Coinbase Custody partner ETC paid $80k fine for putting customer assets at risk

posted 8 months ago
Cryptocurrency exchange and brokerage giant Coinbase onboarded 10 customers for its new institutional-grade custody service. However, the firm’s partner in the venture, Electronic Transaction Clearing (ETC), a broker-dealer already operating as an institutional custodian, was recently the subject of an SEC enforcement action regarding failing to safeguard customer funds.

In March of 2018, the SEC charged ETC with “repeatedly putting customers assets at risk.”

The SEC charged ETC with having “illegally placed more than $25 million of customers’ securities at risk in order to fund its own operations.”

The actions violated a provision in the Customer Protection Rule that requires custodians to maintain physical possession or control of customer assets. ETC ultimately agreed to pay an $80,000 penalty without admitting or denying the SEC’s allegations.
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