Client Alert

SEC Charges FinTech Adviser for Misrepresenting Hypothetical Crypto Performance Resulting in Million Dollar “Marketing Rule” Enforcement

August 23, 2023

By John L. Budetti,Esther Chiang,Scott Gluck,

Ira Kustin,

Eric C. Sibbitt,& Ryan Swan

On August 21, 2023 the SEC announced charges (available here) against a FinTech-focused registered investment adviser (the “Adviser”) alleging the use of misleading hypothetical performance metrics in advertisements.

The SEC alleged that the Adviser, whose client base primarily is comprised of retail investors, provided misleading hypothetical performance results, including by claiming a 2,700% annualized return for its crypto strategy but failing to disclose that the performance was based on a hypothetical account (rather than an actual account) or that the annualized performance was based on a three-week period, and assumed the performance in the three-week period would continue for the entire year. 

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Practice Areas

Investment Funds & Private Capital

Fintech and Payments

For More Information

Image: John L. Budetti
John L. Budetti

Partner, Corporate Department

Image: Esther Chiang
Esther Chiang

Partner, Corporate Department

Image: Scott Gluck
Scott Gluck

Of Counsel, Corporate Department

Image: Eric C. Sibbitt
Eric C. Sibbitt

Partner, Corporate Department

Image: Ryan Swan
Ryan Swan

Partner, Corporate Department

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