Crypto-Related Crime: SEC Launches New Unit to Combat Fraud

The Securities and Exchange Commission (SEC) has announced the creation of a new organization dedicated to combating crypto-related crime. The Cyber and Emerging Technologies Unit will work with the SEC’s crypto task force to “root out those seeking to misuse innovation to harm investors and diminish confidence in new technologies.”

About the New Unit

The unit will be made up of around 30 fraud specialists and lawyers from across the SEC, with SEC attorney Laura D’Allaird leading the new unit. D’Allaird was one of the attorneys who worked on the SEC’s case against messaging service Kik Interactive, which the SEC alleged offered its Kin digital tokens in violation of the federal Securities Act.

Background on Kik’s Token Sale

In 2017, Kik sold $50 million in Kin tokens as part of a private pre-sale to 50 investors. As part of this “Simple Agreement for Future Tokens,” or SAFT, investors understood they were getting in at a discount. They explicitly agreed that they were buying a security.

SEC’s Shift in Approach

The SEC has shifted its approach to overseeing the industry since the election of Republican President Donald Trump, a far more crypto-friendly candidate. Acting SEC Chairman Mark T. Uyeda said in a statement that “the [Cyber and Emerging Technologies Unit] will not only protect investors, but will also facilitate capital formation and market efficiency by clearing the way for innovation to grow.”

The statement added that the new unit will combat fraud involving blockchain technology, cryptocurrencies, and artificial intelligence; fight hackers working to obtain material nonpublic information; and target criminals using social media, the dark web, or false websites to con retail investors.

SEC’s Enforcement Actions

Crime in the crypto space is rife. Last year, the SEC brought 33 enforcement actions against companies and individuals related to cryptocurrency fraud. In fact, a $4.5 billion of $8.2 billion the SEC secured in penalties came from its one case against blockchain project Terraform Labs and its founder, Do Kwon.

Conclusion

The SEC’s new unit is a step in the right direction to combat crypto-related crime. With a focus on protecting investors, facilitating capital formation, and promoting market efficiency, the unit has the potential to make a significant impact on the industry. However, it remains to be seen how effective the unit will be in its efforts.

FAQs

Q: What is the purpose of the Cyber and Emerging Technologies Unit?
A: The unit is dedicated to combating crypto-related crime and promoting innovation in the industry.

Q: Who will lead the new unit?
A: SEC attorney Laura D’Allaird will lead the new unit.

Q: What is the goal of the SEC’s new approach to the industry?
A: The goal is to protect investors, facilitate capital formation, and promote market efficiency by clearing the way for innovation to grow.

Q: What are some of the objectives of the new unit?
A: The unit will combat fraud involving blockchain technology, cryptocurrencies, and artificial intelligence, fight hackers, and target criminals using social media, the dark web, or false websites to con retail investors.

Q: How effective will the unit be in its efforts?
A: Only time will tell, but the unit has the potential to make a significant impact on the industry.