SEC Charges VanEck Over ETF Marketing Violation

The Securities and Exchange Commission of the United States recently penalized VanEck with a $1.75 million penalty. The ETF and mutual fund investment firm has agreed to pay the charges as part of the settlement deal with the regulatory agency. In the press release issued by the regulator, VanEck failed to disclose the involvement of a high-profile social media influencer to the independent trustees of its social sentiment fund called BUZZ.

The board gained awareness of the influencer only days before the launch of the said fund. VanEck launched the ETF in March, 2021. VanEck Associates Corp. was found guilty of not disclosing the appointment of Dave Portnoy, founder of Barstool Sports as the main promotor of the VanEck ETF.

VanEck Fails to Fulfill Licensing Agreement

The regulatory agency further claimed that the addition of Portnoy hindered the ability of board members to manage and measure the economic impact of its licensing agreement.

Meanwhile, the addition of the said influencer also made a significant impact on the management contract, operational structure, and administrative fee. SEC officials identified the details in the contract of Portnoy to receive compensation tied to the growth of the fund.

To this effect, his interest was tied to expanding the fund to claim a higher compensation. SEC officials were also critical of the hidden deal with VanEck failing to inform the ETF board about the involvement of the influencer.

Financial Prospects of the Advisory Contract

As per media reports, VanEck board members view the undisclosed appointment of Portnoy as the inability to supervise the financial prospects for advisory contracts. Andrew Dean, the joint chief of the Enforcement Division Asset Management Unit, further emphasized the need for transparency from advisors. VanEck officials have accepted the charges of breaching the Investment Company and Investment Advisor Acts.

On this account, the firm also agreed to a cease and desist order geared towards imposing a financial penalty without acknowledgment or denial of these allegations. These announcements furthered the decision of the firm to revoke one of its important ETF offerings namely Bitcoin Strategy ETF. It is important to note that VanEck decided to delist its Bitcoin Strategy Fund to focus more attention on its Bitcoin spot ETF named HODL.

VanEck announced on 15th February that the firm has decided to lower its management fee from 0.25% to 0.20% as of 21st February. Meanwhile, VanEck Europe head Martijn Rozemuller recently spoke with Cointelegraph about the increasing amount of institutional investment interest in spot Bitcoin ETFs in the USA.

However, the executive retained that the case was not the same for the European sector. He noted that the investors hailing from the USA are open to educated risks and prefer using digital trading platforms.

Bitcoin ETF Popularity Plunges in Europe

Rozemuller talked about the different approaches between investors hailing from the USA and Europe. He noted that European investors usually process investments through bank recommendations or fund managers.

He also noted that in Europe the greater population of cryptocurrency investors hails from the retail sector including small-scale fund managers and family-based brokerages. He also claimed that a greater portion of European financial firms is still crypto-agnostic.

Before the approval of Bitcoin spot ETFs in the US, investors and analysts modeled it after European counterparts. However, after 11th January investors visibly opted out of European crypto ETFs and sought positions in US-based alternatives. Rozemuller stated under these regulations, investors will not have to deal with transparency issues as in Grayscale products listed in the US that could result in volatile premiums or discounts.

According to the exec, European firms have a greater percentage of crypto ETNs that are fully regulated. Meanwhile, he also claimed that European investors have explicitly ruled against crypto-based investments.

Alessandro Rollo, the product manager of VanEck recently shared details of DAPP, a UCITS ETF product offered by his firm. Rollo noted that DAPP draws 50% of its value from Riot Blockchain, Marathon Digital, and Agro Blockchain.

Rollo explained that the fund has added shares of firms such as Coinbase and MicroStrategy with Bitcoin reserves on balance sheets. Rozemuller also stated that senior investors who have been skeptical towards Bitcoin can invest safely in Bitcoin-based ETFs/ETPs.

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