On May 3, 2022 the SEC announced that it is nearly doubling the size of the Division of Enforcement's Crypto Assets and Cyber Unit – the unit charged with policing the crypto markets for securities law violations and for protecting the securities markets against cyber-related threats — by adding 20 positions to the unit, bringing the unit's total size to 50. The additional positions will increase the number of supervisors, investigative staff attorneys, trial counsels, and fraud analysts devoted to the unit's purpose in both D.C. and regional offices.
The unit, which was created in 2017, has actively brought enforcement actions related to its dual purpose: (1) policing the crypto markets for securities law violations, and (2) protecting investors from cyber-related threats. The unit has brought over 80 enforcement actions related to fraudulent and unregistered crypto asset offerings and platforms, with monetary relief from those actions totaling more than $2 billion. It has also brought numerous enforcement actions related to cybersecurity controls and risk and incident disclosures regarding cybersecurity.
In announcing the increased size of the unit, the SEC discussed the increasing number of cyber-related threats and the risks they pose to the U.S. financial system as justification for the increased size of the unit. The SEC asserted that the increase is necessary for investor protection as investors increasingly access the crypto markets. SEC Chair Gary Gensler said of the importance of devoting additional resources to investigating crypto markets and offerings, "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."
The SEC's decision to increase the size of its enforcement unit devoted to policing the crypto markets makes clear that its mission under Chair Gensler remains one of regulation by enforcement, not regulation through rulemaking and guidance. In reacting to the announcement, Commissioner Hester Peirce tweeted that the "SEC is a regulatory agency with an enforcement division, not an enforcement agency. Why are we leading with enforcement in crypto?"
DISCLAIMER: This article was originally published by McGonigle PC prior to their combination with Davis Wright Tremaine LLP. The article is published here with permission.