TradeStation Crypto Inc. Consent Order Regarding Digital Asset Accounts

STATE OF RHODE ISLAND DEPARTMENT OF BUSINESS REGULATION SECURITIES DIVISION IN THE MATTER OF: 1511 PONTIAC A VENUE, BUILDING 69-1 CRANSTON, RHODE ISLAND 02920 TRADESTATION CRYPTO, INC., Matter No. 23SC005 CONSENT ORDER Respondent. INTRODUCTION WHEREAS TradeStation Crypto, Inc. (hereinafter "TCI") is part of a group of companies that engage in financial services; WHEREAS, TCI has offered digital asset trading accounts to clients to purchase and sell digital assets; WHEREAS, from approximately August 2020 until June 30, 2022, TCI's digital asset trading accounts had a feature that accrued and paid interest to customers on certain digital asset balances in their accounts (the "Interest Feature"); WHEREAS state securities regulators, as part of a North American Securities Administrators Association ("NASAA") Working Group that includes regulators from the states of Alabama, California, Mississippi, North Carolina, Ohio, South Carolina, Washington and Wisconsin (the "NASAA Working Group"), have conducted an investigation into whether the Interest Feature involved the offer and sale of unregistered securities by TCI to retail investors, among other things; and WHEREAS, without admitting or denying any findings of of law, TCI has reached an agreement with the NASAA, Working Group to resolve the investigation with

respect to the 47 states, the District of Columbia, Puerto Rico, Guam, and the U.S. Virgin Islands ( collectively, the "51 Jurisdictions") as follows: TCI has advised the NASAA Working Group of its agreement to resolve the securities investigation pursuant to the terms specified in this Consent Order (the "Order") and pursuant to the multistate resolution recommended by the NASAA Working Group; TCI shall cease and desist offering, selling, or renewing the Interest Feature or any security that is not registered, qualified, or exempt to new clients in the Jurisdictions, unless and until the Interest Feature or other securities are registered, qualified, or otherwise exempt; TCI amended and updated the terms of service, and any other terms or conditions of TC I's relationship with residents of the Jurisdictions, to reflect that such residents were the title, beneficial, and legal owners of all assets held in their digital asset trading accounts with TCI; TCI shall pay up to a total of one million five hundred thousand dollars ($1,500,000) in settlement payments divided equally among the Jurisdictions and paid to each of the Jurisdictions that enter into a consent order pursuant to the terms of TCI's agreement with the NASAA Working Group; TCI admits to the jurisdiction of the Rhode Island Department of Business Regulation Securities Division (the "Department") in this matter; TCI elects to permanently waive any right to a hearing and appeal under the Rhode Island Administrative Procedures Act, R.I. Gen. Laws § 42-35-1 et seq., with respect to the entry of this Order; and Solely for the purpose of terminating the NASAA Working Group's securities investigation and in settlement of the issues contained in this Order, TCI, without admitting or denying the findings of of law contained herein, consents to the entry of this

Order. Notwithstanding the foregoing, TCI will admit to the findings of fact and conclusions of law solely for the purposes of exceptions to discharge in bankruptcy proceedings under any jurisdiction, including the proceedings set forth in Sections 523 and 1192 of the Bankruptcy Code, u.s.c. §§ 523; 1192 (1978). NOW, THEREFORE, the Director, as administrator of the Department as set forth in R.I. Gen. Laws§§ 7-11-101 and 42-14-1, hereby enters this Order: I. FINDINGS OF FACT 1. The Department has jurisdiction over this matter pursuant to the R.I. Gen. Laws §§ 7-11-101 and 602. 2. TCI is a Florida corporation that was formed in June 2018 and from November 2019 until February 22, 2024 was in the business of providing onli digital asset trading accounts to self-directed retail and institutional investors and traders for the purpose of buying, selling, trading, and holding certain digital assets. At the time that TCI discontinued its services, TCI supported trading in Bitcoin ("BTC"), Ether ("ETH") and USD Coin ("USDC"). 3. TCI is a subsidiary of TradeStation Group, Inc., which is headquartered in Plantation, Florida. Since 2011, TradeStation Group, Inc. has been a wholly-owned subsidiary of Monex Group, Inc. ("Monex"), a publicly traded Japanese corporation listed on the Tokyo Stock Exchange. TradeStation Group, Inc. is also the parent company of TradeStation Securities, Inc., and TradeStation Technologies, Inc. which also have their principal place of business in Plantation, Florida. 4. TCI is a registered Virtual Currency Licensee and Money Transmitter Licensee, including Currency Exchange with the Rhode Island.

