Former SEC Official Urges DOJ Action Against Crypto Industry – Formerly in charge of internet enforcement at the U.S. Securities and Exchange Commission (SEC), John Reed Stark has urged the U.S. Department of Justice (DOJ) to step up its efforts in prosecuting crypto firms. Stark emphasized that the SEC’s role is primarily civil enforcement, and unless crypto companies face the possibility of DOJ prosecution, including imprisonment, they will continue to view SEC enforcement risks as manageable costs for regulatory manipulation.
Commenting on the fraud case of Sam Bankman-Fried (SBF), former CEO of cryptocurrency exchange FTX, Stark wrote on social media platform X Saturday: “For the life of me, I cannot comprehend why the U.S. Department of Justice and the U.S. Securities and Exchange Commission have not added SBF’s parents as defendants. For the SEC, SBF’s parents should at least be named as ‘relief defendants.’”
The former SEC internet enforcement chief elaborated: “In particular, the extraordinary dearth of U.S. DOJ crypto-related criminal prosecutions (in light of close to 200 crypto-related SEC enforcement actions) is mind-boggling.” “I served for almost 20 years as an attorney in the SEC Division of Enforcement (including 11 years as chief of the SEC’s Office of Internet Enforcement) and led dozens of SEC prosecutions with parallel criminal investigations and proceedings,” Stark noted.
The former SEC official proceeded to explain that the crypto industry is not taking SEC charges seriously. For example, he said that Tyler Winklevoss, co-founder of cryptocurrency exchange Gemini, “has called SEC allegations ‘super lame’ and akin to ‘manufactured parking tickets.’” In addition, he pointed out that crypto exchanges Coinbase and Binance “have touted their SEC charges like badges of honor (laughing all the way to the bank).”
Stark continued: “The stark reality is that the SEC is merely a civil enforcement agency. And until crypto-grifters face the threat of DOJ prosecution (i.e. prison time), they will continue to treat SEC enforcement-related risks (like injunctions, penalties, and disgorgement) as the cost of regulatory arbitrage and just another liability item on their balance sheets.”