It is not news that the popularity of cryptocurrencies like Bitcoin and Ethereum have continually been on the rise since their inception a little more than a decade ago. Although cryptocurrencies and digital assets were almost certainly on the radar of regulators like the Securities and Exchange Commission (“SEC”) prior to 2018, since 2018 the SEC has issued fourteen press releases related to enforcement actions involving crypto or digital assets. Perhaps more importantly, the SEC has identified financial technology and cryptocurrencies as areas of priority in every annual examination report since 2018. The SEC is clearly paying attention to this evolving space.

According to the Director of the SEC’s Division of Enforcement, Gurbir S. Grewal, “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.” To combat these threats, the SEC announced on Tuesday, May 3 that it was changing the name of the Cyber Unit to the “Crypto Assets and Cyber Unit” and nearly doubling its allocation of staff to the Unit.

It is Director Grewal’s goal that this addition of 20 new positions to the newly renamed Crypto Assets and Cyber Unit will allow the Unit to “be at the forefront of protecting investors and ensuring fair and orderly markets in the face of these critical challenges.” In particular, the new Unit will focus on investigating securities violations related to:

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

Market participants who engage in the crypto space, or who have representatives or clients who do, can expect an increase in enforcement activity as a result of the SEC’s actions. SEC Chair Gary Gensler had this to say related to the expansion of the new unit: “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.”

###

At Jennings Haug Keleher McLeod, our experienced securities attorneys regularly represent both claimants and respondents in FINRA arbitrations. We work to ensure the selection of experienced and knowledgeable arbitrators for our clients. Contact our securities attorneys today.