Tag: Chairman Gensler

SEC Treating Ripple Like a Ponzi Schemer, Not Shaper of Future

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By JW Verret. October 27, 2022. (Real Clear Markets).

The Securities and Exchange Commission’s (SEC) case against Ripple, the largest case it has brought against a defendant working in the crypto industry to date, has been heating up this month with a series of summary motions and some big discovery losses for the SEC. The SEC alleges in that case that one test for a security required to register with the SEC, contained in the 1946 Supreme Court case SEC v Howey, applies to the XRP token that is used by Ripple.

The SEC should admit the secret it isn’t saying out loud to the court and everyone watching the case. The test used in SEC v. Howey is typically used by the SEC to sue hucksters, Ponzi schemers and other con men who sell fake securities. The Howey test is a way to stop them, not a means to facilitate registration with the SEC.

Read the full article here.

Regulators Increase Their Power Over Crypto But With Little To Show For It

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By Ike Brannon. October 26, 2022. (Forbes).

Federal regulators are notorious for bogging down industries and stifling economic growth with myriad regulations, which is why most industries are loath to ask Congress to enact more regulations. Yet, that’s precisely what cryptocurrency companies and investors alike are asking for.

The fact that Congress has yet to consider any crypto-specific legislation has left regulators to their own devices, to which they have responded by adopting a strategy of regulation through enforcement: Instead of prescribing what is and is not possible in this space they merely react to the actions of market participants and then determine whether what they did is, in fact, allowable.

While such ex post regulations are easier for regulators, it leaves us with a market in which those that innovate in this market risk being subject to retroactive punishment and ruinous lawsuits.

Read the full article here.

Gary Gensler’s Bad Performance Review

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By WSJ Editorial Board. October 26, 2022. (Wall Street Journal)

Businesses have been warning that Securities and Exchange Commission Chair Gary Gensler’s fast-and-furious regulation could cause damage across the economy. Now agency officials and Democratic Senators are raising alarms too.

The SEC Office of Inspector General this month issued a withering review of Mr. Gensler’s leadership that would probably get a CEO of a public company sacked. Agency division managers told the IG that his move-fast-and-break-things agenda is overwhelming staff and taking resources from investor protection.

The number of rule-makings on the SEC agenda increased by nearly two-thirds between spring 2017 and 2022. In the first eight months of 2022, the SEC proposed 26 new rules, twice as many as in 2020 and 2021. Unlike predecessor Jay Clayton’s rules that focused on investor protection, Mr. Gensler is sprinting to impose new burdens on business in line with the progressive desire to achieve via regulation that Democrats can’t get through Congress. Investor protection is an afterthought.

Read the full article here.

The SEC’s Kardashian fine was a dumb publicity stunt

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By Jeff John Roberts. October 4, 2022. (Fortune)

Securities and Exchange Commission Chair Gary Gensler got what he wanted on Monday. The media lapped up news of his agency slapping Kim Kardashian with a $1.26 million fine for promoting a cryptocurrency on Instagram. It was the top story of the day in the business and tech press, and that’s no surprise since Gensler planned it that way—taking the unusual step of announcing it on a Monday before markets opened and hyping the heck out of it with a video designed to ride the coattails of Kardashian’s celebrity status.

What a shame this is all so stupid. As some astute Twitter users pointed out, the promotion in question was from June of 2021, and the SEC’s fine matters little in the bigger picture of crypto regulation. Meanwhile, Gensler’s agency failed to spot the massive fraud underlying Terra and Celsius earlier this year that helped wipe out more than $1 trillion, much of it from small investors. His SEC has also refused to approve a Bitcoin ETF akin to those in place in Canada and Europe, a step that would save retail investors millions in fees.

Read the full article here.

Crypto Goes to Washington

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By Molly Ball. October 3, 2022. (TIME).

To the untrained ear, Hester Peirce’s comment sounded anodyne, but everyone in the audience knew what she was doing: selling out her boss. “It’s fairly clear,” the U.S. Securities and Exchange commissioner said from the Washington conference stage, “that we’ve been taking an enforcement-first approach in an area where we should be taking a regulatory-first approach. I think we’ve got the balance wrong right now.”

Peirce was speaking at the D.C. Blockchain Summit in May, to an audience of the cryptocurrency faithful. Outside the auditorium, geeks, lobbyists and investors mingled in a cavernous converted warehouse. “Trust is non-fungible,” read a banner for the accounting firm Deloitte, hung from a balcony where the company was sponsoring a lavish spread of snacks. Most attendees were done up in D.C. drag—conservative suits and dresses, more boardroom than Burning Man.

Read the full article.

