Ex-SEC Lawyer Calls for Everyone to “Get Out of Crypto Platforms Now”
In a recent statement, former US Securities and Exchange Commission (SEC) lawyer John Reed Stark sounded the alarm on the risks associated with unregulated cryptocurrency trading platforms.
“Get out of crypto platforms now, I can’t say it any plainer,” he opened his long post on Twitter. Stark spent almost 20 years in the SEC Enforcement Division, including 11 years as Chief of the SEC Office of Internet Enforcement. He expressed his deep concern about the lack of regulatory oversight and investor protections in the crypto market.
Stark emphasized that SEC registration of financial firms plays a vital role in safeguarding investor funds and securities, ensuring transparency, and providing adequate disclosures. He highlighted the absence of such regulatory measures in the crypto space, suggesting that it leaves investors exposed to potential fraudulent activities and inherent risks.
The former SEC lawyer pointed out several key areas where the lack of SEC registration impacts the safety of investors. Crypto trading platforms, unlike SEC-registered financial firms, do not have robust surveillance programs, individual licensure requirements, traditional accountability structures, compliance systems, or routine examinations and audits by the SEC or Financial Industry Regulatory Authority (FINRA).
This regulatory vacuum creates a significant gap in customer protections, making it challenging for law enforcement to investigate and apprehend individuals involved in illegal activities facilitated by cryptocurrencies.
Stark also raised concerns about the absence of record-keeping requirements, pricing regulations, mandated cybersecurity standards, internal compliance teams, and adequate customer complaint management on crypto platforms. These deficiencies increase the risk of market manipulation, insider trading, and other fraudulent behavior, posing threats to investors and the overall integrity of the crypto market.
The former SEC lawyer stressed the critical role of SEC registration in protecting investors from individual and systemic risks, as well as in maintaining the fairness, transparency, and vibrancy of capital markets.
As Stark promoted the role and task given to the SEC, commenters, including Outlier Ventures founder and CEO Jamie Burke, underlined that the regulatory vacuum is “an abject failing by regulators like the SEC.”
Stark’s call comes as the SEC descends on Binance, the world’s largest crypto exchange, with an all-out lawsuit.
The suit has triggered withdrawals worth approximately $790 million from Binance and its US affiliate Binance.US within a span of 24 hours. Binance has tried to quell panic by saying that their user assets “remain safe and secure” after the SEC announced that it has requested an immediate freeze of its US assets.
Late Thursday evening, Binance announced that it would freeze USD deposits and pause fiat (USD) withdrawal channels as early as June 13 as Binance.US is being cut off from its banking partners.
Information for this story was found via Twitter, Bloomberg, Vox, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
