chaired the letter, which was aimed at China-based Shanghai Wanxiang Blockchain, which he considers to be Promethium's largest outside investor. and its subsidiary HashKey Digital Asset Group, Ltd., one of the largest cryptocurrency companies in Asia. Rep. Norman (R-South Carolina), Rep. Byron Donald (R-Florida), and Rep. Mark Alford (R-Missouri) also signed the letter.

"These relationships are of deep concern to each of us and to many of our colleagues in Congress," lawmakers said in a Monday letter.

Most of the House Republicans who signed the letter are members of the House Financial Services Committee, which oversees the SEC. Most Republicans on the committee did not sign the letter.

Ahead of the June hearing, Mr. Tuberville expressed his concerns about Prometem's relationship with China in a letter dated June 5 to the financial industry regulator and the SEC, which licensed Prometem as a specialist broker-dealer.

In a testimony he prepared before the House Financial Services Committee last month, Kaplan said those concerns were "unfounded and unfounded." Hashkey invested in Promethium in 2018, and Promethium and Wanshan had a "development agreement," Kaplan said, but a year later it became clear that "joint development was not viable." he added. Kaplan added that Promethium's servers, code, data, and proprietary technology were all built independently of Manxiang.

Republican lawmakers who signed the letter expressed skepticism about the statement. "If Kaplan was trying to get Congress to believe his testimony in December 2019, Promethium began developing its own technology platform completely independently of its China-based CCP partners. So why wasn't this made clear in the Promethium documents?" filing with the SEC? lawmakers said.