For self-reporting securities law violations, crypto companies may still face SEC penalties: Report

Gurbir Grewal, the SEC’s enforcement head, reportedly stated that the agency will not ignore any money or securities laws violations brought to them by crypto firms.

The enforcement director of the Securities and Exchange Commission in the United States has reportedly stated that cryptocurrency companies will not be granted amnesty for reporting possible securities law violations.

According to a Reuters article published Monday, Gurbir Grewal, the SEC’s director of enforcement, said the agency may see crypto businesses’ conduct “more positively” if they self-report securities law infractions first. He did clarify, though, that while businesses may face reduced penalties, they will not be fully free of responsibility.

“Our message to crypto businesses isn’t, ‘Register your product and we’ll just ignore the billions you have under control in this crypto lending product and your securities law violations,'” Grewal explained.

In July 2021, the SEC enforcement director came to the agency from the New Jersey Attorney General’s office. He fought back against claims that the SEC will use “regulation by enforcement” to regulate crypto and other securities in November:

“First and foremost, let me state unequivocally that we support and encourage the use of innovative technologies for capital development. They have the potential to improve the efficiency and dynamic of our markets, as well as boost investor access. But, more crucially, any securities offered or sold to US investors, regardless of their form or name, must adhere to US securities rules.”

Grewal’s alleged statement appears to contradict SEC chair Gary Gensler’s repeated requests for crypto businesses to “come in and chat”  i.e. register their securities with the regulatory agency. Many crypto businesses and their products, according to Gensler, may fall under the SEC’s regulatory scope and must be registered in order to protect investors. SEC Commissioner Hester Peirce, dubbed “Crypto Mom” by many in the industry, has repeatedly chastised the agency for a lack of regulatory clarity regarding crypto companies and potential securities law breaches.

As the crypto field grows, the SEC appears to be ramping up its enforcement operations against crypto businesses. The agency charged two individuals and a Cayman Islands-based corporation in a $30 million securities fraud case employing DeFi technology in August 2021. BlockFi, a crypto lending company, said this month that it would pay $50 million to the SEC as part of a settlement, as well as $50 million in state-level enforcement suits, for allegedly failing to register high-yield interest accounts.

Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

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