Skip to main content

Hedge Fund's ‘Regulated Crypto’ Claim Becomes Self-Fulfilling Prophecy

The Crypto Asset Fund may not have been regulated when it made that claim—but it is now.
  • Author:
  • Updated:
By Mike Cauldwell ( [Public domain], via Wikimedia Commons

By Mike Cauldwell ( [Public domain], via Wikimedia Commons

Last year, something called the “Crypto Asset Fund” began offering its services to investors, which services included putting their money to work in the “first regulated crypto asset fund in the United States.” This pitch attracted $3.6 million in real money to be invested in fake money, which admittedly seemed like a better idea at the time—specifically, between August and December, before the words “worse than the dot-com crash” could be applied to cryptocurrencies—especially given CAF’s assurance that it had filed a registration statement with the” SEC.

Except, of course, it hadn’t. And was not only not the “first regulated crypto asset fund in the United States” but was, like the crypto market itself, not really regulated at all. These are the kinds of things that make the SEC’s Low-Hanging Fruit Division a bit tetchy, and so the agency decided to make CAF’s claims of regulation come true.

CAM and its founder Timothy Enneking agreed to a censure, a $200,000 fine, and to cease any violations of specific securities rules….

“Will you find for me another example of the SEC going through all of this for $3.6 million?” he asked rhetorically, before acknowledging that he is not a securities lawyer and does not know for certain if there are other instances. “The real reason we’re having this conversation is because the SEC wants to make a point. That point is, ‘Crypto funds, you’re dealing with securities. Crypto assets are securities.’ That’s the reason I submit that the SEC — I can’t speak for them — wanted to reinforce.”

Um, can you blame them? The SEC has made clear that, while they can’t do much about cryptocurrencies, they can and will do something if you get a little too brazen about things. And there’s not much the SEC is likely to find as brazen as taking its name in vain. Plus, the SEC isn’t alone in making the point that cryptos are securities.

In March, Zaslavskiy’s lawyers asked Dearie to dismiss the charges, arguing that REcoin and Diamond were currencies, not securities, and therefore not covered by the Securities Exchange Act.

Dearie rejected that argument, writing on Tuesday that the federal securities law must be interpreted “flexibly.” The judge noted that the U.S. Securities and Exchange Commission, which brings civil securities fraud actions, has said that it considers some cryptocurrencies to be securities.

Unlike Zaslavskiy’s diamond- and real-estate backed cryptos that were allegedly backed by neither, Enneking’s unregulated regulated crypto fund is still in business, now absent the claims about regulation. Given the exodus of crypto investors over the last several months, it’s fair to ask just how in business the hedge fund—which managed $37 million before crypto values plummeted by 80%—still is, but Enneking’s not telling.

He declined to comment on the firm’s current assets under management or performance track record. “I’m not allowed,” he said, adding that CAM had brought on a chief legal officer to lead compliance efforts.

Good call.

SEC ‘Wanted to Make a Point’ in Fining Crypto Hedge Fund, Founder Claims [II]
SEC takes first action against a crypto hedge fund [CNBC]
Crypto’s 80% Plunge Is Now Worse That the Dot-Com Crash [Bloomberg]
U.S. securities law can cover cryptocurrencies, judge rules [Reuters]
‘Crypto Tourists’ Flee as Bitcoin Slump Drags On [WSJ]


By AntanaCoins (Own work) [CC BY-SA 3.0], via Wikimedia Commons

Convicted Hedge Fund Fraudster Now Also Accused Crypto Fraudster

Boaz Manor a.k.a. Shaun MacDonald has (allegedly) moved on with the times.

(Getty Images)

SEC Charges Alleged Mastermind Of Made-Up Stuff With Fraud

According to the authorities, when Eric Malley wasn’t pontificating on cryptos, he was conjuring imaginary real estate investment funds.

By Chris Potter (Flickr: 3D Judges Gavel) [CC BY 2.0], via Wikimedia Commons

Allegedly Fraudulent Hedge Fund Counters Fraud Allegations With Award Won Through Alleged Fraud

Goldsky Asset Management may have no assets, but it does have hardware.

By AntanaCoins (Own work) [CC BY-SA 3.0], via Wikimedia Commons

Looks Like We’ve Got Another Crypto Civil War On Our Hands

What makes a cryptocurrency a currency, one lawsuit-battling crypto wonders aloud and angrily?

By Chris Potter (Flickr: 3D Judges Gavel) [CC BY 2.0], via Wikimedia Commons

Older Brother Sells Out Younger Brother In Alleged Crypto Hedge Fund Fraud, But Notes That Real Villain Is SEC

If they’d just unfreeze those assets, his little bro would quickly get them back to his alleged victims, he’s pretty sure.