Linus Financial Agrees to Settle SEC Charges of Unregistered Offer and Sale of Securities

The Securities and Exchange Commission (SEC) has announced that it has reached a settlement with Linus Financial, Inc. The settlement is related to charges of failure to register its retail crypto lending product, the Linus Interest Accounts, for offers and sales. Notably, the SEC decided not to impose civil penalties against Linus Financial due to the company’s cooperation and swift corrective actions.

According to the SEC’s order, Linus Financial introduced its Linus Interest Accounts in the United States around March 2020. These accounts allowed U.S. investors to deposit U.S. dollars with Linus Financial in exchange for the company’s commitment to pay interest. Linus Financial then converted investors’ cash into crypto assets, pooled these assets, and controlled their use to generate income for both the company and the interest payments to investors. The SEC determined that these Linus Interest Accounts were treated as securities, and their offers and sales did not meet the requirements for an exemption from SEC registration. Therefore, Linus Financial was obligated to register these offerings and sales.

The SEC’s order further reveals that on March 25, 2022, shortly after the SEC charged a similar crypto asset investment product, Linus Financial voluntarily ceased offering the Linus Interest Accounts to new investors and instructed existing investors to withdraw their funds by late April 2022. All investor funds have since been withdrawn.

Stacy Bogert, Associate Director of the SEC’s Division of Enforcement, stated, “The SEC will continue to hold companies accountable for failing to comply with federal securities laws, but we also want to encourage companies to cooperate and take prompt corrective action when problems arise. Today’s settlement provides a valuable message to other market participants about the importance of cooperation and remediation.”

Linus Financial agreed to a cease-and-desist order without admitting or denying the SEC’s findings, which prohibits the company from violating the registration provisions of the Securities Act of 1933.