Investors Beware! SEC Goes After Consumer-Facing Crypto Hedge Fund

Jay Clayton, chairman of the SEC

Jay Clayton, chairman of the SEC Chip Somodevilla/Getty Images

A hedge fund, which at one point claimed it was “the first regulated crypto asset fund in the United States,” turned out to be a complete stranger to the U.S. Securities and Exchange Commission (SEC). On Tuesday, the SEC issued a cease-and-desist order against Crypto Asset Management (CAM), a La Jolla, Calif.-based hedge fund that manages Ethereum and Bitcoin, for not being appropriately registered with the federal agency.

In addition, the SEC slapped a $200,000 fine on the fund and its sole principal, Tim Enneking.

The case was the SEC’s first action against a cryptocurrency fund since it began regulating the digital asset space. Before this, the agency had only cracked down on initial coin offerings (ICOs), which are categorized as securities and are therefore subject to securities laws.

CAM was founded in March 2017 and had $37 million in assets under management by the end of 2017. According to the SEC, the fund raised $3.6 million in the last five months of 2017 from 44 investors, primarily retail investors from 15 states. SEC documents revealed that CAM had no pre-existing relationship with these investors and solicited them mostly through the company website, social media promotions and Enneking’s appearances in traditional media outlets, including Forbes, The Wall Street Journal and a number of cryptocurrency-focused outlets.

Before CAM, Enneking ran a foreign-based private fund managing digital assets. CAM is his first U.S.-based fund.

CAM agreed to pay the fine and stopped its public offering after being contacted by the SEC, but didn’t admit or deny the allegations, Tuesday’s filings showed.

CAM hasn’t responded to a request for comment by Observer.

Correction: The original article mistakenly said that the fund had raised $3.6 billion in the last five months of 2017. The number should have been $3.6 million. The story has been updated to reflect this correction.

Investors Beware! SEC Goes After Consumer-Facing Crypto Hedge Fund