SEC charges financial advisor Galois Capital over crypto security management failures

The SEC has accused investment adviser Galois Capital of crypto custodial violations, including seizing investors' assets on FTX.
Galois Capital settled with the regulator and will pay $225,000 in civil penalties.

The U.S. Securities and Exchange Commission has charged Florida-based investment adviser Galois Capital Management LLC with mishandling client assets.

In an announcement on September 3, Galois Capital failed to meet crypto-protection requirements and violated the Advisers Act, including holding cryptocurrencies with the failed crypto exchange FTX. As a result, almost half of the assets under management of the hedge fund that Galois advised were lost when FTX entered.

Galois Capital misled investors.

The SEC also alleged that the firm misled investors about its redemption practices—specifically, the “notice period required for redemption.”

Corey Schuster, General Manager of the SEC Enforcement Division's Asset Management Unit, said: “By failing to comply with the provisions of the Securities Act, Galois Capital exposed investors to the risk of loss, misappropriation or theft of assets backing its assets, including crypto assets. .

According to the SEC, Galois agreed to settle with the regulator and pay $225,000 in civil penalties. The penalty will be distributed to the investors affected by the fall.

“Without accepting or denying the SEC's findings, Galois Capital agrees to enter an order requiring it to cease and desist from further violations of the Advisers Act, condemning and imposing civil penalties,” the SEC wrote.

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