By Nathalie Voit
The U.S. Securities and Exchange Commission (SEC) is getting more serious about cryptocurrency fraud.
In a press release issued on May 3, the agency said it would expand the size of its special unit developed to counter crypto and digital asset fraud as the $1.7 trillion cryptocurrency market continues to evolve.
The SEC’s Crypto Assets and Cyber Unit will hire 20 investigators and litigators for a total of 50 personnel. The division will also select a new leader as the current chief, Kristina Littman, prepares to leave the agency in June.
The cyber unit was created in September 2017 following an explosion in unregulated digital-coin offerings and platforms. Since then, the SEC has filed more than 80 cryptocurrency-related enforcement actions, primarily targeting new and unregistered crypto products. In August 2021, the SEC charged the decentralized finance industry for the first time in its history. Regulators accused a Cayman Islands-owned company called Blockchain Credit Partners of illegally selling over $30 million of securities in unregistered offerings. The unit’s expansion arrives amid a rise in digital fraud and the entry of newer assets into the market.
“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,” said SEC chair Gary Gensler. “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.”
The expanded unit will investigate securities law violations related to crypto-asset offerings, crypto-asset exchanges, and crypto-asset lending and staking products. Prosecutors will also investigate newer assets such as decentralized finance (“DeFi”) platforms, non-fungible tokens (“NFTs”), and stablecoins.
“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,” Gensler said.
“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,” he added.
