SEC Questions Grayscale’s Legal Stance on Stellar, Zcash and Horizen Crypto Trusts

Grayscale Investments LLC has been fielding questions from the U.S. Securities and Exchange Commission (SEC) over the firm’s “securities law analysis” of tokens in some of its less-popular crypto trusts.

The inquiry, which Grayscale disclosed in little-noticed filings made in June and mid-August, casts a shadow over the trusts’ viability at a time when the world’s largest digital asset manager is already dealing with a precipitous decline in its assets’ value due to the ongoing crypto winter.

The disclosures appear in filings for trusts containing the native cryptocurrencies of the Stellar (XLM), Zcash (ZEC) and Horizen (ZEN) blockchains. In the filings, Grayscale said it was “responding” to SEC staff from the Division of Corporate Finance as well as Enforcement, the investigations wing that recently doubled down on policing crypto.

Grayscale did not immediately answer CoinDesk’s request for comment.

Other changes between Grayscale’s June and August filings further suggest a rapidly evolving situation for ZEC’s, ZEN’s and XLM’s treatment by the SEC.

In the June 28 filings, where Grayscale first reveals the regulatory back-and-forth, the asset manager says “SEC staff has not provided any guidance as to the security status of” ZEN, ZEC and XLM.

That line does not appear in the Aug. 16 filings.

Another addition in the Aug. 16 filings: Grayscale “has received a memorandum regarding the status of [ZEN, ZEC and XLM] under the federal securities laws from its external securities lawyers.” The disclosures do not detail what that memo says.

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