A former high-ranking official at the U.S. Securities and Exchange Commission (SEC) thinks digital asset investors should “get out of crypto platforms now.”
John Reed Stark, who founded the SEC’s Office of Internet Enforcement and spent 11 years as its chief, says crypto exchanges are under “a US regulatory/law enforcement siege which has only just begun.”
Stark notes that he has been an SEC critic in the past, but believes the regulator’s recent crypto enforcement actions have been “spot on.”
“No matter what the carnival barkers promise, it is axiomatic that crypto trading platforms are high-risk, perilous and inherently unsafe.”
The former SEC official argues that there is a “chasm” of necessary investor protections at crypto exchanges, which results in a lack of requirements regarding record-keeping, cybersecurity, codes of conduct, customer complaints and order flow transactions.
Reed also says exchanges currently have “no reason to abide by US statutes and rules prohibiting manipulation, insider trading, trading ahead of customers and other fraudulent behavior by customers or employees.”
He also thinks the SEC currently lacks the ability to detect fraud at crypto exchanges.
“With traditional SEC-registered financial firms, the SEC has unlimited and instantaneous visibility into every aspect of operations. With crypto trading platforms, the SEC lacks any sort of oversight and access — and has scant ability to detect, investigate and deter fraudulent conduct.”
Crypto prices crashed across the board on Monday after news broke that the SEC launched a lawsuit against top global crypto exchange Binance and its CEO Changpeng Zhao. The regulator alleges the exchange violated investor protection and securities laws.
The SEC followed up the Binance lawsuit by suing top US crypto exchange Coinbase on Tuesday, alleging the company operated as an unregistered securities exchange, broker, and clearing agency.
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