Linus Financial, a Nashville-based crypto platform, has settled its dispute with the SEC out of court. Previously, the project offered pooled crypto investment opportunities to its users in exchange for fiat.

However, the firm voluntarily winded down its operations when a similar firm got into hot water with the securities regulator over a nearly identical product.

Unregistered Securities Offering

Many of the SEC’s recent lawsuits – the most high-profile one being the case against Ripple – focused on the sale of tokens that the agency believes should be classified as securities. However, in this case, the Commission referred to the interest-garnering accounts themselves as the point of friction.

According to a press release submitted by the U.S. regulator, Linus Interest Accounts were “offered and sold as securities and did not qualify for an exemption from SEC registration.”

In order to qualify as a security, a financial product must pass the Howey Test, marking it as a financial investment, with a reasonable expectation of profit in a common enterprise to be derived from the efforts of others. Since all that Linus’ users had to do was buy an investment account to benefit from the firms’ trading services, the SEC ruled that the accounts in question qualified as securities.

No Penalties Due to Cooperation

Fortunately for Linus Financial, the SEC has agreed to suspend penalties for the unregistered offering in return for a cease-and-desist order signed by the crypto platform.

According to Stacey Bogert, the Associate Director of the SEC’s Enforcement Division, the SEC’s course of action should encourage other firms in the industry to cooperate when necessary.

“The SEC will continue to hold companies accountable for failing to comply with federal securities laws. But we also want to encourage companies to cooperate and take prompt corrective action when problems arise. Today’s settlement provides a valuable mes