Prometheum, the would-be SEC crypto darling, is in the crosshairs of the political right

Crypto company Prometheum looked poised to become a darling of the Securities and Exchange Commission (SEC). But in the past month, it’s been dragged by the internet—ever since its cofounder gave an SEC-friendly speech on Capitol Hill, irking many members of the widely anti-SEC crypto community.

If you know anything about crypto, you know the wrath of its Twitter presence can be deadly. And social media users were quick to dig into Prometheum’s background—unearthing a bizarre story that involved its cofounder being invited last-minute to a Congressional hearing to serve as an expert witness on crypto legal regulation, despite having a law degree from a school that was stripped of its accreditation by the American Bar Association.

But more explosive were claims about Prometheum’s links to China-related entities—which a group of Republican senators are now asking the SEC and the Department of Justice to investigate.

Allegations center on Prometheum’s investors, Shanghai Wanxiang Blockchain and its subsidiary HashKey Digital Asset Group, which together own a 20% stake in the firm. Both investors are thought to be backed by the Chinese Communist Party (CCP).

In a letter this week, addressed to U.S. Attorney General Merrick Garland and SEC chair Gary Gensler, Senator Tommy Tuberville of Alabama and five members of the House of Representatives argued that Prometheum cofounder Aaron Kaplan’s testimony on its China ties at last month’s Congressional hearing may have been false. At the time, Kaplan said Prometheum decided in December 2019 not to develop its blockchain trading technology with CCP-backed entities, and “upon such realization, Prometheum started to independently develop its own platform.”

But according to Prometheum’s SEC filings, the firm still worked with Wanxiang on coding its blockchain technology until October 2021, the letter argued.

A bigger battlefield

Tuberville, like other Republican lawmakers, has doggedly crusaded against China-affiliated companies. A month ago, he introduced a bill that would ban Chinese entities from acquiring stakes in American crypto firms. Other Republican congresspeople issued warnings against using the Chinese digital yuan during Beijing’s 2022 Winter Olympics. And both sides of the aisle have zeroed in on ByteDance-owned TikTok, over fears that its tech collects and sends user data to Beijing.

In a statement to Fast Company, Prometheum called the concerns over its China ties “dated and incorrect,” and said the company “will not be derailed by partisan and specious allegations.” In a letter to The Wall Street Journal last month, Prometheum’s cofounders, brothers Aaron and Benjamin Kaplan, wrote that “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.”

But even beyond the China problem, this latest battle puts the once-SEC-allied Prometheum in the crossfire of an ongoing war between clashing forces: the political left, which has sought to crack down on crypto’s lawlessness with the help of the SEC, and the right, which has taken a more laissez-faire stance and criticized the regulatory body’s moves.

Prometheum’s alignment with the SEC has also squared it in enemy territory for much of the crypto community. The small 50-employee firm had not been on the industry’s radar until recently—but earlier this year, it received special approval from the SEC to deal in the digital asset space—a green-light that even the $10 billion stock platform Robinhood failed to earn.

Last month, Tyler Winklevoss, an outspoken crypto advocate and cofounder of Gemini, criticized the SEC for bestowing such approval upon a firm that had yet to launch any products or generate revenue, despite six years of operation.