The U.S. Securities and Exchange Commission (SEC) announced Tuesday that it will double its cryptocurrency enforcement division, adding another 20 positions to the Crypto Assets and Cyber Unit — which was recently renamed from the “Cyber”. Unit”. The total number of employees will increase from 30 to 50, making the agency better able to prosecute securities law violations related to new crypto products.
In a press release, the SEC cited a booming period for crypto markets and a corresponding responsibility to protect investors from the growing risk of fraudulent investment schemes.
“Crypto markets have exploded in recent years, with retail investors suffering the most from 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 reinforced Crypto Assets and Cyber Unit will play a leading role in protecting investors and ensuring fair and orderly markets in the face of these critical challenges,” said Grewal.
As cryptocurrency has become more available to retail investors, fraud and abuse have kept pace. A prominent form of scam is known as a carpet puller, where the operators of a project ask for investments, promise big returns and just go into hiding with the money – as happened recently with a collection of 3D avatars called Frosties and a crypto token inspired by the Netflix hit show Squid Game†
In its announcement, the SEC expressed particular interest in crimes related to strike and lending platforms, decentralized financial (DeFi) services, stablecoins and NFTs. The newly created staff positions include investigative attorneys, trial attorneys and fraud analysts, the SEC said.
“The Division of Enforcement’s Crypto Assets and Cyber Unit has successfully filed dozens of cases against those seeking to exploit investors in crypto markets,” SEC Chair Gary Gensler said in a statement. “By nearly doubling the size of this key unit, the SEC will be better equipped to monitor misconduct in the crypto markets, while continuing to identify disclosures and manage cybersecurity issues.”
Since taking on the position of SEC chairman in 2021, Gensler has often pointed to the need for greater power and resources in regulating cryptocurrency. In August 2021, he described the industry as the “Wild West” in terms of investor protection, and called on Congress to expand the agency’s powers to regulate trading and lending platforms. Shortly thereafter, the SEC filed its first-ever lawsuit against a DeFi platform, accusing the operators of the Cayman Islands-based Blockchain Credit Partners of unregistered sales of more than $30 million worth of securities.
While the crypto enforcement team’s expansion is a boon to Gensler, it’s unclear if it will be enough to fulfill all of the agency’s ambitions in the field. Previously, Gensler highlighted the sheer number of newly launched products and services that could fall under the SEC’s purview, citing 6,000 new projects that must be evaluated to determine whether they qualify as securities under US law.