1. These affiliates, specifically TCI, TradeStation Securities, Inc., and TradeStation Technologies, Inc., all used brand messaging under the "TradeStation" trademark to advertise their respective platforms and services. The O ffer and Sale of Securities in Rhode Island and Nationwide 6. TCI began offering its digital asset trading accounts in or around November 16, 2019 to Rhode Island residents. From August 1, 2020 to June 30, 2022 (the "Offering Period"), TCI offered the Interest Feature to at least thirty-one (31) Rhode Island investors. Through the Interest Feature, TCI paid interest to customers who held digital asset balances in their TCI digital asset trading accounts. To pay the interest, TCI generated revenue through lending both firm-owned and customer-owned digital assets to institutional borrowers, from commissions earned by TCI customer trading activity in their digital asset trading accounts, and from capital that was contributed to TCI in connection with the start-up of its business operations. On June 30, 2022, at the end of the Offering Period, there were thirty-three (33) active Rhode Island digital asset trading accounts with TCI, coJlectively valued at over $219,159.83 USD. Nationally, at the end of the Offering Period, there were a total of 11,958 active digital asset trading accounts with TCI, with assets under custody totaling $98,214,155.40 USD. TCJ's Interest Feature 7. During the Offering Period, TCI advertised that customers could "actively trade and earn interest on eligible crypto assets simultaneously." TCI described the Interest Feature as "passive income." TCI advertised that customers could earn up to 6 percent interest on eligible digital assets that customers held in digital asset trading accounts with TCI. TCI paid interest on several types of digital assets, including BTC, ETH, L TC, BCH, and USDC.
2. TCI offered its digital asset trading accounts to the general public through the TradeStation website (www.TradeStation.com). The website supported TradeStation Securities, Inc., TradeStation Technologies, Inc. and TCI. TCI also offered a mobile version of its web application for trading digital assets. 9. TCI promoted the Interest Feature in internet ads that would appear in search engine results based on certain terms searched by customers. TCI promoted the Interest Feature by advertising, for example: "Automatically Earn Interest on Eligible Crypto Balances with No Limits or Lockups," "Easily Customize the Trading Interface, Analyze Prices & Keep Track oflnterest Income," "We Put the Power in Your Hands to Buy, Sell, Invest, and Earn Cryptocurrencies," and "Join the New Digital Economy with TradeStation Crypto to Learn, Invest, and Earn Crypto." 10. TCI allowed eligible customers to apply for a digital asset trading account by utilizing a unified TradeStation online account opening process (the "AOP") that allowed prospective customers to select and apply for the desired account type. As part of the AOP, prospective customers provided personal information for the purpose of Know Your Customer (KYC) and Anti Money Laundering (AML) checks. Socure, a third-party identity verification provider, then verified customer-provided information against Socure-sourced information, including public records. 11. TCI set interest rates and credited TCI customer accounts with earned interest on a monthly basis. According to TCI, the interest "accumulates daily and is paid and compounds monthly directly in your TradeStation Crypto account." TCI based interest rates on a number of factors, including, but not limited to, the rates TCI earned from borrowers, economic, and competitive factors.
