New crypto supremo role shows Washington’s clear intent
Multiple Federal agencies are now co-ordinating the US' legal response to alleged crypto frauds and a top cyber crime expert has just joined the fight
The US Federal government is knocking harder and harder on that crypto door, with Washington now making at least one major crypto-related regulatory announcement every week.
This week’s came from the Securities and Exchange Commission, the Washington agency ultimately responsible for regulating US stocks and securities. The SEC has engaged one of its top cyber crime experts, Valerie Szczepanik, to “co-ordinate efforts across all … Divisions and Offices regarding the application of US securities laws to emerging digital asset technologies and innovations.”
Her remit includes “both Initial Coin Offerings and crypto-currencies,” which effectively means Szczepanik is the SEC’s crypto-currency supremo.
“Valerie’s thought leadership in this area is recognized both within the commission and across financial regulators in the United States and abroad,” said SEC Chairman Jay Clayton. “With her demonstrated skill, experience and keen awareness of the importance of fostering innovation while ensuring investor protection, Val is the right person to coordinate our efforts in this dynamic area that has both promise and risk.”
Only days before the Szczepanik announcement, on May 29, the US Department of Justice announced it was opening a criminal probe into whether traders were manipulating the price of digital currencies. Federal prosecutors are now working with the Commodity Futures Trading Commission, the financial regulator with responsibility for overseeing Bitcoin derivatives, and specifically are examining allegations of both ‘spoofing’ and ‘wash trading’.
Significantly, the Department of Justice action marks the first time that both major regulator agencies responsible for US capital markets – the Commodity Futures Trading Commission and the US Securities and Exchange Commission – were publicly involved in anti-crypto fraud actions. And there’s more.
On May 22, again only days before the DoJ announcement, the North American Securities Administrators Association said its members have been carrying out 70 state- and provincial-level investigations, just since April, and that the actions, into crypto-currency scams and fraudulent ICOs, are “just the tip of the iceberg.”
Dubbed Operation Crypto-sweep , the investigations are receiving the full public support of the US Securities and Exchange Commission, with Clayton saying it “should be a strong warning to would-be fraudsters in this space that many sets of eyes are watching, and that regulators are coordinating on an international level to take strong actions to deter and stop fraud.”
And a week before the Crypto-sweep announcement, the SEC was again in the news when it was behind a spoof website that contained an ICO launch intended “to educate investors about what to look for before they invest in a scam.”
The “Howey Coin” claimed to combine “the two most growth-oriented segments of the digital economy, blockchain technology and travel” … it was to be “the newest and only coin offering that captures the magic of coin trading profits AND the excitement and guaranteed returns of the travel industry.” But anyone who clicked on the spoof website’s ‘Buy Coins Now’ button was instead led to investor education tools and tips from the SEC and other financial regulators.
“The rapid growth of the ‘ICO’ market, and its widespread promotion as a new investment opportunity, has provided fertile ground for bad actors to take advantage of our Main Street investors,” said SEC chairman Jay Clayton.
“We embrace new technologies, but we also want investors to see what fraud looks like, so we built this educational site with many of the classic warning signs of fraud. Distributed ledger technology can add efficiency to the capital raising process, but promoters and issuers need to make sure they follow the securities laws. I encourage investors to do their diligence and ask questions.”
The latest SEC announcement concerning Szczepanik’s new role – formally her title is the Associate Director of the Division of Corporation Finance and Senior Advisor for Digital Assets and Innovation for Division Director Bill Hinman – clearly place her at the center of the SEC’s increasingly focused efforts against crypto fraud, and Szczepanik’s CV certainly indicates she is suited to the task.
Szczepanik, who joined the SEC in 1997, most recently worked as the Commission’s Assistant Director in the Division of Enforcement’s Cyber Unit where she headed the SEC’s Distributed Ledger Technology Working Group, co-headed its Dark Web Working Group and is a member of its FinTech Working Group.
So what will the crypto announcement from the US Federal government be next week?
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