Aaron Kaplan, co-founder and co-CEO of cryptocurrency company Promethium testified at the U.S. House Committee on Financial Services on June 13.
The “full-service marketplace” cryptocurrency brokerage has made headlines when Kaplan took a pro-SEC position in his testimony, in stark contrast to the majority of industry leaders.
Kaplan’s testimony fueled the Twitter community with curiosity about the little-known cryptocurrency platform and rumors about its ties to the Chinese Communist Party.
Promethium thinks the existing rules are good enough
read from his preparation statement, Kaplan said there is no need for regulatory clarity in cryptocurrencies. His comments contradict comments from Coinbase and the crypto industry at large, which have sought greater clarity over the years.
“Almost 90 years of tried and tested” federal securities laws are sufficient to regulate cryptocurrencies, Kaplan said. he added:
“The immediate focus is more or less on applying existing regulatory frameworks to digital assets rather than regulation or new regulations.”
Kaplan went on to say that cryptocurrency platforms that advocate for new laws are “unwilling” to comply with existing laws and regulations.
He added that the new law is “not in the best interest” of investors and the crypto industry. He argued that the new legislation would take years, during which time investors would be exposed to reckless and illegal platforms.
Kaplan stressed that the U.S. Securities and Exchange Commission has “clearly indicated” that there is “a path forward for cryptocurrency compliance.”
But Sen. Mike Flood called Kaplan’s argument that the industry doesn’t need new legislation “totally make no sense.” Flood also emphasized that Promethium itself is seeking regulatory clarity by April 2021.
Confirming to Kaplan that Promethium users will not be able to trade Bitcoin or Ethereum, the two most popular cryptocurrencies that control nearly 60% of the market, Flood added:
“If anything, the fact that Promethium customers are unable to trade some of the most popular digital assets points to a broader problem.”
The people behind Promethium
Aaron Kaplan and Benjamin Kaplan co-founded Promethium in 2017. As of March 2022, the company has raised his $42 million in funding.
Promethium is notable for having two regulatory approved subsidiaries.
In October 2022, the Prometheum Ember ATS became an SEC-registered Alternative Trading System (ATS) for digital assets.
In May 2023, Promethium Ember Capital became the first regulated cryptocurrency custodian with the approval of financial industry regulators. However, according to Bloomberg, Prometheum Ember Capital has not obtained clearing and settlement approval for trades, which means it cannot effectively allow users to trade cryptocurrencies, Bloomberg reports. rice field. report. The company also did not disclose which tokens it supports.
It is worth noting that Prometheum itself created a native Ember token and partially sold it to affiliates in China, as per the SEC. Documents to be submitted.
Co-founders who are also co-CEOs of Prometheum include: listed As crypto analyst Adam Cochrane pointed out on Twitter, as a lawyer at financial law firm Gusle Kaplan, thread. In addition, Prometheum Chairman Martin H. Kaplan is an executive member of Gusle Kaplan.
Cochrane also said Promethium chief regulatory officer Rosemary Fanelli had previously worked Worked for FINRA, a self-regulatory organization, for 13 years. Additionally, Promethium Chief Compliance Officer Joseph Zangri previously said: worked As a Senior Enforcement Counsel for the SEC.
In addition, Promethium’s head of business development, John Tornatore, worked at the Chicago Board Options Exchange for 10 years.
Cochrane speculated that the close ties between these Promethium executives and regulators may have helped secure the company’s approval.
Speculation and uproar on Twitter
Cochrane theorized that the SEC could be giving Kaplan “a sweet regulatory deal in exchange for engaging in the way the SEC wants it.” He also speculated that perhaps Promethium is trying to “advance the agenda” of labeling certain cryptocurrencies as securities and becoming the only regulated platform to capture the market.
Finally, Cochrane speculated that Promethium may be run by “scammers” funded by “opaque sources” who want to continue their fraudulent activities. He concluded:
“I don’t know which one, but something is rotten here.
It’s hard to believe that this sketchy agency got the go-ahead despite all the efforts Coinbase, Kraken, and other reputable companies have put in to do their best. “
Castle Island VC General Partner Matt Walsh Said The story of Promethium is “the weirdest thing I’ve seen in this industry in a while.”
other critics pointed Claiming that Promethium’s approach “doesn’t work as advertised”, he called it a “wheelless bike”. To list a token on his licensed ATS, the token must first be registered with the SEC as a security.
Paradigm Senior Advisor Rodrigo Seira explained:
“Promethium’s ATS cannot trade any token unless the project first registers the token with the SEC.
And, as we pointed out, there are effectively no tokens registered with the SEC as the current regime is not a viable option. “
Essentially, the crypto community is plagued with questions about whether Promethium is the right company to guide crypto regulation. Not only are people questioning the integrity of the firm itself, but they are also questioning the credentials of Aaron Kaplan, a now-disaccredited law school graduate.
Possible connection with the Chinese Communist Party
According to Promethium’s 2019 SEC filing, China-based Wanxiang Blockchain and its affiliate HashKey were its “strategic partners and joint ventures.”
Promethium raised money from Hushkey in 2018, according to testimony Kaplan provided.
In December 2018, as part of the investment, Promethium and Hashkey decided to jointly launch a cryptocurrency trading system, Kaplan said. But within a year, Promethium realized it needed to dissolve the joint venture, he said. The partnership officially ended in November 2021.
Kaplan testified that Wanshan still controls 20% of Promethium shares despite the termination of the partnership. But Mr Kaplan made it clear to senators that Chinese companies have no access to any code, technology or data.
Wanxiang Blockchain, a spin-off of Wanxiang Group, has strong ties to the Chinese Communist Party, as Blaine Lutkemeyer pointed out at the hearing. The group’s founder and chairman, Lu Guanchi, who died in 2017, said: good relationship The Communist Party, and even President Xi Jinping. The group’s current leader, Lu Weiding, is reportedly close to the ruling party as well.
Walsh also noted that Prometheum paid more than $1.5 million in sales commissions to a New Jersey-based firm called Network1 Financial Securities. Affiliated company in China and is the subject of more than 20 regulatory and civil lawsuits.
