Why SEC Fined Bitcoin ETF Issuer $1.75 Million

The US Securities and Exchange Commission (SEC) has imposed a $1.75 million fine on VanEek, a bitcoin exchange-traded fund (ETF) issuer, citing a lack of disclosure.

According to the SEC, VanEyck neglected to inform the board that oversees his Social Sentiment ETF ( BUZZ ) about the involvement of a popular social media influencer.

VanEck neither accepted nor denied the SEC's findings

The SEC did not identify the influencer in the statement. However, Bloomberg analyst Eric Balchunas explained that Barstool Sports founder Dave Portnoy was the man involved.

“[VanEck] ‘Popular and controversial' social media influencer Dave Portnoy did not inform the fund's board that he was being paid by the index company to promote his ETF, Balchunas said.

VanEck declined to admit or deny the SEC's findings. Still, the organization agreed to cease and desist, condemn it, and pay huge fines.

Andrew Dean, associate chief of the asset management division of the SEC's enforcement division, emphasized the critical importance of accurate disclosures by fund boards, particularly those that may affect advisory contracts.

“Van Eck Associates' failure to disclose the launch of this high-profile fund limited the Board's assessment of the economic impact of the licensing arrangement and the participation of a prominent social media influencer in Van Eck Associates' advisory contract to the fund.” Dean added.

VanEck's BUZZ ETF is designed to track a basket of 76 large-cap U.S. stocks that exhibit significant positive investor sentiment. It is influenced by various online content sources such as social media platforms, news articles and blog posts.

Notable companies included in this ETF are Coinbase, Microsoft, Tesla, Alphabet, AMD, Nvidia, Meta, Apple and MicroStrategy.

The updated Spot Ethereum ETF app

Despite recent regulatory issues, VanEck updated its S-1 filing with the SEC on February 16 for a spot Ethereum ETF.

The revised document shows that the ETF will feature a cash creation and redemption mechanism. In January, the regulatory agency favored this process to approve the spot Bitcoin ETF, VanEck's HODL being one of them.

Financial attorney Scott Johnson said VanEick's filing does not show the company has a stock plan. Updates from other applicants such as Ark Invest and 21Shares had a section on including assets to receive rewards.

Meanwhile, the ETF filing reflects broader industry speculation following the success of the Ethereum Fund's spot Bitcoin ETFs. The SEC will decide on ETH ETF applications sometime in May.