Gary Gensler: Crypto Frauds Extend Beyond a Single Case

1699524615-107227238-1681840878110-gettyimages-1251950740-sec_hearing_023_041823-3 — Image Source: CNBC

Gary Gensler, Chair of the Securities and Exchange Commission (SEC), has issued a warning about the prevalence of fraud in crypto, stating that there are multiple “notorious fraudsters” operating in the space.

Gensler’s comments come on the heels of the criminal trial of former FTX CEO Sam Bankman-Fried, who was found guilty on all on seven counts of fraud and conspiracy.

Speaking at DC Fintech Week, Gensler said that the SEC’s enforcement actions part of a broader effort to address widespread fraud in the cryptocurrency sector and not limited to a single case.

“It’s not just about one circumstance and one notorious fraudster, it’s multiple notorious fraudsters,” Gensler said.

Gensler also discussed the SEC’s approach to enforcement actions, stating that the agency must carefully consider its resources and prioritize cases that have the greatest impact.

“We have to think through our resources because unfortunately, there are a lot of complaints and not all of them are this way, but there are a lot of bad actors out there,” Gensler said.

“We think about accountability and holding people accountable. We think about high impact cases. We do think about the gatekeepers and how we pursue enforcement actions around that as well.”

SEC Brought 760 Enforcement Actions in 2022

In fiscal year 2022, the SEC brought 760 enforcement actions, and the agency has doubled the size of its Crypto Assets and Cyber Unit. Gensler also noted that a report on fiscal year 2023 numbers could be released as early as this month.

In addition to addressing fraud, Gensler also spoke about the need for investor protection in the cryptocurrency sector.

“It also comes back to what is the darn use case of this stuff. We’re merit neutral, but the investors need to understand, what is the use case for these 15 to 20,000 tokens each individually,” Gensler said.

Gensler has previously warned of the crypto industry’s noncompliance with SEC regulations and has called on crypto firms to register with the agency.

Back in September, he acknowledged that while not all tokens can be prejudged, a significant portion of the crypto industry falls under securities laws but remains non-compliant.

“This crypto space that much of it, without prejudging any one token, much of it is under the securities laws, but unfortunately, much of it is also non-compliant,” he said.

He claimed that crypto has had a destructive impact on millions of investors who have suffered losses, emphasizing that these problems could potentially extend beyond the crypto industry and affect the broader financial system.

“Millions of investors have been hurt in this field,” he said.

“It’s an area that can hurt investors, but it can also hurt the broader economy because it can hurt investor confidence, and finance is ultimately built on trust.”