Calendar of former official provides insight into SEC regulatory intent, Satoshi stumble

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By Eleanor Terrett , Charlie Gasparino. September 29, 2022. (Fox Business)

The meeting schedule of a former official of the Securities and Exchange Commission provides a detailed roadmap into the agency’s thinking as it began to weigh how best to reign in the burgeoning digital-asset business, but it could also buttress the growing sentiment that Wall Street’s top cop unfairly targeted a leading crypto outfit in its crackdown.

The itinerary of former SEC Director of Corporation Finance William Hinman hasn’t been reported before, and it shows the SEC casting a wide net in seeking advice from key crypto officials, including the person they thought was crypto’s founding father, the elusive Satoshi Nakamoto, FOX Business has learned.

From 2017 through 2020, Hinman was at the center of the agency’s crypto regulation efforts under former SEC chair and Trump appointee Jay Clayton. During those years, the commission began to navigate its regulatory authority over the business, which was growing exponentially and posing problems for government officials worried the anonymous nature of the blockchain would finance illicit activities. 

Read the full article here.

The SEC’s Reckless Crusade to Crush the Cryptocurrency Market

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By Gerard Scimeca. September 26, 2022. (Real Clear Markets)

The laws of physics dictate that nature abhors a vacuum, an interesting phenomena considering how many federal regulatory agencies simply love one. Harkening back to the New Deal, it has become accepted that wherever a gap may exist in the regulation of human activity, a federal agency will soon appear, mobilizing its vast and frequently questionable powers to fill the space.

Whether it is the Department of Energy deciding to pull the plug on a popular type of light bulb, or the Environmental Protection Agency dictating the allowable volume of water in toilets, our vast administrative state lurks behind every corner, poised to assert itself within every nook, crevice, and cranny that presents an opportunity for regulatory interference. Last year federal agencies created over 74,000 pages of new rules and regulations to fill the perceived vacuums in our lives, and we are currently on track this year to surpass that tree-crushing total.

Read the full article here.

Gensler Says Crypto Treated Just Like The Market; 200 SEC Lawsuits Say Otherwise.

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By Roslyn Layton. August 28, 2022. (Forbes)

By law, regulatory agencies should only regulate that which they have authority to regulate. Deference is allowed to some degree, should the agency’s justification be reasonable and ideally evidenced. Notably Congress promulgated the Administrative Procedure Act (APA) in 1946 to guide agency process to publish notice of rulemaking in the Federal Register and provide opportunity for public comment. This standard process seems to have never have happened for crypto assets at the Security and Exchange Commission (SEC). The SEC website does not include an entry for regulation for crypto, either completed or proposed.

In May 2022, the SEC beefed up its Cyber Unit to the Crypto Assets and Cyber Unit, budgeted for 50 dedicated officers and more than doubling the department’s headcount. The unit counts some 200 lawsuits since its founding in 2017, with fraud being the subject in at least 80 investigations. The agency also reports restoration of $2 billion in monetary relief.

No one denies that crypto assets, like any asset or technology, can be used fraudulently. The very features that make crypto assets desirable can also be exploited, including but not limited to ease of startup and use, anonymization, and lack of intermediaries. Plus, some users can undoubtedly be greedy and gullible. It does not help that some have disguised crypto scams as legitimate services.

Read the full article here.

Gary Gensler’s gross SEC overreach

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By John Deaton. August 21, 2022. (FOX Business).

The Supreme Court may have recently struck down overreach by the Environmental Protection Agency, but at the Securities and Exchange Commission, chairman Gary Gensler remains undeterred in expanding the agency’s power beyond its constitutional boundaries.

For proof, you need no better example than his all-out assault on the cryptocurrency space.

It doesn’t take a constitutional law expert to understand that the SEC has limited jurisdiction over the crypto industry; barring congressional action, front line regulation of digital assets belongs with the Commodity Futures Trading Commission – the main regulator of investments that are not deemed traditional securities.

Read the full article here.

For Clarity on Cryptocurrency, Look to Congress or the Supreme Court

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By Curt Levey. August 1, 2022. (The Federalist Society)

With the rapid growth of cryptocurrencies have come increasing calls for its regulation and both uncertainty and overreach concerning the applicability of existing rules. If Congress doesn’t address the regulatory confusion, that job may fall to the Supreme Court.

Most of the attention has focused on the Securities and Exchange Commission, which has sued a number of companies in the cryptocurrency field, citing its authority to regulate securities under the 1933 Securities Act and the 1934 Securities Exchange Act. But that’s quite a stretch. Unsurprisingly, those 90-year-old statutes did not include anything like crypto—that is, digital assets existing only on a decentralized ledger (the “blockchain”) that’s distributed across disparate computers—in their definition of a security.

Instead, the Acts defined a “security” by listing well-understood examples, such as “stock” and “bond,” then adding a catch-all term, “investment contract.” Because cryptocurrency is not among the examples, the SEC argues that crypto is sometimes an investment contract.

Read the full article here.