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US Lawmakers Demand Answers on Prometheum’s China Ties

2 mins
Updated by Michael Washburn
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In Brief

  • A Republican senator and five members of the House of Representatives calll for answers about digital asset firm Prometheum's alleged Beijing ties.
  • Their letter to the Justice Department and the SEC on Monday notes that Prometheum's founder claimed to have parted ways with Chinese investors.
  • But Prometheum's SEC filings tell a different story, and the firm may well have benefited from Chinese Communist Party resources and know-how.
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US Senator Tommy Tuberville (R-AL) and five members of the House of Representatives sent a letter on Monday to Merrick Garland, Attorney General of the United States, and Gary Gensler, head of the Securities and Exchange Commission (SEC), about the conduct of Prometheum. The latter is an SEC-registered digital asset company that may have accepted money and technology from a China-based firm, and hid the fact from US lawmakers, they allege.

On its website, Prometheum states that it has registered with both the SEC and the Financial Industry Regulatory Authority (FINRA). It calls itself the first such entity to have gained approval to operate as a special-purpose broker-dealer (SPBD) for digital asset securities. But there is far more to the story.

Prometheum’s China Ties

When Prometheum’s subsidiary, Prometheum Ember Capital, got SPBD approval, it gained the ability to custody digital asset securities for retail and institutional customers, the letter noted.

It drew the attention of large investors in China, including Shanghai Wanxiang Blockchain and subsidiary Hashkey Digital Asset Group.

Both the latter entities, the letter charges, have close ties to the Chinese Communist Party (CCP).

China has a complex relationship with digital asset innovation, and its cross-border activities call for scrutiny, US lawmakers believe. Source: Investopedia

The letter quotes testimony that Prometheum co-CEO and founder Aaron Kaplan gave before a recent House Committee on Financial Services hearing. In it, Kaplan said Prometheum had decided in December 2018 that developing its blockchain trading system jointly with the CCP-backed entities was not an option. Kaplan went on:

“Upon such realization, Prometheum started to independently develop its own platform. . . . Prometheum does not use any resource, code, or other assets from Wanxiang or its affiliates in any of its systems.”

But audited financial statements and SEC filings from 2020 and 2021 tell a different story, the lawmakers state. Prometheum continued its relationship with the CCP-backed firms and went on using their technology until October 2021.

The lawmakers ask why Prometheum would say one thing in its SEC filings, while its CEO told Congress something else. They had assumed that Prometheum did the right thing and gave up working with entities backed by a repressive regime.

But, they have the truth straight from the horse’s mouth. Prometheum’s own filings show it went right on working with CCP affiliates after December 2018.

Tuberville and the other lawmakers end their letter with a reminder that making false statements to Congress is a serious crime.

And lying in SEC filings? That’s called securities fraud.

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Michael Washburn
Michael Washburn is a New York-based managing editor who joined BeInCrypto in March 2023. Over his career, he written extensively about the corporate legal world and the intersection of finance and law, has produced thousands of articles and features, and has mentored many reporters and researchers finding their way in a fast-changing industry.
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