Steven Nerayoff, a key figure previously advising Ethereum, leveled allegations at Gary Gensler, chair of the U.S. Securities and Exchange Commission (SEC) on Tuesday, hinting at Gensler’s undisclosed deep ties with Ethereum and potential influence by external political forces.
He additionally claimed that Gensler’s decisions might be strongly influenced by the Chinese Communist Party (CCP).
Ethereum ETFs Stir the Pot
There’s a clamor for an Ethereum ETF which is driven by major interest from retail and institutional investors.
This is because a spot ETF would provide Ethereum investors with indirect exposure to the price movements of the second-largest cryptocurrency.
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“Specifically, he accuses Gensler of indirectly approving Prometheum Inc. to designate ETH as a security, effectively endorsing an ETF covertly. “https://t.co/CAP71sVm7N
— Eli (@elighvk) February 13, 2024
This has made prominent players like Fidelity, WisdomTree, and BlackRock file many applications for spot Ethereum ETF approval.
Despite declaring some popular cryptocurrencies as securities, the SEC hasn’t decided on Ethereum’s legal classification.
In the wake of the FTX collapse, Gensler has doubled the SEC efforts on crypto regulations. He also emphasized the sufficiency of current crypto regulations and stated that legal actions have been taken against exchanges for non-compliance.
Prometheum, a data analytics firm, claims it has discovered a compliant route for cryptocurrency trading. Subsequently, in 2023, the firm became the first and only special-purpose crypto broker-dealer licensed under SEC regulations.
In addition, it has also obtained approval to handle the clearing and settlement of digital asset securities trades.
Although it has yet to initiate trading or generate revenue, Prometheum co-CEO Aaron Kaplan announced plans to begin custodying institutional clients’ assets in the upcoming quarter.
This turn of events has sparked a wave of skepticism and concern among cryptocurrency enthusiasts.
As a result, the former Ethereum advisor Steven Nerayoff alleged that the growing speculation surrounding an Ethereum ETF suggests a potential deeper involvement of the SEC with Ethereum than publicly acknowledged.
He specifically accused Gensler of indirectly endorsing the designation of ETH as a security by approving Prometheum, effectively backing an ETF under the radar.
Steven Nerayoff Raises Alarms Over SEC’s Ethereum Decisions
Prometheum’s assertion that it had discovered a compliant avenue for crypto trading was immediately criticized by legal experts within the cryptocurrency industry.
They contended that even if the SEC and the Financial Industry Regulatory Authority (FINRA) endorsed Prometheum’s framework, it would lack tradable assets.
Skeptics argue that while the SEC oversees securities, cryptocurrencies such as Solana and Ethereum resemble commodities like oil or gold. As a result, they fall outside the legal definition of security and therefore ineligible for registration.
In mid-2023, Prometheum gained considerable attention by securing approval from FINRA, allowing it to function as a special-purpose broker-dealer for digital asset securities.
The suspicion is that although the SEC introduced this designation in 2021, this is the only company that has obtained a license.
Due to all this, Steven Nerayoff raised public concerns, alleging compromised integrity within the SEC and related entities.
He attributed this to the alleged influence of the Chinese Communist Party (CCP) over the Ethereum blockchain.
Additionally, reports from TruthLabs indicate the CCP’s speculated control over approximately 66.6% of the ETH supply.
Nerayoff further highlighted the strategic influence wielded by the CCP through entities like Wanxiang, which has major involvement with Prometheum.
These claims would substantially impact Ethereum’s decentralization, security, and regulatory status.