SEC’s Intensified Scrutiny on Cryptocurrency: From Regulation to Enforcement
Author: Destiny Aigbe
October 11, 2024
In July 2017, the cryptocurrency landscape shifted dramatically when the SEC issued its Section 21(a) Report, classifying most cryptocurrencies as securities under the Howey Test. Since then, the regulatory focus on digital assets has been primarily driven by enforcement actions and evolving guidance, including speeches by SEC Chair Gary Gensler and other top officials. The SEC’s approach to cryptocurrencies, particularly with platforms offering digital assets, is stringent, demanding compliance with federal securities laws or registration as a national securities exchange.
The complexities of applying securities laws to cryptocurrencies have deterred most traditional means of capital raising. While Regulation A provided a slight opening, only a handful of companies, such as Blockstack in 2019, managed to qualify their offering circulars for full token issuances. U.S. regulators are currently approaching the digital asset class with skepticism, seeing it as guilty until proven otherwise, which has led to heightened scrutiny and frequent enforcement actions.
In December 2022, the SEC took further action by issuing a sample comment letter highlighting the need for detailed crypto-related disclosures. The 16-comment letter stresses the importance of disclosing significant market events, including bankruptcies of key players like FTX. Companies are expected to report risks tied to redemptions, withdrawals, regulatory uncertainty, and the impact of crypto market volatility on their business operations and financial standing.
Adding to this, the SEC has intensified its scrutiny of audit firms involved with crypto companies, with regulators warning investors to be cautious of claims made by these firms. SEC Acting Chief Accountant Paul Munter emphasized the increased review of audit reports and firms to ensure compliance with financial standards.
Finally, the SEC’s request for an additional $2.4 billion in funding underscores its focus on investigating crypto-related misconduct. This increase represents a 12% rise from the previous year's budget, with a significant portion allocated for regulatory actions in the crypto space.
About the Author
Destiny Aigbe
Managing Partner
Aigbe Law PLLC | Dark Alpha Capital
A Corporate and Securities Law Firm
With a robust foundation in law and finance, Destiny Aigbe has carved a distinguished career, underpinned by his pivotal role in orchestrating and managing complex transactions that have propelled companies to significant growth and market prominence. As a seasoned attorney and strategic advisor, Destiny has been instrumental in facilitating over $75 million in capital raises, demonstrating a keen acumen for securing funding and fostering investor confidence.
Destiny's leadership in the execution of six successful public listings, through meticulously structured reverse mergers and registration statements, showcases his adeptness in navigating the intricacies of the public markets and his capacity to guide companies through transformative growth phases. His involvement in five mergers as an operator further illustrates his versatile skill set, extending beyond legal expertise to include hands-on management and operational strategy, though these ventures did not involve funding.
Destiny's professional journey is marked by a commitment to excellence and a diverse range of experiences, from representing a wide spectrum of clients including public and private companies, and investment firms, to holding significant roles within the US government. His tenure with the US Department of State and the National Institutes of Health highlights his adaptability and his contribution to the advancement of entrepreneurial ventures in sectors like biotechnology and nanotechnology through strategic funding initiatives.
An alumnus of Vanderbilt University Law School, Destiny focused on Finance and Mergers & Acquisitions, further honing his expertise with a certificate in Law and Business. His foundational education in Finance was obtained with honors from the University of Maryland's Robert H. Smith School of Business, which laid the groundwork for his subsequent achievements in investment banking and legal practice.
Residing in the Washington, D.C. area, Destiny Aigbe continues to leverage his extensive experience and insightful leadership to drive innovation, growth, and success for his clients and the ventures he is involved with.
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