3. TCI commingled customers' like-kind digital assets together and rehypothecated, or used, the customers' digital assets to lend to "trusted institutional or corporate borrowers," such as BlockFi Lending LLC and Genesis Global Capital, LLC-both of which have since filed for bankruptcy protection. TCI represented that notwithstanding, no borrower failed to return all digital assets lent by TCI to them, and none ofTCI's customers lost money from the Interest Feature. 13. TCI represented that it implemented various risk mitigation strategies towards its lending activities and that all loans made by it were fully secured. TCI set the amount of crypto assets that it was willing to lend to individual borrowers depending on the borrower's credit profile. TCI further represented that it utilized its "automated risk management system" to "monitor positions 24/7" and maintained a reserve balance to fulfill TCI customer withdrawal demands. Further, TCI claimed to maintain an internal risk committee to evaluate, among other things, credit and market risks that may affect its business. Customer account balances with TCI were not SIPC or FDIC insured. 14. During the account opening process, TCI required customers to agree to the rehypothecation of their digital assets when the customer accepted the TCI Terms, including the Customer Account Agreement, during account set-up. Specifically, TCI required that customers agree that TCI may hold the digital assets in TCI's name, that their digital assets could be commingled with other customers' digital assets, and that TCI could "pledge, repledge, hypothecate, rehypothecate, loan or invest" the digital assets. Further, the agreements provided that TCI was under no obligation to share with its customers any of the interest revenue generated by TCI' s lending arrangements.
4. Customer deposits into TCl's digital asset trading accounts during the period when the Interest Feature was offered were passive investments. TCI alone determined how customer assets were deployed; TCI customers had no control over how their assets were invested. TCI required that customers give up certain rights to their assets-specifically, that customers agreed to allow TCI to "pledge, repledge, hypothecate, rehypothecate, loan or invest" digital assets. 16. On or about June 30, 2022, TCI discontinued the Interest Feature and ceased all lending activities of customer assets. Failure to Complv with Registration Requirements 17. During the Offering Period, TCI's offer and sale of securities in the form of the Interest Feature was not offered or sold pursuant to an exemption or exception from registration. 18. During the Offering Period, TCI offered and sold securities in Rhode Island that were unregistered or did not meet an exemption for registration as required by R.I. Gen. Laws § 7-11-301. II. CONCLUSIONS OF LAW 19. The offer and/or sale of the Interest Feature within digital assets trading accounts maintained by customers as described above constitutes the offer and/or sale of a security as defined in R.I. Gen. Laws§ 7-11-101. 20. During the Offering Period, TCI' s offer and sale of securities in Rhode Island that were unregistered, or did not meet an exemption for registration, violated R.I. Gen. Laws§ 7- 11-301.
5. ORDER Based on the Findings of Facts, Conclusions of Law, and TCI's consent to the entry of this Order, IT IS HEREBY ORDERED: . This Order concludes the securities investigation by the Department with respect to TCI's Interest Feature and resolves any other securities action the Department could commence against TCI and its affiliates concerning the Findings of Fact and Conclusions of Law, including as it relates to the offer and sale of the Interest Feature without registration, qualification, or otherwise complying with an exemption. 22. This Order is entered into solely for the purpose of resolving the referenced multi- state securities investigation with respect to the Interest Feature and is not intended to be used for any other purpose. Other than the obligations and provisions set forth herein, this Order does not limit or create liability for TCI nor limit or create defenses for TCI to any claims. 23. This Order is not intended to subject any Covered Person to any disqualifications under the laws of the United States, any state, the District of Columbia, Puerto Rico, Guam, or the U.S. Virgin Islands, or under the rules or regulations of any securities or commodities regulator or self-regulatory organization, including, without limitation, any disqualification from relying upon the state or federal registration exemptions or safe harbor provisions. "Covered Persons" means TCI, all of its parent companies, and all of its affiliates and their current or former officers, directors, employees, contractors, or other persons that could otherwise be disqualified as a result of the Order. 24. TCI is hereby ORDERED to cease and desist from offering, selling or renewing the Interest Feature or any security that is not registered, qualified, or exempt to investors in Rhode Island.
