EF Hutton, headquartered in Springfield, is apparently having trouble.

Filing shows SEC investigating Springfield firm

HUTN, Inc. said in a financial filing that the Springfield company is being investigated by the Securities and Exchange Commission focusing on the company’s involvement with digital currency.

The Springfield firm said in a quarterly financial report that company officials are confident there are no violations, but will continue to cooperate and respond to information requests.

“HUTN fully supports the SEC review of the fintech sector and, specifically the digital asset sub-sector of financial services,” said Chris Daniels, the company’s CEO. “HUTN, which operates in those sectors, has voluntarily provided information to the SEC and is now responding to specific requests for information.”

A spokesman for the SEC said the agency does not confirm or deny ongoing investigations. The firm is a financial services company that opened in downtown Springfield in 2016 in the former Credit Life Building. Its subsidiaries include EF Hutton Inc. and Megga Inc.

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The quarterly financial report also showed the company reported a net loss from operations of about $1.9 million for the quarter that ended Sept. 30, and a total loss from operations of $6 million for the first nine months this year.

Company officials voluntarily responded to an information request from the SEC on Oct. 16 this year, the filing stated. The information request appeared to focus on company activities involving digital instruments, according to the document. Officials at HUTN, Inc. also voluntarily replied to questions from the SEC over the phone on Nov. 7, and the company said it received a subpoena on Nov. 14 requesting documents and stating that the SEC is conducting a formal investigation.

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“The company has reviewed its activities related to digital instruments and is confident that there has been no impropriety,” the firm’s financial document states.

The NY Times reported earlier this year that the SEC has sent subpoenas to dozens of entities and companies selling virtual currencies as a way to raise money for their projects. That paper reported the subpoenas were a signal of the agency’s intent to crack down on the emerging trend of coin offerings.

The News-Sun reported earlier this year that among other initiatives, the company plans to generate about $60 million by early 2019 from issuing cryptocurrency. The company said in a press release it will issue “multiple instruments, coins and tokens.”

The company’s latest financial filing also shows the firm also later announced it would provide a dividend to shareholders in the form of a digital instrument, called FAVR, that the company developed internally.

“Furthermore, the company announced that it developed an instrument that would enable hedging of Bitcoin,” the financial report states. “In October, the Bitcoin hedge instrument was put on hold because management determined that certain aspects needed revision. The company continues to develop a Bitcoin hedge product.”

READ MORE: Firm reports $3.6M loss while ramping up operations

The company also said earlier this year it will provide subscription-based research on cryptocurrencies, and is establishing a cryptocurrency exchange.

“On Sept. 12, 2018, the company announced an economic development package with the Commerce Department of the State of Arizona for development of ACEx, an exchange for digital currencies and other digital assets,” the financial document states. “The company is the sponsor and founding member of the ACExchange. The company intends for ACEx to be a membership organization in which members are regulated entities. The company’s plan for ACEx is presently on hold pending funding from the company’s planned sale of common stock.”

“We decided to push that back by a few months and I expect that will open in the second quarter of 2019,” Daniels said of the exchange.

On Nov. 8 the company commenced an offering of up to five million shares of common stock, the financial documents showed. The offering price was set at $2.50 per share.

Company officials also took part in a roundtable discussion in September in Washington, D.C., called “Legislating Certainty for Cryptocurrencies.” That event was hosted by U.S. lawmakers including Congressman Warren Davidson, R-Troy, who said he planned to introduce legislation that would provide more clarity and lighter regulations for the growing cryptocurrency market.

The firm is also developing a variety of other services and products from various subsidiaries, primarily focusing on investment and retirement products, mobile communications and a social networking platform called Meggalife.

Financial documents for the three months that ended Sept. 30 show the firm reported about $177,000 in revenue for the first nine months of the fiscal year including about $50,000 during the most recent quarter. The firm’s latest financial statements filed with the OTC show the company had about $76,117 cash on hand at the end of the quarter ending Sept. 30.

The firm’s total assets are listed at about $21.5 million.

Daniels said Monday that the company’s loss from operations is the result of investments the firm has made as it develops new products and services.

“We continue to invest in our business and to develop new products and services,” Daniels said. “The capital we invest in the business is a long-term asset for the company even though that may result in a loss for the quarter, as it has in other quarters.”

He said the company spent the last two years developing its products, but some of that work is expected to begin to show in 2019, he said. Daniels previously told the News-Sun the company has a total of about 65 employees, with about half of those workers located in Springfield. He declined to discuss the company’s latest employment figures Monday, saying the figures fluctuate and he did not want to comment on the latest employment figures every quarter.

“The important thing is we’re putting money into the business,” Daniels said. “People can see we are investing and developing a great deal in Springfield.”

Along with its facilities in Springfield, documents show the company also previously established a roughly 2,200 square foot office in Miami Fla., in February this year.The most recent statement though showed the company has already terminated its office lease in Florida and has arranged to instead use temporary space on an interim basis. Daniels said the company is still planning to open a separate office in Scottsdale, Ariz.

The company’s most recent financial statements also describe several subsidiaries under HUTN Inc. All of the subsidiaries sell and distribute their products and services to consumers through the Internet, according to information from the company.

The financial report showed employees at the firm are still developing apps for the company’s Meggalife social network platform. The company is still conducting beta tests of the software and believes the products will be available for widescale use in early 2019. A portion of proceeds from the company’s Nov. 8 stock offering is expected to cover costs to market the social network applications.

“New funding is crucial for the company to continue operations and to achieve the company’s business objectives,” the financial report states. “The company plans to use proceeds to fund operations, working capital, general corporate expenses and redemption of debt.”

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