The Securities and Exchange Commission has settled charges against a former Florida-based cryptocurrency hedge fund Galois Capital Management for failing to comply with requirements related to the safeguarding of client assets.

The Commission also found that Galois misled fund investors about the notice period required for redemptions. To settle the SEC’s charges, Galois agreed to pay a civil penalty of $225,000, which will be distributed to the fund’s harmed investors.

The SEC’s order found that, beginning in July 2022, Galois Capital failed to ensure that certain crypto assets held by the private fund that it advised were maintained with a qualified custodian, a violation of the Investment Advisers Act’s Custody Rule.

According to the order, Galois Capital held certain crypto assets in online trading accounts on crypto asset trading platforms, including FTX Trading Ltd, that were not qualified custodians. Approximately half of the fund’s assets under management from early to mid-November 2022 were lost in connection with the collapse of FTX.

The SEC’s order also found that Galois Capital misled certain investors by representing to them that redemptions required at least five business days’ notice before month end while allowing other investors to redeem with fewer days’ notice.

The SEC’s order found that Galois Capital violated the Investment Advisers Act. Without admitting or denying the SEC’s findings, Galois Capital consented to the entry of an order requiring it to cease and desist from further violations of the Advisers Act, and pay the civil penalty.