SEC Spin Doctors Trying to Hide Crypto Regulatory Disaster

[ad_1]

Black and white hypnotic spiral

Getty

Over the past two U.S. administrations, the U.S. Securities and Exchange Commission (SEC) has promoted a comprehensive policy of regulation through enforcement of U.S.-based digital asset markets like Coinbase and the banking industry. enterprise blockchain that develops fintech solutions like Ethereum, Ripple, Stellaire and Circle. Two successive presidents, Jay Clayton and Gary Gensler, have said that every digital asset except bitcoin is a security and should be registered with the SEC like a stock. The details end there, unless you find yourself on the wrong side of an SEC lawsuit. The SEC is betting on quick settlement of the parties it invoices. Parties who dare to challenge the SEC need financial reserves, superstar attorneys, and years of patience to get litigation through the courts. This “enforcement” produces little market clarity or investor protection, which is the ostensible point of the regulatory exercise.

FTX

The SEC claimed that this approach would protect investors. It didn’t work for FTX. A series of regulatory mishaps and wealth-destroying events created the current crypto winter.

SEC Chairman Gary Gensler claims that FTX all other digital crypto assets are non-compliant and their innovators must enter and register with the SEC. Presumably, the paper and physical presence at the SEC is just the ticket. In any event, the SEC has not issued any such registration forms, guidelines, procedures or instructions, or any theory as to how such regulatory deterrence will protect investors.

Sheila Warren, the well-respected head of the Crypto Council for Innovation, rightly observed that the FTX case was not about the crypto itself, but about the bad guys. Sam Bankman-Fried and his conspirators are duly charged with multiple charges of fraud, wire fraud, theft and money laundering by the Justice Department, in addition to the SEC complaint and another for violation campaign finance. This already crypto shoe is subject to a variety of regulations and laws, Warren notes. In fact, there are already several regulators claiming jurisdiction over crypto.

Genslers scapegoating the entire industry is likely a distraction from the many meetings he and his entourage have had with FTX founder Sam Bankman-Fried (SBF) and how close SBF has come to a regulatory pass before the fraud appeared under the nose of the SEC.

Ripple

But FTX wasn’t the only major crypto event at the end of the year that launched the SEC spin machine. The SEC Century Cryptocurrency Trial. v. Ripple reached final arguments after two grueling years in the Southern District of New York. The lawsuit regarding sales and distributions of the XRP token by the San Francisco-based enterprise blockchain company is the SEC’s flagship crypto enforcement policy case.

It was apparent when Claytons SEC filed the case on the last day of his tenure that it was a bet for a quick settlement. The SEC made sweeping arguments that the XRP token itself was a security for seven years, and included Ripple Chairman Chris Larsen and CEO Brad Garlinghouse as defendants. In retrospect, it seemed tactically difficult to terrorize the company’s two senior officials into a settlement, isolate the company in court, and shame it into surrender. But Ripple fought back, tore up legal theories from the SEC, and won the strong support of 75,000 XRP holders and numerous industry-leading associations, legal experts, and companies.

It was therefore curious that Charles Gasparino of Fox Business had tweeted exclusive reports about an autopsy of the Ripple case that was taking place at the SEC. Gasparino and his colleague Eleanor Terrett reported on conflicts of interest between Clayton and his now deceased senior executives.

Gasparino tweeted, it’s worth asking why the SEC focused on XRP/Ripple, noting that his agency’s sources claim that Ripple’s management was flouting his authority by continuing to sell XRP after being warned to stop because the way it was being sold seemed to establish the XRP designation as a security.

Ripple has never received an XRP stop sale notice from the SEC. No official letter or warning was published or issued that appeared on the record of the case. While the Ripples sales appeared to make XRP a security for an official, a trove of emails and internal documents that the SEC fought for over a year to hide from the judge show a murky internal picture. What does compliance mean for Ripple or any market player in such a cloud of confusion?

Journalist Gasparino attempts to capture verbatim the mind-bending gibberish of the SEC on the matter, but no conversational workaround can hide the failure of destructive enforcement policy.

[ad_2]