6. TCI is hereby ORDERED to pay a penalty in the amount of$29,41 l.76 to Rhode Island, pursuant to R.I. Gen. Laws§ 7-11-602. 26. Full payment in the amount of $29,411.76 (in United States dollars) shall be tendered within thirty (30) days of the entry of this Order. 27. TCI shall pay the full penalty using whatever method agreed upon with Rhode Island, which may include: a. TCI may transmit payment electronically to the Department, which will provide detailed ACH transfer instructions upon request; b. TCI may pay by certified check, bank cashier's check, or United States postal money order per payment instructions provided by the Department. 28. Payments must be accompanied by a cover letter identifying TCI (with relevant tax identification numbers) and the file number of these proceedings. A copy of the cover letter must be sent per payment instructions provided by the Department. 29. This Order shall be binding upon TCI, its parent and affiliates, and their respective successors and assigns with respect to the provisions above and all future obligations, responsibilities, undertakings, commitments, limitations, restrictions, events, and conditions. SIGNED AND ENTERED BY THE Director this rd day of April 2024. Elizabeth Kelleher Dwyer, Director Rhode Island Department of Business Regulation CONSENT TO ENTRY OF ADMINISTRATIVE ORDER BY TRADESTATION CRYPTO, INC. TradeStation Crypto, fuc. (TCI), hereby further understands, acknowledges, and agrees to the following (the Department and TCI are referred to below (i) individually as "party" and (ii) together as "parties"): 30. Waiver of Hearing Rights. TCI acknowledges that it has been served with a copy of the Order, has read the foregoing Order, is aware of its right to a hearing and appeal in this matter, and has waived the same. TCI hereby waives the right to any hearings, and to any reconsideration, appeal, or other right to review which may be afforded pursuant to the Rhode Island Administrative Procedures Act, R.I. Gen. Laws § 42-35-1 et seq, or any other provision of law. 31. Failure to Comply with Order. TCI agrees that if it fails to comply with the terms of the Order, the Department may seek any and all remedies under the law. 32. fuformation Willfully Withheld or Misrepresented. The Order may be revoked and the Department may pursue any and all remedies available under the law against TCI if the Department discovers that TCI knowingly or willfully withheld or misrepresented information used for and relied upon in the Order. 33. Future Actions by the Department. IfTCI fails to comply with the terms of the Order, the Department may institute proceedings for any and all violations otherwise resolved under the Order. The Department reserves the right to bring any future actions against TCI, or any of its partners, owners, officers, shareholders, directors, employees or successors for any and all violations of any law over which the Department has jurisdiction other than violations resolved under this Order. 34. Jurisdiction & Findings. TCI admits to the jurisdiction of the Department, neither admits nor denies the Findings of Fact and Conclusions of Law contained in the Order, and consents to entry of the Order by the Department as settlement of the issues contained in the Order. Notwithstanding the foregoing, TCI will admit to the Findings of Fact and Conclusions of Law solely for the purposes of exceptions to discharge in bankruptcy proceedings under any

and all jurisdictions, including the proceedings set forth in Sections 523 and 1192 of the Bankruptcy Code, U.S.C. §§ 523; 1192. 35. No Tax Deduction or Credit. TCI agrees that it shall not claim, assert, or apply for a tax deduction or tax credit with regard to any state, federal, or local tax for any administrative fine or investigative costs that TCI shall pay pursuant to the Order. 36. Assisting Other Agencies. Nothing in the Order limits the Department's ability to assist any other government agency (city, county, state or federal) with any prosecution, administrative, civil or criminal action brought by that agency against TCI or any other person based on any of the activities alleged in this matter or otherwise. 37. No Presumption Against Drafter. Each party acknowledges that it has had the opportunity to draft, review, and edit the language of the Order. Accordingly, the parties intend no presumption for or against the drafting party will apply in construing any part of this Settlement. The parties waive the benefit of any Rhode Island statute, which provide that in cases of uncertainty, language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist. 38. Independent Legal Advice. Each of the parties represents, warrants, and agrees that it has had the opportunity to receive independent advice from an attorney(s) and/or representatives with respect to the advisability of executing the Order. 39. Heading s. The headings to the paragraphs of the Order are inserted for convenience only and will not be deemed a part hereof or affect the construction or interpretation of the provisions hereof. 40. Binding. The Order is binding on all ofTCI's heirs, assigns, and/or successors in interest. 41. Reliance. Each of the parties represents, warrants, and agrees that in executing the Order, it has relied solely on the statements set forth herein and the advice of its own legal counsel, if represented. Each of the parties further represents, warrants, and agrees that in executing the Order it has placed no reliance on any statement, representation, or promise of any other party, or any other person or entity not expressly set forth herein, or upon the failure of any

