U.S. Senator Tommy Tuberville of Alabama and Congressman Blaine Luetkemeyer are calling on Attorney General Merrick Garland and the Securities and Exchange Commission (SEC) Chair Gary Gensler to investigate Prometheum, Inc. amid allegations of false testimony to Congress and potential violations of U.S. securities laws.
In a letter dated July 10, 2023, Tuberville and Luetkemeyer expressed concerns about discrepancies in statements made by Prometheum, a digital asset company, in testimony before Congress and in its SEC filings. They highlighted that Aaron Kaplan, Co-CEO and founder of Prometheum, testified before Congress that the firm commenced independent development of its technology platform, separate from its China-based partners, in December 2019. This claim, the legislators argue, contradicts indications in Prometheum’s financial statements and SEC filings.
According to the letter, Prometheum continued to rely on its partnership with Shanghai Wanxiang Blockchain, Inc. (Wanxiang) and its subsidiary HashKey Digital Asset Group, Ltd. — both China-based entities with ties to the Chinese Communist Party — long after Kaplan said the company had started independent operations.
The lawmakers wrote:
“Prometheum’s audited financial statements and SEC filings during 2020 and 2021, which were relied upon by investors, indicate that Prometheum continued to rely on its partnership with Wanxiang and HashKey long after December 2019.”
The representatives underscored that Prometheum emphasized its relationship with Wanxiang in its SEC filings and public appearances, potentially misleading investors into believing the relationship was ongoing and advantageous. They argue that Kaplan’s testimony to Congress appears to conflict with these filings.
“Making false statements to Congress is a crime. Submitting false or misleading statements in SEC filings constitutes securities fraud,” the lawmakers emphasized, urging a thorough review of Prometheum’s statements, its continued membership in the Financial Industry Regulatory Authority (FINRA), and its registration with the SEC.
Prometheum, a New York-based company, has recently become the first crypto-focused company to register with the U.S. Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) as a special-purpose broker-dealer. This is a significant development in the crypto industry as it indicates possible paths to regulatory approval for other crypto companies looking to engage with digital assets.
However, Prometheum has attracted speculation and criticism since Kaplan’s congressional testimony; as a relatively unknown player at the beginning of the year, its ability to gain SEC approval where others have failed has raised questions.