Former SEC lawyer points out lack of prosecutions against cryptos due to ‘incomprehensible’ application

The world of cryptocurrencies never ceases to be a battleground for debate and discourse, especially when it comes to regulation and enforcement. Recently, a former U.S. Securities and Exchange Commission (SEC) attorney, John Stark Reed, chimed in with pointed criticism of how cryptocurrency enforcement is being handled.

Reed, with nearly two decades of experience in the SEC’s Enforcement Division, wasted no words in expressing his concerns about the current state of cryptocurrency enforcement. In a recent post on X (formerly known as Twitter), he highlighted the urgency of the US Department of Justice (DOJ) to take stricter action against those who commit crypto fraud.

He highlighted the clear distinction between the SEC’s actions, which are primarily civil, and the notable lack of criminal actions. For Reed, crypto offenders see SEC penalties as just a simple obstacle on the path to more significant profits. He mentioned that as long as this perception persists, regulatory arbitrage will continue to be seen as a mere operational cost.

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I served for almost 20 years as an attorney in the SEC Division of Enforcement (including 11 years as Chief of the SEC’s Office of Internet Enforcement) and led dozens of SEC prosecutions with… pic.twitter.com/pElbR2wUeX

— John Reed Stark (@JohnReedStark) September 23, 2023

The scenario is further complicated when influential figures in the crypto space, such as Tyler Winklevoss, co-founder of cryptocurrency exchange Gemini, publicly disparage the SEC’s actions. The stance of major exchanges such as Coinbase and Binance also doesn’t help, as they often appear to trumpet the SEC’s accusations as marketing strategies, downplaying the seriousness of the allegations.

The DOJ’s incomprehensible lack of criminal prosecutions is another hot spot in Reed’s argument. He has not hesitated to call on the DOJ to step up its efforts, believing that a tougher approach could finally make cryptocurrency offenders take enforcement seriously.

The topic becomes even more relevant when we look at high-profile cases such as that of Sam Bankman-Fried, founder of cryptocurrency exchange FTX. Reed expressed surprise that Bankman-Fried’s parents were not dragged into court as defendants in the case.

Reed, who has in the past questioned the cryptocurrency industry’s response to the SEC’s enforcement of regulations, is now more than ever convinced that the SEC’s approach is fair and well-directed, and believes that change is necessary to ensure the system integrity.

Disclaimer:

The views and opinions expressed by the author, or anyone mentioned in this article, are for informational purposes only and do not constitute financial, investment or other advice. Investing in or trading cryptocurrencies carries a risk of financial loss.