In a firm stance against the crypto world, SEC Chairman Gary Gensler promised relentless enforcement action, as evidenced by a 3% increase in enforcement cases, and reiterated his position that crypto are securities.
Summary
Gensler and the SEC continue their fight for the crypto world: he claims they are securities, citing scams, frauds and bankruptcies
The Securities and Exchange Commission (SEC) is stepping up its efforts to crack down on cryptocurrency-related violations, according to SEC Chairman Gary Gensler.Â
Gensler recent speech to a meeting of securities lawyers highlighted the SEC commitment to prosecuting crypto violators and the agency’s firm stance on asserting regulatory authority over the cryptocurrency space.
In the fiscal year just ended in September, the SEC saw a significant increase in its enforcement actions, with Gensler noting a 3% increase in enforcement actions filed.
In total, there were more than 780 judicial and administrative proceedings, a significant portion of which were directly related to the cryptocurrency market.
Gensler made it clear that the SEC will not be swayed by arguments that cryptocurrencies fall outside its jurisdiction.
Gensler strongly described the cryptocurrency market as a landscape characterised by fraud, scams, bankruptcies and money laundering.
Drawing a historical parallel, he compared the current state of the cryptocurrency market to circumstances in the 1920s, before the enactment of federal securities laws.
The complaints against Gensler
A significant portion of Gensler’s speech covered a large catalogue of SEC lawsuits filed against prominent figures in the cryptocurrency industry over the past year. These include Samuel Bankman-Fried of FTX, Changpeng Zhao, the founder of Binance, and prominent trading platform Coinbase Global.
Notably, all of these parties are currently contesting the SEC’s charges. Gensler stressed that he was not able to list all of the individuals charged in this non-compliant industry.
Gensler pointed out that the federal securities laws extend their jurisdiction beyond traditional stocks and bonds to anything classified as an “investment contract”.
According to his analysis, the vast majority of cryptocurrencies would fall under this definition, making those involved in their trading subject to securities laws.
It is important to note, however, that this view has met with strong opposition from a significant faction of the cryptocurrency industry.
A federal district court judge ruled in July that a token issued by Ripple Labs does not necessarily qualify as a security.
The SEC has stated its intention to appeal this ruling, while other federal judges have upheld the classification of crypto tokens as securities.
In the fiscal year ending September 2023, the SEC obtained a total of $5 billion in recoveries, including the return of $930 million to affected investors. The most notable of these recoveries was a $413 million penalty imposed on Danske Bank, Denmark’s largest financial institution.
The penalty stemmed from the bank’s concealment of anti-money laundering deficiencies, a problem first exposed by Barron’s and other media outlets working with the Organised Crime and Corruption Reporting Project.
The SEC other interests
During this period, the SEC focused primarily on the rampant use of personal messages and phone calls by Wall Street professionals for official business.
These recordkeeping violations led to sanctions against 23 firms.
In the past, the SEC has sometimes preferred to sanction firms while allowing individuals to escape liability.
However, in the last fiscal year, Gensler found that the SEC charged individuals in two-thirds of its enforcement cases.
In total, 113 individuals were barred from serving as officers or directors of public companies, including former McDonald’s CEO Stephen Easterbrook, who agreed to the bar without admitting to the SEC’s fraud charges.
Gensler’s farewell message reiterated the SEC’s unwavering commitment to pursuing cases regardless of the calibre of the individuals or entities involved.
This resolve extends to the most ingenious founders, the oldest companies, emerging industries, and especially the largest cryptocurrency exchanges.
Conclusion
In conclusion, Gary Gensler’s declaration of robust enforcement action against cryptocurrency wrongdoers signals a significant shift in the SEC’s approach to regulating the cryptocurrency space.
With a significant increase in enforcement actions and an ongoing commitment to market oversight, the SEC is poised to address the challenges of fraud and non-compliance that have plagued the industry. As cryptocurrencies continue to evolve, the SEC’s oversight and enforcement will play a critical role in maintaining the integrity of the financial markets and protecting investors.
The road ahead may be fraught with litigation and debate, but Gensler’s determination to enforce securities laws in the cryptocurrency space sets a precedent for the future of digital assets in the financial landscape.
