In a groundbreaking case, the SEC charged private fund manager, Galois Capital Management LLC, with Custody Rule violations when it failed to hold crypto assets at a qualified custodian. Galois maintained certain fund crypto assets at FTX Trading Ltd and lost approximately half of the fund’s assets under management in connection with the collapse of FTX. Galois was further faulted for preferential treatment and disclosure failures surrounding its redemption practices by permitting certain investors, including affiliated investors, to redeem with shorter notice than outlined in fund governing documents. Galois agreed to pay a civil penalty of $225,000 to settle the SEC’s charges, which will be distributed to its fund’s harmed shareholders.