Following the failure of the FTX exchange in November 2022, the SEC has increased the number of anti crypto applications in the US.
It sure looks like the federal commission is trying to clean up its reputation after the embarrassment of letting an $8 billion fraud slip through its fingers.
Full details below
Summary
The SEC has increased the number of crypto enforcement activities in the US following the FTX case
After the FTX collapse in November 2022, the SEC took a tougher approach to crypto companies in the US.
In the wake of what has emerged as one of the most unexpected financial crashes in history, the federal agency is seeking to redeem itself by increasing controls in the crypto sector.
The lawsuits filed against Coinbase and Binance are just the latest in a series of actions aimed at restoring order to the market.
In particular, the number of applications against crypto-friendly companies filed with US federal districts has soared since the FTX case.
In fact, in the six months prior to the collapse of the $8 billion exchange, the US Securities and Exchange Commission filed only six cases in this context, compared to 19 in early 2023.
However, rather than a real need for controls for wrongdoing, it seems that the SEC just wants to clean up its reputation from its apparent inability to protect US investors from multibillion-dollar fraud.
Then again, the federal agency’s recent indictments of Binance and Coinbase have not revealed data demonstrating the unsustainability or danger of such businesses.
Instead, what has been brought to light is the complexity of the corporate structure behind Binance and its various affiliates, which, by necessity, had to protect themselves from the risks of imposition by individual governments and regulators.
Indeed, since Binance is a company that operates worldwide, in an industry that is still not fully regulated, it is difficult to run the show through a single company, but more importantly, potentially deleterious.
In any case, it is clear that the SEC is acting in bad faith and only in an attempt to salvage its reputation.
In this regard French Hill, a member of the House of Representatives for the state of Arkansas said recently at an event in Washington that the federal commission’s anti-crypto crackdowns in the US are trivially a move to “cover its own ass.”
The SEC could have sided against FTX in due time and saved the crypto sector in the US
Many still wonder why the SEC is coming down so hard on the crypto sector in the US and never investigated FTX in the past.
If the Securities and Exchange Commission’s operational strategy is to have formal applications, why did it not file a single one against what turned out to be an $8 billion fraud?
By avoiding the FTX crash, the federal commission could have not only avoided disastrous losses for a multitude of US investors, but also saved the crypto sector in the US from the bad name it has since created for itself.
In this regard, the CEO of Ripple, Brad Garlinghouse, believes that all the anti-crypto actions taken by Gensler since the beginning of the year serve only to mask the agency’s negligence in the FTX debacle.
Rather than focusing its efforts on investigations related to Kim Kardashian‘s promotion of the EthereumMax crypto scam in Super Bowl ads, the SEC could have focused on far more serious issues.
Even Changpeng Zhao, CEO of Binance, expressed disappointment on Twitter over the federal agency’s lack of scrutiny of FTX.
Speculation is circulating about the cryptic figure of Gary Gensler, Executive Chairman of the SEC, regarding his involvement in the FTX scam, having had some ties to Sam Bankman Fried and the father of Caroline Ellison, former CEO of Alameda Research.
In particular, SBF graduated from M.I.T., precisely where Gensler was “Former Professor,” under the supervision of Glenn Ellison, Caroline’s father.
Of course, this is not enough to blame the trio for fraudulent collusion. However, it still leaves some doubt.
In addition, in recent days it has emerged that Gensler had applied as Binance’s head of compliance in 2019, having then been rejected by CZ.
The issue becomes even more convoluted and complex, in a framework of working relationships and friendships that cannot coexist with such a delicate activity as that carried out by the SEC.
We hope that Gensler will soon be discharged from his role to be replaced with someone who has no history with the companies and individuals just mentioned.
Gensler compares Binance to FTX
The icing on the cake of this story that is now about to fall into science fiction is the fact that Gary Gensler, chairman of the SEC, has compared Binance, a leading crypto exchange, to FTX.
In detail, the comparison was made in terms of what concerns the management of customer assets, which should be entrusted to qualified custodians rather than companies controlled by Binance‘s CEO.
There are also allegations that Binance.US violated securities laws by manipulating the market and offering illegal trading services to US customers from the international platform.
There is also talk of mixing customer funds with Binance management’s personal assets, somewhat what happened months ago with Alameda Research and FTX.
In reference to the allegations, Gary Gensler quoted the following:
“The founders of the platforms are trying to accumulate wealth for themselves and their investors through related organizations, hedge funds or even… by betraying their customers.”
These are heavy words that are likely to generate distrust in the markets from crypto investors.
Should a judge rule in favor of the CZ exchange, demolishing Gensler’s allegations, these words could be considered defamation by the federal agency.
It is not fair at all for a commission whose ultimate purpose is to protect investors to use terms like “treason,” before a judge even issues a ruling.
Such statements obviously have repercussions on the markets and should not be overlooked.
As shady as the head of the SEC is, there may also be attempts at insider trading or manipulation behind his actions.
After all the revelations about Gensler’s past, he can no longer be trusted.
