Former SEC Employee Warns Investors to ‘Get Out of Crypto Platforms Now’ and Predicts the Regulatory Siege Will Remain
Someone who used to work at the U.S. Securities and Exchange Commission (SEC) has said that those who own digital assets should “get out of crypto platforms now.”
The former head of the SEC’s Office of Internet Enforcement, John Reed Stark, who led the division for 11 years, has warned that “a US regulatory/law enforcement siege which has only just begun” on cryptocurrency exchanges.
Stark says he used to be an SEC critic but now thinks the commission’s crypto enforcement efforts have been “spot on.”
Fundamentally, crypto trading platforms are high-risk and intrinsically dangerous, despite what the funfair barkers offer.
According to the former SEC official, there is a “chasm” of critical investor safeguards at crypto exchanges, which claims this is due to the absence of rules for record-keeping, cybersecurity, codes of conduct, customer complaints, and order flow transactions.
Reed also says that platforms have “no reason” to follow US laws and rules that ban trickery, secret trading, trading ahead of customers, and other illegal actions by customers or workers. He also believes the SEC cannot effectively monitor cryptocurrency exchanges for signs of fraud.
The SEC has complete and immediate insight into the workings of conventional financial institutions since they are required to file periodic reports with the agency. The SEC has little control over crypto trading platforms and hence can do nothing to prevent or even investigate instances of fraud.
The announcement that the SEC had filed an action against Binance, the largest cryptocurrency exchange in the world, and its CEO, Changpeng Zhao, caused a widespread drop in cryptocurrency prices on Monday.
On Tuesday, the SEC filed a similar action against Coinbase, the largest cryptocurrency exchange in the United States, charging that it had acted as a security, not a registered exchange, broker, and clearing agency.