Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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Over 400 SEC new enforcements in 2021 including Crypto, Dark Web, DeFi targets
Crowdfund Insider | | Nov 19, 2021
A review of the Securities and Exchange Commission’s (SEC) enforcement actions in this fiscal year show a growing threat posed by cryptocurrency and decentralized finance (DeFi) scammers. The year ended Sept. 30.
The SEC filed 434 new enforcement actions in FY2021, and that is a seven per cent increase over FY2020.
Overall, 697 total enforcement actions were filed, including 120 against issuers for delinquent filing and 143 “follow-on” proceedings that sought bars against people for criminal convictions, civil injunctions, or other malfeasances.
Orders for almost $2,4 billion in disgorgement fees and more than $1.4 billion in penalties, the latter a 33 per cent increase, were obtained. A total of $564 million was awarded to whistleblowers.
See: Hester Peirce Says SEC Enforcement is Not the Way to Provide Crypto Clarity
Among the highlights the agency cited were charging Poloniex for operating a digital asset exchange and the BitConnect platform and some top executives in an alleged $2 billion cryptocurrency scam.
They also entered into new areas like SPACs, highlighted by an action against the Stable Road Acquisition Company which alleged, among other things, a former CEO tried to obtain shares worth around $200 million.
More new territory was explored as the SEC charged individuals in decentralized finance. In August, they hit Blockchain Credit Partners with charges they offered unregistered securities which raised more than $30 million.
Then the SEC ventured in the murky areas of the dark web by charging James Roland Jones of Redondo Beach, Cal. With selling “insider tips” on the dark web. To access the dark web and obtain insider information for his own activities, Jones allegedly lied about having non-public information to exchange.
See: U.S. State Department offers $10M to hunt Darkside cyber group
Also in the crosshairs was regulation crowdfunding. On Sept. 20 the SEC charged a trio with concocting a fraudulent plan to sell almost $2 million of unregistered securities via a pair of crowdfunding offerings.
Electronic traders were also caught. On June 29 the SEC announced Neovest, a provider of order and execution management software for electronic trading, agreed to pay $2.75 million for failing to register as a broker-dealer. It was the first such charge by the agency against an OEMS provider.
Prior to being acquired by JPMorgan Chase, Neovest engaged in order routing through its registered broker-dealer, Neovest Trading Inc. The order found that although Neovest withdrew its broker-dealer registration after it was acquired, it continued to operate the OEMS as an unregistered broker-dealer by, among other things, participating in the order-taking and order-routing process and soliciting customers and destination brokers through the firm’s website and direct outreach at industry conferences and trade shows.
See: Crypto fraud and breaches on pace to exceed $3 billion in 2021
“Neovest played a role in determining the routing options that were available to its customers by entering into agreements with the destination brokers,” the SEC said in a statement at the time.
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