Prometheum, which was a relatively unknown firm until it recently got approval for a Special Purpose Broker-Dealer (SPBD) for digital asset securities, is catching the attention of the crypto community following the high-profile testimony of its cofounder, Aaron Kaplan, before a U.S. House Committee on the subject of cryptocurrency regulation. 

Kaplan, who also holds the position of co-CEO, presented a viewpoint aligned with that of the Securities and Exchange Commission (SEC), arguing for the application of existing securities laws to the regulation of cryptocurrency — a view that differs from most of the rest of the industry. And yet Prometheum’s background is not what one would expect of a firm that claims to be compliant. 

In the hearing, Kaplan defended the SEC’s regulatory framework, describing current rules as providing a “compliant path forward for crypto in the United States” and called out those platforms that fail to adhere to these regulations as “reckless and unlawful.” 

During a recent episode of Unchained, Kaplan expounded his views, remarking that: “[Crypto exchanges] argue that there’s a lack of regulatory clarity because they’re literally best served by the lack of regulatory clarity.”

Additionally, during the episode, he argued that ETH is a security, echoing SEC Chair Gary Gensler’s stance: “The overwhelming majority of digital assets, basically everything besides bitcoin, is an investment contract and therefore a security.”

However, during the Congressional hearing, he admitted Prometheum cannot list ETH, answering “not currently,” when asked. 

Kaplan’s position and the rising profile of Prometheum piqued the curiosity of a number of crypto players who unearthed some unsavory facts about the company. Matt Walsh, a partner at venture capital firm Castle Island Ventures, tweeted that the company has paid out more than $1.5 million in sales commissions to Network 1 Financial Securities, which has a total of 23 infractions in its history. 

In fact, as crypto lawyer Collins Belton pointed out, it was the firm that also underwrote Long Island Iced Tea, which, in 2018, had pivoted Long Blockchain and later became the subject of an SEC enforcement action. 

In addition, the law school that two Prometheum officers cite as their alma mater lost its accreditation by the American Bar Association. 

Adding to the debate, cryptocurrency expert Adam Cochran presented a series of questions and speculated about Prometheum’s strategies in a detailed Twitter thread. Cochran highlighted that Prometheum’s website shows screenshots of the platform offering specific tokens, including Filecoin, Flow, Compound and The Graph, in 2022 (as an example, since trading on Prometheum has not yet commenced). Notably, these are the same tokens now under scrutiny by the SEC in their recent actions against industry leaders Coinbase and Binance.

Cochran put forth three possibilities to explain this: Prometheum might be enjoying a favorable regulatory deal in return for compliance with the SEC; the company could be leveraging its regulatory connections to gain an unfair advantage in the market; or they might be operating a sophisticated grift funded by questionable sources, Cochran said. Cochran drew attention to the SEC’s endorsement of Prometheum as a potential warning sign and, with a touch of humor, voiced his anticipation of Sen. Elizabeth Warren’s potential criticism, given her well-known stance on crypto regulation.