SEC Charges FinTech Investment Adviser Titan for Violations

The Securities and Exchange Commission (SEC) has issued charges against Titan Global Capital Management USA LLC, an investment adviser based in New York specializing in FinTech, for employing misleading hypothetical performance metrics in its advertisements.

Furthermore, the SEC has brought forward allegations of multiple compliance failures against Titan. These failures resulted in inaccurate disclosures related to the custody of clients' cryptocurrency assets, the inclusion of inappropriate “hedge clauses” in client agreements, unauthorized utilization of client signatures, and the absence of policies governing crypto asset trading by employees.

According to the SEC's official order, during a period spanning from August 2021 to October 2022, Titan, which provides diverse intricate strategies to retail investors through a mobile trading app, disseminated misleading information on its website concerning hypothetical performance. This included advertising “annualized” performance results reaching as high as 2,700 percent for their Titan Crypto strategy.

The order asserts that these advertisements by Titan were misleading due to their omission of crucial details. For instance, the hypothetical performance projections assumed that the performance achieved in the strategy's initial three weeks would persist for an entire year.

Additionally, the order highlights Titan's violation of the marketing rule by promoting hypothetical performance metrics without fulfilling the necessary requirements outlined in the Commission's marketing rule, which was revised in December 2020.

The SEC's order further indicates that Titan: (1) provided inconsistent information to clients regarding the custody of crypto assets; (2) introduced liability disclaimer language in client advisory agreements that wrongly implied clients had relinquished their rights to certain legal actions against Titan; and (3) contrary to prior representations, neglected to adopt policies and procedures concerning personal crypto asset trading by its employees.

The order also discloses that Titan voluntarily reported to the SEC staff regarding its failure to obtain client signatures for specific types of transactions in client accounts. The company has agreed to settle the associated charges.

In a collaborative gesture, Titan cooperated with the investigation and consented to the SEC's order, which confirms violations of the Advisers Act. While neither admitting nor denying the SEC's findings, Titan has accepted a cease-and-desist order, a censure, and a financial settlement that encompasses $192,454 in disgorgement, prejudgment interest, and a civil penalty amounting to $850,000. This penalty will be distributed to clients who were affected by these actions.