party or any other person or entity to make any statement, representation, or disclosure of anything whatsoever. The parties have included this clause: (1) to preclude any claim that any party was in any way fraudulently induced to execute the Order; and (2) to preclude the introduction of parole evidence to vary, interpret, supplement, or contradict the terms of the Order. 42. Waiver. Amendments. and Modifications. No waiver, amendment, or modification of the Order will be valid or binding unless it is in writing and signed by each of the parties. The waiver of any provision of the Order will not be deemed a waiver of any other provision. No waiver by either party of any breach of, or of compliance with, any condition or provision of the Order by the other party will be considered a waiver of any other condition or provision or of the same condition or provision at another time. 43. Full Integration. The Order is the final written expression and the complete and exclusive statement of all the agreements, conditions, promises, representations, and covenants between the parties with respect to the subject matter hereof, and supersedes all prior or contemporaneous agreements, negotiations, representations, understandings, and discussions between and among the parties, their respective representatives, and any other person or entity, with respect to the subject matter covered hereby. 44. Govemine Law. The Order will be governed by and construed in accordance with the laws of the State of Rhode Island. Each of the parties hereto consents to the jurisdiction of such court and thereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in such court. 45. Counte rparts. The Order may be executed in one or more separate counterparts, each of which when so executed, shall be deemed an original. Such counterparts shall together constitute a single document. 46. Effect Upon Future Proceeding s. IfTCI applies for any license, permit, or qualification under the Department's jurisdiction, or is the subject of any future action by the Department to enforce the Order, then the subject matter hereof shall be admitted for the purpose of such application(s) or enforcement proceeding(s); provided, however, that, for the avoidance

of doubt, such admission of the subject matter hereof shall not be construed as any admission or denial by TCI of any findings of of law contained herein. 47. Voluntary Aereement. TCI hereby enters into the Order voluntarily and without coercion and acknowledges that no promises, threats, or assurances have been made by the Department or any officer, or agent thereof, about the Order to induce TCI to consent to the Order. The parties each represent and acknowledge that he, she or it is executing the Order completely voluntarily and without any duress or undue influence of any kind from any source. 48. Notice. Any notice required under the Order shall be provided to each party at the following email addresses: ToTCI: To the Department: David Schubauer General Counsel, TradeStation Crypto, Inc. dschubauer@tradestation.com GaryDeWaal Katten Muchin Rosenman LLP 50 Rockefeller Plaza New York, NY 10020 (212) 940-6558 gary.dewaal@katten.com 49. Signatures. A fax or electronic mail signature shall be deemed the same as an original signature. 50. Public Record. TCI hereby acknowledges that the Order is and will be a matter of public record. 51. Effective Date. The Order shall become final and effective when signed by all parties and delivered by the Department's agent via e-mail to TCI's counsel for this matter, Gary DeWaal, at the following email address: gary.dewaal@katten.com. 52. Authority to Sie n. David Schubauer represents that he is General Counsel of TCI and that, as such, has been authorized by TCI to enter into the Order for and on behalf of TCI.

Dated this 10th day of April , 2024. TradeStation Crypto, Inc. By: _ t>i:..1ri.d _ ~c.k,,J;, __ = __ ... _ _ ~::,i 04/10/2024 :PM EDT Name: David Schubauer Title: General Counsel Approved as to form by: Cf~'1 l:>e.We..a.t @" 04/10/2024 12:37 PM EDT Katten Muchin Rosenman LLP SUBSCRIBED AND SWORN TO before me this 10th day of __ A.pn·1 _ _ _ ,, 2024. [ Affix seal] 11;,l! ~ 04/10/2024 12:39 PM EDT ----------------- -------Notary Public in and for the State of Florida ----------My Commission expires: _ 07 /26/2025 _ _ _ ',, TAMAAA MCLENDON-COLEMAN • Not.ry Public - St.le of Florido Commls,ton # HH 158095 My Ccmm, Expire, Jul 26, 20H Online Notary Publ ic. This notarial act Involved the use of online audio/video communication technology. Notarization facilitated by SIGNiX®