According to reports from the Wall Street Journal (WSJ), the SEC is investigating the SALT lending platform, a well-known blockchain protocol disrupting the loan industry. SALT conducted a USD 50 Million ICO in 2017 and allegedly failed to register as a securities offering organization. The counter-argument against these investigations is that there was no law in place or even guidance to indicate that such ICOs constituted securities platforms. There was, therefore, no way for such organizations to possibly comply.
The SALT lending platform investigation
The WSJ reports that a subpoena was sent to the SALT lending platform this February and the SEC is currently evaluating whether or not the ICO constituted an unregistered securities offering. SALT’s troubles do not end there. The SALT CFO has also filed a lawsuit against the company because favorable loans were given to company executives and family members.
The SALT lending platform currently accepts BTC, LTC, DOGE, and ETH as collateral for loans. The loans start at USD 5,000 with an APR of 5.99%, which is quite steep but necessary in a new industry with little or no standards or available data. These types of crypto loan options are especially significant as they bypass the traditional credit system, heavily tied to banks with fiat money and centralized control. Cryptocurrency based loans are on the rise worldwide to create a new form of finance. These platforms can enable a new infrastructure where people who have acquired cryptocurrencies can build wealth more easily, without enriching centralized bodies along the way.
SALT stands for Secure Automated Lending Technology, and it is currently available in 33 US states, New Zealand, and the United Kingdom. SALT was founded in 2016 and is one of the worlds first crypto-based lending platforms, though there have been more entrants into the market since its inception. The SALT lending platform is based in Denver and issues fiat loans to those who can show crypto collateral. Its main competitor includes EthLend, which has an advantage in that it is a decentralized loan platform while SALT is centralized. With centralized systems, there is the potential for corruption, as evidenced by the current lawsuit where favorable loans were allegedly given to family members. Additionally, matching borrowers to lenders can take some time on the SALT lending platform. Other notable crypto lending platforms include Nexo and BlockFi.
Another Wall Street Journal attack
The SEC is also reported to be investigating ShapeShift CEO Eric Voorhees, who was once involved in SALT and has been reprimanded by the SEC previously. However, Voorhees has issued a blog post titled ‘Yet Another Wall Street Journal Attack‘ where he clarifies that he is not a part of any private lawsuit and has settled his dispute with the SEC:
“The Wall Street Journal has once again published an inaccurate and misleading article against me and against the crypto industry…First, I am not a party to the private lawsuit brought against Salt by a former CFO of the company…Second, I have abided by the terms of my SEC settlement. Third, the Wall Street Journal has not dealt with me or my company Shapeshift in good faith and this recent story is simply an unfortunate continuation of that trend”
The previous attack concerned two WSJ journalists who gathered freely given information from ShapeShift, ignored the data, used a heavily flawed methodology and submitted a factually inaccurate story to convince readers that the ShapeShift platform was used to launder money. The WSJ has since refused to respond to Voorhees analysis with regards to the operation. Their most recent article continues to assert that ShapeShift is used by criminals to launder millions, despite this being grossly misleading. Additionally, the statement that the SEC is investigating Voorhees is materially false. The same two authors who wrote the initial piece (Justin Sheck and Shane Shifflet) are also responsible for the continued attack with more deliberately misleading journalism.
According to Voorhees, it is an attack not just on his character and on Shapeshift, but on the whole cryptocurrency industry by a media outlet with established interests. The ShapeShift CEO is one of the most outspoken proponents within the DLT industry and is a prime target for playing such a key role in facilitating the decentralization movement. Ironically, ShapeShift is one of the worlds most transparent exchanges with advanced AML procedures. Due to regulatory pressures, ShapeShift is now being forced to ask customers for KYC documents, much to the inconvenience of its customer base.
Digital Nomad with an interest in Zen and Blockchain technology.
Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.