Gensler’s Strong Stance on Crypto as Securities
The Chairman of the Securities and Exchange Commission (SEC), Gary Gensler, has made it clear that the agency is intensifying its efforts to crack down on cryptocurrency-related violations. In a recent speech, Gensler emphasized the SEC’s commitment to prosecuting crypto wrongdoers and asserted its regulatory authority over the crypto space.
In the previous fiscal year, the SEC saw a notable increase of 3% in enforcement actions filed, with over 780 judicial and administrative proceedings, many of which were directly related to cryptocurrencies. Gensler firmly stated that arguments claiming cryptocurrencies fall outside the SEC’s jurisdiction will not sway them.
Gensler described the cryptocurrency market as a landscape plagued by fraud, scams, bankruptcies, and money laundering. Drawing a parallel to the 1920s, he compared the current state of the crypto market to a time before federal securities laws were enacted.
Gensler Highlights SEC Lawsuits Against Prominent Figures
Gensler’s speech also addressed a catalog of SEC lawsuits filed against well-known figures in the crypto industry over the past year. Notably, these individuals include Samuel Bankman-Fried of FTX, Changpeng Zhao from Binance, and Coinbase Global. All parties are currently contesting the charges brought by the SEC.
Gensler stressed that federal securities laws extend their jurisdiction beyond traditional stocks and bonds to anything classified as an “investment contract.” According to his analysis, most cryptocurrencies fall under this definition, making those involved in their trading subject to securities laws. However, this view has faced opposition from a significant faction within the crypto industry.
The SEC obtained $5 billion in recoveries during the fiscal year ending September 2023. This includes a $413 million penalty imposed on Danske Bank, Denmark’s largest financial institution, for concealing anti-money laundering deficiencies.
SEC’s Focus on Recordkeeping Violations and Individual Accountability
During this period, the SEC primarily targeted recordkeeping violations related to the use of personal messages and phone calls by Wall Street professionals for official business. Sanctions were imposed on 23 firms for these violations.
In the past, the SEC has often sanctioned firms while allowing individuals to escape liability. However, in the last fiscal year, Gensler noted that individuals were charged in two-thirds of enforcement cases. A total of 113 individuals were barred from serving as officers or directors of public companies, including former McDonald’s CEO Stephen Easterbrook.
Gensler reiterated the SEC’s unwavering commitment to pursuing cases regardless of the individuals or entities involved. This resolve extends to founders, established companies, emerging industries, and especially large cryptocurrency exchanges.
Hot Take: The SEC’s Firm Stand Against Crypto Wrongdoers
Gary Gensler’s strong declaration of robust enforcement action against cryptocurrency violators marks a significant shift in the SEC’s approach to regulating the crypto space. With an increase in enforcement actions and a continued commitment to market oversight, the SEC is poised to address fraud and non-compliance challenges within the industry. As cryptocurrencies continue to evolve, the SEC’s oversight and enforcement will play a crucial role in maintaining financial market integrity and protecting investors. While there may be legal battles and debates ahead, Gensler’s determination to enforce securities laws in the crypto space sets a precedent for digital assets’ future in the financial landscape.
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