Investor enthusiasm continues to fuel the explosive growth of digital assets, including virtual currency and tokens, precipitating U.S. efforts to establish a cohesive regulatory and supervisory regime for them. Existing laws and regulators cover many of the activities of exchanges, traders, issuers and investors, but the new products and services at the heart of this wave often do not fit perfectly into an organization’s orbit. Although the Commodities Futures Trading Commission and the Securities and Exchange Commission have decided to give market participants an idea of their jurisdiction and programs, the future treatment of digital assets and related activities remains characterized more by uncertainty than by clarity. Criminal prosecutors have made it clear that they have their own role in this evolving network and are ready to fill any perceived regulatory gap.
Recent regulatory and enforcement activity
UNITED STATES DEPARTMENT OF JUSTICE
National prosecutors for criminal offenses
- Apparently focusing on how digital asset trading can be subject to the same forms of tampering as traditional markets (including spoofing and wash trading)
- In April 2018, the co-founders of a cryptocurrency startup were charged with fraud, alleging they made false statements and omissions to raise more than $ 25 million in an initial coin offering.
- In February 2018, a cryptocurrency trader was charged with fraud for misappropriating virtual currency assets to cover his own trading losses by transferring $ 2 million worth of Bitcoin and Litecoin from his employer’s trading account to personal accounts.
STATE ATTORNEYS GENERAL
Top Civil and Criminal Prosecutors in 50 States, District of Columbia and Puerto Rico
- New York has taken the lead in digital assets and launched its Virtual Markets Integrity Initiative – an informational survey of the policies, procedures and practices of exchange platforms used by consumers to trade currencies virtual ones like Bitcoin and Ether.
- New Jersey recently issued an emergency order to prevent a cryptocurrency-related investment entity from offering unregistered securities in New Jersey; the state is also reportedly conducting a broad survey of many companies sponsoring ICOs.
National Securities Regulatory Authority
- Has focused its enforcement efforts on ICOs and unregistered platforms that facilitate the exchange of ICO tokens, which, he warned, are often structurally similar enough to securities to be regulated as such.
- In April 2018, two co-founders of an alleged financial services start-up accused two co-founders of orchestrating a fraudulent ICO that raised more than $ 32 million from thousands of investors.
National regulator of raw materials
- Focused enforcement efforts on identifying fraud and price manipulation in virtual currency.
- In April 2018, many people charged with a fraudulent scheme involving binary options trading and a virtual currency known as an ATM coin.
- In January 2018, fi filed a federal civil action against a company for fraud and embezzlement in connection with purchases and transactions of Bitcoin and Litecoin.
Jurisdiction of Law Enforcement and Regulatory Agencies
|AGENCY||SUPERVISORY OR LAW ENFORCEMENT ROLE|
|US Department of Justice (and Federal Bureau of Investigation)||
|United States Securities Commission||
|United States Commodity Futures Trading Commission||
|State Attorneys General 50 different, plus DC and Puerto Rico||
|Other federal agencies||