SEC Charges Seagal and Shuts Down a Bitcoin ETF


Cryptocurrency Market Capitalizations

Key Takeaways

  • The SEC has shut down another Bitcoin ETF
  • The SEC says that Bitcoin market manipulation is its main fear
  • The SEC also charged actor Steven Seagal for failing to disclose payments he received for promoting a cryptocurrency

Bitcoin ETF Denied Again

The SEC has denied yet another attempt to create a Bitcoin ETF. The latest proposal came from Wilshire Phoenix and NYSE Arca Inc. The application wanted to list an ETF whose holdings would include a mix of Bitcoin and short-term treasuries. 

The denial has further dampened the already sunken hopes that fans of the digital currency clung to. The appeal of a Bitcoin ETF is that it could help to bring more institutional money into the market while also providing an easier entry ramp for retail investors who may feel that the current process of purchasing cryptocurrency and creating a wallet is too complicated.

“The Commission concludes that NYSE Arca has not established that the relevant Bitcoin market possesses a resistance to manipulation that is unique beyond that of traditional security or commodity markets such that it is inherently resistant to manipulation,” the SEC said. 

The SEC’s main complaint surrounding a Bitcoin ETF has always been the possibility of market manipulation. In Bitcoin’s past, its market saw low trade volumes, which gave “whales,” or industry players who have huge quantities of Bitcoin or money, the ability to manipulate the entire market with a large buy or sell. 

Whales could act solo or even coordinate together to stage massive sell-offs causing Bitcoin’s price to dive, only to buy back at a significantly lower price. While the SEC certainly had cause for concern in the past, Bitcoin’s trading volume since this time of lower liquidity has increased substantially.

Bitcoin’s weekly trading volume.

In the last three weeks, Bitcoin has seen seeing closer to $50 billion in weekly trading volume across the hundreds of exchanges it is being traded on. Compare this to a popular and heavily traded ETF, like SPY, which has a weekly average of around $350 million, you can see that Bitcoin really doesn’t have a liquidity problem at all and that the SEC’s concerns may be misguided. 

It’s important to note that while the aggregate of Bitcoin’s trading volume across all of these exchanges is immense, many of these exchanges have very low trading volumes, putting users of these lesser-known exchanges in danger of price manipulation. This only further justifies the importance of creating an ETF on a well-known traditional market.

Steven Seagal Charged by the SEC for an ICO Promotion

In the wave of ICO mania, prior to the crypto collapse of 2018, there were several celebrities and athletes that were paid to promote cryptocurrency projects and initial coin offerings.

Famous names that have promoted failed cryptocurrency projects include Paris Hilton, Floyd Mayweather, Mike Tyson, and DJ Khaled.

Another celebrity has gotten in some trouble for the promotion of a cryptocurrency that many had called a pyramid scheme. Steven Seagal, the martial arts actor, has settled charges from the SEC that claims the actor did not disclose payments received for the crypto projects promotion.

The cryptocurrency project was called B2G, short for Bitcoiin2Gen. Seagal was allegedly promised significant payments for the promotion of the project. His payment for the promotion was to be in the form of $250,000 cash and $750,000 worth of B2G tokens. 

Seagal settled with the SEC and agreed to pay $157,000 in disgorgements, while also not admitting or denying fault, and is also restricted from promoting any securities for three years. He was also ordered to pay another penalty of the same amount totaling over $300,000.

Mr. Seagal’s manager, Christopher Nassif, said in a statement that “Mr. Seagal was not involved in the creation of this product, nor did he have any prior relationship with the individuals who approached him. To him, it was simply a case of someone paying a celebrity for the use of his image to promote a product.”

Seagal had a number of posts on Facebook (FB) and Twitter (TWTR) that promoted that cryptocurrency. One post read: “Zen Master Steven Seagal Has Become the Brand Ambassador of Bitcoiin2Gen.”

Another post read: “Friends, I wanted to announce that @Bitcoiin2Gen will soon be listed on some of the biggest exchanges globally. Stay tuned for more information coming very shortly.”

The SEC has declared that any endorsements of coin offerings are illegal if payments and their amounts are not disclosed. 

Kristina Littman, the chief of the SEC Enforcement Division’s cyber unit, said that “these investors were entitled to know about payments Seagal received or was promised to endorse this investment so they could decide whether he may be biased. Celebrities are not allowed to use their social media influence to tout securities without appropriately disclosing their compensation.”

In 2018 Bitcoiin2Gen was ordered by the state of New Jersey to stop offering unregistered securities in the state and said that B2G broke the law by failing to disclose its payments to Seagal.

Performance: Year-to-Date

Performance YTD.
  • Bitcoin (BTC) YTD: 21.31%. Two weeks ago’s YTD: 42.19%
  • Bitcoin Cash (BCH) YTD: 58.56%. Two weeks ago’s YTD: 129.14%
  • Ripple (XRP) YTD: 22.66%. Two weeks ago’s YTD: 69.13%
  • Ethereum (ETH) YTD: 72.07%. Two weeks ago’s YTD: 103.07%
  • S&P 500 YTD: -7.80%. Two weeks ago’s YTD: 4.43%

Investing in cryptocurrencies and Initial Coin Offerings (“ICOs”) can be highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or ICOs. Since each individual’s situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein.

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