SEC doubles down on regulation-by-enforcement despite criticism

Rick Steves

The agency has been criticized extensively for its regulation-by-enforcement practice but it seems to be doubling down on the matter. 

The Securities and Exchange Commission has nearly doubled its Crypto Assets and Cyber Unit by adding 20 positions. The unit, which operates under the SEC’s Division of Enforcement will grow to 50 dedicated positions.

The infusion of 20 additional positions into the Crypto Assets and Cyber Unit will bolster the ranks of its supervisors, investigative staff attorneys, trial counsels, and fraud analysts in the agency’s headquarters in Washington, DC, as well as several regional offices.

“The U.S. has the greatest capital markets because investors have faith in them, and as more investors access the crypto markets, it is increasingly important to dedicate more resources to protecting them. The Division of Enforcement’s Crypto Assets and Cyber Unit has successfully brought dozens of cases against those seeking to take advantage of investors in crypto markets. By nearly doubling the size of this key unit, the SEC will be better equipped to police wrongdoing in the crypto markets while continuing to identify disclosure and controls issues with respect to cybersecurity”, SEC Chair Gary Gensler.

“Crypto markets have exploded in recent years, with retail investors bearing the brunt of abuses in this space. Meanwhile, cyber-related threats continue to pose existential risks to our financial markets and participants. The bolstered Crypto Assets and Cyber Unit will be at the forefront of protecting investors and ensuring fair and orderly markets in the face of these critical challenges”, said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.

Crypto products, exchanges, lending, staking, DeFi, NFTs, stablecoins

The agency has been criticized extensively for its regulation-by-enforcement practice but it seems to be doubling down on the matter. The expanded Crypto Assets and Cyber Unit will leverage the agency’s expertise to ensure investors are protected in the crypto markets, with a focus on investigating securities law violations related to:

Crypto asset offerings;
Crypto asset exchanges;
Crypto asset lending and staking products;
Decentralized finance (“DeFi”) platforms;
Non-fungible tokens (“NFTs”); and
Stablecoins.

Since its creation in 2017, the unit has brought more than 80 enforcement actions related to fraudulent and unregistered crypto asset offerings and platforms, resulting in monetary relief totaling more than $2 billion.

In addition, the unit has brought numerous actions against SEC registrants and public companies for failing to maintain adequate cybersecurity controls and for failing to appropriately disclose cyber-related risks and incidents. The Crypto Assets and Cyber Unit will continue to tackle the omnipresent cyber-related threats to the nation’s markets.

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