This week: The SEC's 2023 report shows increased crypto-related enforcement actions, an XRP trust hoax validates market manipulation concerns, and Gensler's political ambitions might influence his leadership.
SEC crypto-related actions pride
The U.S. Securities and Exchange Commission's report for the 2023 fiscal year reveals that the regulator took great pride in "another highly productive and impactful year for the SEC's enforcement efforts relating to crypto asset securities". Under the leadership of Chair Gary Gensler and Enforcement Division Director Gurbir S. Grewal, the Commission leveraged diverse strategies, including risk-based initiatives and whistleblower protection, to reinforce investor protection.
The SEC report shows a 3% increase in enforcement actions, totaling 784. This includes 501 standalone actions, up 8% from the previous year, and 162 follow-on administrative proceedings.
These actions addressed a range of violations, from billion-dollar frauds to unregistered digital assets and illegal influencing. Over two dozen enforcement actions, a notable increase from past years, targeted crypto assets and digital securities.
This year, the regulator focused on leading figures and key organizations. The agency brought allegations of fraud and registration non-compliance against Samuel Bankman-Fried of FTX and Do Kwon from Terraform Labs. Additionally, prominent crypto companies such as Celsius, Kraken, Genesis, Gemini, and Nexo faced SEC charges for various infractions. Kraken and Nexo agreed to substantial settlements, with civil penalties of $30 million and $22.5 million, respectively.
Furthermore, the SEC's vigilance extended to the NFT space, charging entities like Impact Theory and Stoner Cats 2 for illegal, unregistered offerings.
The year also saw a focus on the role of celebrities and influencers in crypto promotions, with charges against figures like Kim Kardashian for undisclosed promotional activities, alongside other celebrities, including Lindsay Lohan, Paul Pierce, and Jake Paul. Most of these celebrities settled their charges.
The report claims that financial remedies ordered approached $5 billion, with about $930 million returned to harmed investors. The whistleblower program saw a record payout of nearly $600 million, with over 18,000 tips received.
The XRP Trust Hoax
An incident involving a fake filing for a BlackRock XRP trust led to a temporary spike in XRP prices. This hoax, which claimed the existence of an 'iShares XRP Trust' by BlackRock in Delaware, was quickly identified as such, and did not have a lasting impact on XRP price or the broader market. The filing did trigger a rapid 12.3% increase in XRP's price within 30 minutes, which quickly plummeted back down after the hoax was revealed.
Industry observers sugest that the hoax should not significantly influence the SEC's decisions regarding pending Bitcoin ETF approvals. The SEC has historically expressed concerns about market manipulation in the crypto space, and this incident, while isolated, could be seen as validating those concerns.
However, experts argue that it's unlikely to provide a legal basis for delaying ETF applications, instead suggesting a need for applicants to demonstrate robust measures against market manipulation and fraud.
The fake BlackRock filing, which contributed to the XRP price fluctuation, has been referred to the Delaware Department of Justice (DOJ) for further investigation. BlackRock has filed for both Ethereum and Bitcoin ETFs, awaiting regulator approval, and has indicated a strong interest in integrating cryptocurrencies into traditional financial products.
Is Gensler's Ambition in The Way of ETF Approvals?
We reported last week that the SEC is poised to decide on approving spot bitcoin ETFs very soon. Several applications from major financial institutions such as ARK Invest, BlackRock and Fidelity are under review, with a high likelihood of approval by January 10 according to analysts, .
Cathie Wood, CEO of ARK Invest, said on CNBC that Gary Gensler's political ambitions might influence his stance on spot Bitcoin ETF approvals.
Despite Gensler's extensive understanding of Bitcoin, Wood pointed out his hesitancy might be due to other reasons beyond market concerns. She speculates that this may be linked to aspirations of becoming Treasury Secretary.
Wood said she expects a spot ETF approval soon and that this global opportunity could boost the current $1 trillion market to $25 trillion by 2030.
Experts have criticized Gary Gensler's approach to regulating cryptocurrencies, pointing to inconsistencies and contradictions in his statements. This criticism underscores skepticism about the effectiveness of his regulatory methods, suggesting a complex and potentially conflicted perspective on managing the market. The recent 2019 video, where Gensler said the absence of spot Bitcoin ETFs was "inconsistent", raised doubts about Gensler's confidence in his own leadership and policies.