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SEC Keeps Crypto Fraud in Its Sights Through Expanded Enforcement Team

Posted  May 4, 2022

The SEC announced on May 3 that it was dramatically expanding its Cyber Unit and renaming the team the Crypto Assets and Cyber Unit.  The newly enlarged team will now include fully 50 enforcement personnel.

The expanded team shows that the SEC is continuing to see crypto fraud as a major enforcement priority.  As the number of digital currencies continue to grow and the increasing number of new investors in the space continues to expand, the SEC recognizes the important role it will play in stopping fraud in a space highly prone to it.  Some of the SEC’s identified areas of focus include:

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

The SEC has already brought a few blockbuster enforcement actions against crypto companies.  In February 2022, the SEC charged BlockFi with marketing unregistered securities.  In June 2020, Telegram settled with the SEC for a similar failure for over $1 billion, and Kik was similarly found liable for the same conduct in October 2020.  The SEC has also gone after promoters of ICOs for failing to disclose those payments and crypto lending companies for violating the antifraud provisions of the Securities Act.

Without doubt, with the additional enforcement assets added to the team, the Crypto Assets and Cyber Unit will be able to continue this string of enforcement actions.  As the crypto universe continues to grow and change, and as the number of frauds continues to grow exponentially, there is no question the SEC will need all the enforcement resources they can find.  And of course the SEC’s sister agencies, including the CFTC, FinCEN, and the IRS will have to play an important role in this space as well.

If you have information about fraud in the cryptocurrency markets, please contact us.

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Tagged in: Cryptocurrency, Financial and Investment Fraud, Securities Fraud,