US Lawmakers Call On SEC, DOJ To Investigate Prometheum

Table of Contents

• Republicans Step Up Attack On Prometheum 
• What Did Kaplan Say? 
• Prometheum Responds 
• Concerns About China

Six members of the United States Congress have called on the Department of Justice (DOJ) and the United States Securities and Exchange Commission (SEC) to investigate crypto firm Prometheum. 

The members have alleged that the firm has close ties with the Chinese Communist Party (CCP). 

Republicans Step Up Attack On Prometheum 

The Republican members of Congress stated that the firm’s co-CEO, Aaron Kaplan, may have potentially given false testimony during a Jun. 13 hearing on regulatory clarity in the crypto space. They also alleged that the company may have violated securities laws. The lawmakers stated in a letter written on Jul. 10, stating, 

“We write to express great concern that Prometheum Inc. (Prometheum) may have provided false testimony to Congress or violated United States securities laws.”

The lawmakers further claimed that Prometheum was connected with investors that had close ties with the Chinese Communist Party (CCP), the Shanghai Wanxiang Blockchain and HashKey Digital Asset Group. The group of lawmakers, led by Alabama Senator Tommy Tuberville, called on Securities and Exchange Commission Chair Gary Gensler and Attorney General Merrick Garland to look into the matter. Apart from Tuberville, the letter was signed by Laine Luetkemeyer, R-Miss., Barry Loudermilk, R-Ga., Ralph Norman, R-S.C., Byron Donalds, R-Flor., and Mark Alford, R-Missouri.

What Did Kaplan Say? 

On Jun. 13, Kaplan, the co-founder, and co-CEO of Prometheum, appeared before the US House to discuss regulatory clarity in the crypto space. During the hearing, Kaplan had argued that multiple frameworks put out by the Securities and Exchange Commission had laid out a clear path for crypto firms operating in the United States. Kaplan went so far as to call the Securities and Exchange Commission “the most capable financial markets regulatory agency in the world.”

However, what caught the attention of Republican lawmakers were allegations that the company had links with the Chinese Communist Party. Tuberville alleged that Kaplan, during his testimony, had said that Prometheum was developed independently of Wanxiang and HashKey. Kaplan stated in his testimony, 

"In December 2018, as part of the investment from Hashkey into Prometheum, Prometheum, and Wanxiang agreed to jointly develop a blockchain trading system. Thereafter, in approximately one (1) year, it became clear to Prometheum that joint development was not viable. Upon such realization, Prometheum started to independently develop its own platform. All servers, code, data, and proprietary technology were created independently of Wanxiang and its affiliates. Prometheum does not use any resource, code, or other assets from Wanxiang or its affiliates in any of its systems."

According to Kaplan, Prometheum terminated all strategic relationships with Shanghai Wanxiang Blockchain in October 2021. 

“Prometheum formally terminated all co-development work and strategic relationships with Shanghai Wanxiang Blockchain and its affiliates in October 2021 in an Omnibus Agreement, which was filed with the SEC in November 2021.”

However, lawmakers alleged that this contradicted the information that the firm had provided in filings with the SEC, stating that Prometheum still relied on the HashKey partnership, as shown by the SEC filings from 2020-2021. Furthermore, they questioned why Prometheum did not make clear in the filings that the company was developing its own technology platform, entirely independent of its Chinese partners.

The senators have yet to give the Securities and Exchange Commission and the Department of Justice a deadline to respond but have said they hope to hear from them soon. 

Prometheum Responds 

While Kaplan has not commented on the developments so far, a Jun. 23 op-ed by Kaplan and co-CEO Benjamin Kaplan has claimed that Tuberville’s concerns regarding Prometheum and its alleged ties to China were without merit and relied on old information. 

“We formally terminated all co-development work and strategic relationships with Wanxiang and its affiliates on Oct. 21, 2021. Prometheum has severed all intellectual property and technology ties to Wanxiang, giving it and its affiliates no access to any information that could expose the U.S. or its citizens to risk.”

Concerns About China

Republican lawyers have consistently raised concerns about companies having ties with China-based entities or its government when it came to laws and regulations regarding digital assets. Minnesota Rep Tom Emmer and Former Senator Pat Toomey had issued warnings about the use of China’s Digital Yuan during the Beijing Winter Olympics. The current letter to the Securities and Exchange Commission and the Department of Justice comes a month after Tuberville brought forward a bill to ban companies from China from acquiring a stake in American digital asset companies. The bill was co-sponsored by Sen. Kristen Gillibrand, D-N.Y.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.