VanEck Settles SEC Charges with $1.75M Penalty, Reduces Fees to 0.20% Amid Crypto Fee War

VanEck Associates Corporation, a registered investment adviser, has settled charges with the Securities and Exchange Commission (SEC), agreeing to pay a $1.75 million in civil penalty.

The penalty is linked to allegations that the company failed to disclose the involvement of a social media influencer in the launch of its new exchange-traded fund (ETF).

The SEC's order reveals that in March 2021, VanEck Associates introduced the VanEck Social Sentiment ETF (NYSE:BUZZ), designed to monitor an index based on positive insights from social media and other data sources. As part of the ETF launch, the index provider planned to engage a well-known social media influencer for promotional activities.

The influencer's compensation structure included a fee linked to the fund's size, with larger funds resulting in higher payments to the influencer.

However, VanEck Associates allegedly neglected to disclose the influencer's planned involvement and the fee structure to the ETF's board during the approval process. This failure, according to the SEC, limited the board's ability to assess the economic impact of the licensing arrangement and the influencer's participation in the fund launch.

In settling the charges, VanEck Associates neither admitted nor denied the SEC's findings but consented to a cease-and-desist order, a censure, and the $1.75 million civil penalty.

Fee War Still Going Strong

Nonetheless, it is worth noting that VanEck's forthcoming fee reduction on its spot Bitcoin ETF, as disclosed in a filing with the SEC on February 15, reflects a broader trend of competitive fee adjustments within the cryptocurrency investment landscape.

The firm revealed that its VanEck Bitcoin Trust (HODL) will implement a unified sponsor fee of 0.20% when trading commences on Febraury 21, down from the current 0.25%. This reduction in fees aims to enhance the fund's attractiveness to investors by offering a more competitive fee structure.

In the original S-1 statement, VanEck defined the sponsor fee as an expense paid by the Trust to the Sponsor, VanEck Digital Assets, LLC, for services rendered under the Trust Agreement. Undoubtedly, such fees can influence the overall performance of the fund, making fee adjustments a significant consideration for investors.

The move by VanEck follows a series of fee reductions in the US cryptocurrency market, often referred to as a "fee war," where asset managers have competitively lowered sponsor fees to attract investors.

Notable players like Grayscale, Ark, and BlackRock have previously adjusted fees on spot Bitcoin ETFs around the time of regulatory approval. This trend then continued with Invesco and Galaxy announcing fee cuts on their spot Bitcoin ETF (BTCO) on January 29.

Data from Nerdwallet indicates that most US spot Bitcoin ETFs, excluding Grayscale, now feature fees ranging from 0.19% to 0.25%, with some ETFs also offering temporary fee waivers to further entice investors.

A similar scenario unfolds in the European market, where Bitcoin ETP providers like Invesco and WisdomTree have also reduced fees to align with the competitive landscape, highlighting Fidelity's recent fee cut on its European product, the Fidelity Physical Bitcoin ETP.