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a By U.S. law firm Seward & Kissel LLP.
On September 3, 2024, the U.S. Securities and Exchange Commission (SEC) announced settled charges against Galois Capital Management LLC, a Florida-based former registered investment adviser, for failing to ensure that certain crypto-assets held by the private fund it advised were maintained with a qualified custodian, as required by Rule 206(4)-2 (the Custody Rule) under the Investment Advisers Act of 1940.
Galois maintained client assets in online crypto trading platforms, including FTX Trading Ltd. In November of 2022, the Fund lost approximately half of its assets in connection with the collapse of FTX.
Additionally, the SEC alleged that Galois misled certain investors about its redemption practices for the Fund, requiring 30 days' written notice for redemptions in the Fund's Limited Partnership Agreement (LPA) but communicating a different informal practice to certain investors. Lastly, the SEC found that during the time Galois was registered as an investment adviser with the SEC, it failed to adopt or implement written compliance policies and procedures reasonably designed to prevent violations of the Advisers Act. To settle charges with the SEC, Galois agreed to pay a civil monetary penalty of $225,000, to be distributed to the Fund's harmed investors.
Violations Relating to the Custody Rule
The SEC order found that Galois violated the Custody Rule by failing to maintain certai...................... To view our full article Click here
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