Lying to Congress is a crime. Providing misleading information to investors in U.S. Securities and Exchange Commission (SEC) filings constitutes securities fraud. 

Last month, Prometheum, Inc.’s co-CEO Aaron Kaplan testified before the House Financial Services Committee on the future of digital assets. Democrats invited Kaplan to the hearing in hopes of holding up Prometheum – which recently received a first-ever approval from the SEC and Financial Industry Regulatory Authority to operate as a special purpose broker-dealer for digital asset securities – as a responsible digital asset industry participant that is playing by the rules. 

When the hearing invitation was extended to Kaplan, most of Congress was unaware that Prometheum’s largest outside investor is a Chinese company – Wanxiang Blockchain and its affiliate HashKey – with deep and well-documented ties to the Chinese Communist Party. 

A senior executive from HashKey currently serves on Prometheum’s board, and until October 2021, Prometheum had a formal tech development agreement in place with its China-based partners. While speaking at a conference, Kaplan described Wanxiang in the following way: “They’re not a partner, they’re our co-founder, and we work hand in hand with them, and leveraging their excellent resources and expertise, we really feel that we can achieve our business plan in an efficient and intelligent manner.” 

In the hearing, several Members of Congress asked pointed questions of Kaplan regarding Prometheum’s China ties. Of particular concern were SEC filings stating Prometheum enjoyed a technology development partnership with Wanxiang and HashKey. If Chinese entities built out any part of Prometheum’s platform, the confidential data of American users would be at risk. 

In written testimony submitted to the committee, Kaplan indicated that Prometheum ended the joint development of its blockchain trading system in December 2019 and started to create its own platform independent of its Chinese partners. 

Sounds good, right? The issue is that Prometheum’s audited financial statements and SEC filings throughout all of 2020 and most of 2021 – over a year and a half after December 2019 – document Prometheum’s continued reliance on its partnership with Wanxiang and HashKey for technology buildout. Even Kaplan acknowledged that his company’s formal tech-sharing agreement with these firms was not terminated until October 2021. 

Prometheum’s audited financial statements from the end of 2020 note that the company “uses Wanxiang as their sole project developer and relies on Wanxiang’s ability to create and maintain a successful platform.” The statement, which was included in Prometheum’s SEC filings, notes, “If the Company were to lose the services of Wanxiang, it could be difficult or impossible to replace them, and the loss of them could have a material adverse effect on the Company’s operations and financial conditions.” 

A June 2021 Offering Circular submitted to the SEC by Prometheum reveals that its “strategic Partnership and Joint Development Agreement with Wanxiang has provided the Company with material and significant world-recognized resources.” 

If Prometheum ended its tech buildout with its China-based partners in December 2019 as Kaplan led Congress to believe, that development should have been reflected in the company’s SEC filings. Instead, Prometheum continued to tout its China-tainted tech partnership to regulators and potential investors for nearly two more years. 

Investors rely on accurate SEC filings to make investment decisions. Was Prometheum misleading investors by overstating its partnership with Wanxiang and HashKey? Was Kaplan’s statement to Congress that the joint development of its blockchain trading system with Chinese entities ended in December 2019 deceptive? These are key questions that deserve answers. 

Today, I’m sending a letter to the Attorney General and SEC Chair asking for an investigation into Prometheum’s China ties and a review of the company’s SEC filings and statements to Congress. To me and to my colleagues in Congress who have joined me in sending this letter, there appear to be clear inconsistencies in the story Prometheum is spinning. If Congress has been lied to in written testimony or if SEC statements have been falsified, swift action is needed.

Senator Tommy Tuberville represents Alabama in the United States Senate and is a member of the Senate Armed Services, Agriculture, Veterans’ Affairs, and HELP Committees.

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