Crypto Firms Could Still Face SEC Fines for Self-Reporting Securities Law Violations : Report

The enforcement director of the US Securities and Exchange Commission has reportedly said that cryptocurrency companies will not receive an amnesty for reporting possible violations of securities laws.

According to a Reuters report Monday, the SEC director of the agency’s enforcement division, Gurbir Grewal, said the agency may consider crypto firms’ behavior “more favorable” if they first contact self-reporting securities violations. However, he added that while companies may face smaller fines, they won’t be completely off the hook.

“Our message to [crypto companies] is not, ‘Register your product and we will just ignore the billions you manage in this crypto lending product and your violations of securities laws,’” said Grewal.

The SEC’s enforcement director joined the New Jersey Attorney General’s Office in July 2021 pushed back against criticism that the SEC would apply “regulation by enforcement” on crypto and other securities:

“First let me be clear that we encourage and welcome the use of new technologies for capital formation. They have the potential to make our markets more efficient and dynamic and increase investor access. But – equally important – all securities offered or sold to US investors – regardless of their form or name – must comply with US securities laws.”

Grewal’s reported statement seemingly contrasts with that of SEC chairman Gary Gensler, who has repeatedly asked crypto firms to “come in and talk” — that is, register their securities with the regulatory body. Gensler has said that many crypto companies and their products may fall under the regulatory purview of the SEC and must be registered to ensure investors are protected. However, SEC Commissioner Hester Peirce, known to many in the space as “Crypto Mom,” has previously criticized the agency for its lack of clarity on the regulations governing crypto companies and potential securities law violations.

Related: Powers On… The SEC Takes Reactionary Measures Against Crypto Loans

The SEC has seemingly stepped up its enforcement actions against crypto firms as the space continues to grow. In August 2021, the agency indicted two individuals and a Cayman Islands-based company in a $30 million fraud case involving securities using decentralized financial technology. This month, crypto lending firm BlockFi said it would pay $50 million as part of a settlement with the SEC, as well as $50 million in state-level enforcement cases over its alleged failure to register high-yield interest accounts.

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