SEC Committee Urges “Aggressive Enforcement” Against Crypto Firms

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(Kitco News) – The recent enforcement actions by the US Securities and Exchange Commission (SEC) have worried the crypto community, but they are being welcomed by the SEC Investor Advisory Committee (IAC), which recently sent a letter to SEC Chairman Gary Gensler encouraging him to maintaining pressure on the digital asset industry.

The IAC opened the letter by noting the growth that the crypto industry has seen over the past five years has led to large fluctuations in value. This has resulted in many investors suffering significant losses, with some estimates indicating that these losses have exceeded $2 trillion.

“As a result of targeted marketing, a significant amount of these losses have been borne by unsophisticated investors, including many minority investors seeking rapid investment growth without the knowledge or information to assess the risks associated with such investments,” the IAC wrote. “Many high-profile crypto firms have gone bankrupt, or are on the brink of bankruptcy, and many of them have been charged with civil and criminal violations of various laws.”

The IAC also highlighted the borderless nature of crypto transactions, which “makes them well-suited for various illegal activities such as money laundering and tax evasion.”

According to the US Treasury, an estimated $14 billion worth of digital asset-based crime occurred around the world in 2021, doubling from 2020. “The number of frauds in 2021 increased by over 60% year-on-year, while the value of stolen digital assets increased by over 80 % in 2021, IAC said.

The committee also reiterated the long-standing position of the SEC and Gensler that the vast majority of cryptocurrencies are securities and fall under the agency’s jurisdiction.

“We believe that virtually all, if not all, cryptotokens are securities and that they, as well as the platforms and custodians that handle them, are subject to regulation under the federal securities laws to protect investors,” they wrote. “Therefore, the offering of securities in cryptoassets and the platforms dealing in them should comply with the registration, disclosure, anti-fraud and other investor protection provisions of the federal securities laws.”

In response to the continued growth of the crypto industry and the dangers they believe it poses to the public, the IAC urges the SEC to: “Aggressively continue to assert authority over crypto-assets that are securities and over trading platforms that list or trade in such crypto-asset securities; Continue to provide guidance regarding cryptoassets to promote compliance by cryptoindustry participants with federal securities laws; and Continue to make cryptoasset enforcement a top priority and, where necessary, develop specialized personnel with knowledge of the cryptoindustry.”

Acknowledging that many in the crypto industry “continue to argue that there is a lack of clarity regarding the application of the federal securities laws to crypto and digital assets and that there are gaps in the SEC’s guidance,” the committee recommended that the agency consider issuing a request for comment regarding areas where there is a need for further guidance. “The SEC may then use this input to create additional guidance or propose rules to address issues identified,” they wrote.

The IAC also recommended that the SEC oppose any legislation that seeks to “create special exemptions from the federal securities laws for crypto-assets that would undermine investor protections,” and said the agency should “conduct investigations of broker-dealers and investment advisers focusing on whether standards of care is followed when making recommendations and providing investment advice regarding crypto-related assets.”

The SEC is wasting no time in strengthening its crypto enforcement unit, like a new one job advertisement posted by the agency indicates that it is looking to hire general counsels in New York, New York, San Francisco, California and Washington DC for the Crypto Assets and Cyber ​​​​Unit in its Department of Enforcement.

According to the listing, some of the duties of the new position include conducting “complex, fast-moving investigations” involving crypto-asset securities and cyber issues, developing investigative or litigation plans, drafting subpoenas or document requests, questioning witnesses through interviews and evaluating evidence. .

The positions offer a salary range of $140,830 to $259,590 per year, and interested applicants have until April 17 to apply for the positions. The start date for the application period was April 3, which is interesting in that it came just five days after Gensler requested and received nearly $2.4 billion in funding for the agency to help it increase enforcement against crypto “misconduct” .