Threat Management, Governance, Risk and Compliance, Security Program Controls/Technologies

Securities and Exchange Commission doubles enforcement team for crypto markets

The SEC will add 20 new positions to its team policing cryptocurrency markets. Pictured: The Miami Bull is seen during the Bitcoin 2022 Conference at Miami Beach Convention Center on April 7, 2022, in Miami. (Photo by Marco Bello/Getty Images)

Investment company malfeasance has played a key role in cinematic and real-world incidents in recent years. Hence, the U.S. Securities and Exchange Commission is eager to reduce negative appearances.

The SEC announced May 3 that it will be adding 20 new positions to its enforcement team for crypto markets in an effort to find fraud in the financial industry. The regulator also said that it is henceforth naming this team of 50 employees the "Crypto Assets and Cyber Unit.”

"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," SEC Chair Gary Gensler said in a prepared release.

“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,” said Gensler.

“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,” Gensler said. “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."

In addition to expanding the size of its cybersecurity unit, the SEC expects to broaden the areas of oversight it will cover, including crypto assets and exchanges, asset lending, decentralized finance platforms and non-fungible tokens (NFTs) and stablecoins. Indeed, SEC’s so-called crypto unit has presented more than 80 enforcement actions for fraud and unregistered crypto asset offerings and platforms, resulting in monetary relief totaling more than $2 billion.

In addition, the unit has brought numerous actions against SEC registrants and public companies for failing to maintain adequate cybersecurity controls and for failing to appropriately disclose cyber-related risks and incidents.

“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 Gurbir S. Grewal, director of the SEC’s Division of Enforcement. “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 infusion of 20 additional positions into the Crypto Assets and Cyber Unit will bolster the ranks of its supervisors, investigative staff attorneys, trial counsels, and fraud analysts in the agency’s headquarters in Washington, as well as several regional offices.

“This is a clear signal that the SEC is going to prioritize cybersecurity in public companies and registered entities,” said Padraic O'Reilly, DoD cyber risk advisor and co-founder of cyber risk firm CyberSaint. “Their additional stated goal, ‘protecting investors in crypto markets’ is an ambitious, but a very good development. Crypto is still basically the wild west, and there are very little in the way of conventional protections for investors in this space, even as crypto products seemingly enter the mainstream.”

O’Reilly said that there is still “an obvious connection between crypto and cyber, and this is perhaps intentional on the part of the SEC. Collaboration across these functions will yield better results for investors. ... This is a sea change, but its time has clearly come.”

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