It’s been a rough couple of months for some people who have had it easy for a long time. An increasing number of cryptocurrency operations may face some consequences for their illegal actions.
On Monday, the Securities and Exchange Commission indicted 11 people behind ForSage, a $300 million Ponzi scheme masquerading as a smart contract system. This comes less than a week after the New York Times reported that crypto trading platform Kraken was being investigated by the Treasury for violating US sanctions on Iran. And just days before that, the FBI and the US District Attorney in New York charged three former Coinbase employees with insider trading.
It is not clear which agency is responsible for regulating cryptocurrency. Both the Commodity Futures Trading Commission and the SEC claim here. The SEC, however, seems particularly interested in going after crypto projects that fall under its purview – which seems to be the majority.
Cybersecurity expert and former SEC enforcement attorney John Reid Stark told Recode: “The SEC is in the middle of a sustained attack on crypto companies from all sides. Stark said the agency has expanded its crypto unit and SEC Chairman Gary Gensler has made no secret that many cryptocurrencies are securities and intends to regulate them. .
So even though it’s hot outside, we’re in the middle of a never-ending crypto winter. At the time of the outbreak, the cryptocurrency market soared to $3 trillion, making it easy for anyone to invest with the help of new platforms. Since last November, however, the market has fallen. It’s now worth about a third of what it was at its peak, and there’s no sign the value will rebound significantly anytime soon. The disaster has devastated some of the companies operating in this space and their customers as well.
Now, the law is coming to some crypto companies and their leaders. But it remains to be seen exactly what the consequences will be for many of these companies and the people behind them.
Unlike traditional banks, when crypto lending platforms go belly up, there are no safeguards to ensure investors are fully processed. Two crypto lending platforms, Celsius and Voyager, went bankrupt in July, and customers may never get their money back. Some safe crypto investments called “stablecoins” that are pegged to the value of a fiat currency such as the US dollar have proven to be unstable at all. Last May, the price of Stysticoin’s Terra fell, dragging down the value of the Terra-pegged Luna coin. Luna once cost about $116. Now, it’s worth a fraction of a penny.
But as investor losses mount and enforcement spreads as crypto arms come into play, a day of reckoning appears to be coming for some of these companies that have been operating in an environment with few regulations. Outright scams, obviously, never followed the rules. But some very legitimate companies are said to have played fast and loose with them.
“The arrogance and hubris in the crypto realm is just too much,” Stark said. “Always warriors, warriors and call the SEC DraftHe said.
“I’ve never seen anything like it and I’ve been practicing for over 30 years,” he added.
Again, the SEC is just one of many government agencies going after crypto. And when there are many people Losing a lot of moneyThe government is going to pay more attention to it. But since crypto isn’t regulated like traditional banks and securities, it may not do much for some people — something many crypto investors don’t realize until it’s too late.
“By accumulating token values, many people wanted to get in without knowing anything about the space,” said Mashable reporter Matt Binder. Fraudulent economyA podcast dedicated to crypto and Web3 scams. “And the industry used a lot of people.”
It doesn’t help that some of their favorite celebrities have endorsed these projects, or that some of these companies seem flush with cash so they can buy advertising space at the most expensive show in town. It also didn’t help that crypto was as easy to buy as an ATM transaction. And it didn’t help that many people went into crypto knowing little, but thinking they would have the same protections as they would from more regulated institutions like traditional banks and investment firms.
Stark predicted that we will see more action against these crypto companies in the coming months and years, with the SEC focusing its efforts not on small-time fraudsters but on the gatekeepers who use them for their scams: “exchanges, platforms, whatever you want to call them.” And he thinks he and other agencies investigating the crypto world will get a lot of help, probably from people inside.
“When companies start getting involved in things like this, they’re going to find people who want to be whistleblowers or they’re going to be whistleblowers,” Stark said. “And when criminal prosecutors start yelling, people can become informants very quickly.”
Molly White, who has covered various Web3 failures on Web3, is not yet convinced that the increased scrutiny, investigation and lawsuits will lead to real change.
“Insider trading fees feel like a drop in the bucket compared to the volume of insider trading that is clearly happening at Coinbase and elsewhere, but at least it’s something,” she said. Meanwhile, in an industry where people commit fraud after fraud, it concerns me how slow these actions are.
“I believe there is progress when I see it,” she said.
If regulators can’t make that progress in court, maybe at least all the attention the crypto crash has gotten will discourage potential investors from putting money into a volatile market they don’t really understand, and give them a few protections.
“I think these leaks can help keep the public away from crypto,” Binder said. “There will be some companies that try to go the legal route, but at the end of the day, they’re just crypto companies selling the dream of getting rich on speculative asset trading without any real product or service.”
Even so, it doesn’t help much for people whose dreams are nightmares. White says that while some of the early crypto bankruptcy stories were more fun and the victims less sympathetic (see “All My Monkeys Are Gone”), that’s no longer the case. “We are seeing people now. Writing letters She told the bankruptcy judge how they were broke financially and were thinking about suicide.
Or as Binder puts it, “We have a few people who hit the lottery and a ton more people who lost everything.”
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