U.S. Securities and Exchange Commission Chairman Gary Gensler cited major enforcement actions against crypto firms as part of the “economic realities” of securities regulation.
In a speech written for the Practical Law Institute on Securities Regulation on November 2, Gensler used examples from the SEC’s application against crypto lending firm BlockFi and a former Coinbase employee to justify the agency’s actions on violations of US securities laws.. Under Gensler, the SEC would take a “like-for-like” approach to enforcement actions, regardless of the form of securities, funds, or investors.
“When BlockFi failed to record offers and sales of a crypto lending product, and made materially false and misleading statements about those securities, we charged them,” Gensler said. “When a former Coinbase manager and others allegedly misappropriated sensitive information to buy crypto asset securities, we charged them.”
According to the SEC chairman, the commission’s enforcement staff consisted of “public servants” and “police on duty” who “married public zeal with unusual ability.” The SEC has filed more than 700 enforcement actions against companies through September 30, resulting in approximately $4 billion in civil penalties out of $6.4 billion obtained from judgments and orders.
“Fraud is fraud, regardless of the types of investors you have defrauded and the types of securities used in the fraud.”
However, Gensler reiterated his “come and talk to us” message to companies offering financial products, giving them the opportunity to “cooperate with the investigation [de la SEC]and remedy [su] misconduct.” The SEC chairman suggested that enforcement against crypto firms will likely still be within the purview of the commission in 2023 in his May budget request.
Many inside and outside the cryptocurrency space have criticized the SEC for taking a “regulation by application” approach in its cases against crypto companies.for example, labeling nine tokens as “crypto asset securities” in a July lawsuit against a former Coinbase product manager.
The outcome of the 2022 midterm elections in the United States—either in a lame-duck session of Congress or beginning in January 2023—could influence whether proposed bills on the roles of the Futures Trading Commission Commodities and the SEC to supervise cryptocurrencies get approved.
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