SEC Adds Twenty New Crypto Asset Enforcers | Foley & Lardner LLP

The Securities and Exchange Commission (SEC) recently announced that it will be adding 20 positions to its newly renamed Crypto Assets and Cyber Unit, including fraud analysts, investigative staff attorneys, trial counsels, and supervisors. With the SEC’s current Chair Gary Gensler on record stating that he believes the law is clear enough and only needs enforcement, it is important to highlight that all of these positions are enforcement-related and none of the new staff will be charged with carrying out the SEC’s statutory duties to propose rules and interpret the law for industry participants. As reported by Axios, this comes on the heels of news that current Crypto Assets and Cyber Unit Chief Kristina Littman is stepping down with plans to leave the SEC in early June.

Background

Over the past five years of its existence, the Crypto Assets and Cyber Unit has initiated enforcement actions against more than 80 crypto asset offerings and platforms and obtained more than $2 billion in settlements. Virtually all financial technology-related SEC enforcement actions are settled without admitting or denying the government’s allegations due to the cost of mounting a defense, notably including lending protocol BlockFi’s agreement to pay $50 million to settle with the SEC, and $50 million more to settle with 32 states, for violating the Investment Company Act of 1940.

Another high-profile lawsuit, SEC v. Ripple, is expected to go to trial in November 2022. Legal observers will be watching that case closely for clues about the SEC’s positions in the Biden administration and how judicial rulings will shape the law. The court’s opinion will be binding precedent, unlike the SEC orders issued in connection with settlements, which are written by the SEC staff and do not carry the weight of law.

These SEC moves follow President Biden’s Executive Order on Digital Assets (examined at length here), which noted that 40 million Americans now invest in crypto…

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