Gary Gensler, Chairman of the SEC, stressed the importance to bring crypto platforms into compliance following the filing by the Securities Regulator of charges against Caroline Ellison, former CEO Alameda Research and Gary Wang for defrauding equity investors. Wednesday’s tweet from the SEC boss:
Investors will continue to be at risk if crypto platforms do not comply with the time-tested securities laws. The SEC will continue to make it a priority to use all available tools to bring this industry into compliance.
Gensler stated that the SEC is only just starting to crack down on crypto firms not complying with its rules in a Bloomberg interview.
Gensler stated that the runway for crypto companies to register with SEC is becoming shorter. He stressed: “The casinos in this Wild West, are non-compliant intermediaries.”
Gensler also addressed proof-of-reserves reports (POR), which are used by many crypto exchanges including Binance to show that they have sufficient funds to pay customer withdrawals. Gensler pointed out that this practice does not provide the required disclosures to protect investors.
The proof of reserves does not provide a complete accounting of assets and liabilities of a company. It also does not satisfy the requirements of the securities laws for segregation of customer funds.
Gensler recommended that crypto companies ‘give customers confidence in their crypto’ by complying with time-tested custody rules, segregation rules for customer funds, and accounting rules. The SEC is focusing on crypto companies’ financial records.
Some have criticized the chairman and securities watchdog for their enforcement-centric approach in regulating crypto. In the aftermath of the collapse in crypto exchange FTX, they were examined by SEC staff.
Tom Emmer, a Republican from Minnesota, tweeted Thursday that “Gary Gensler (and the SEC) had more meetings with SBF and FTX/IEX then anyone else in crypto. This was allegedly to create a special regulatory framework to benefit FTX.” Further, the lawmaker wrote:
Backroom regulatory deals with criminal actors are not tools in the SEC’s arsenal.
Last month, Congressman Emmer stated that the FTX saga is not a crypto-related failure. It was a failure by the SEC Chair Gensler. Gensler has been asked to testify in Congress about his regulatory failures.
The SEC chief highlighted the importance of regulating cryptocurrency issuers and intermediaries last week. He stated previously that the majority of crypto tokens are securities, but that the crypto field was substantially non-compliant. Recently, the securities regulator published its strategy plan for the next four year and crypto is one of its top priorities. Gensler stated in November that the SEC’s Enforcement Division is still focused on crypto.
