SEC Chair Jay Clayton Comments on New Presidential Task Force on Market Integrity and Consumer Fraud, Points to Risk of Initial Coin Offerings

Securities and Exchange Commission Chair Jay Clayton has posted remarks on the establishment of the “Task Force on Market Integrity and Consumer Fraud.” The Task Force was announced today as an Executive Action by President Donald Trump.

Clayton said he believes “cyber threats present some of the greatest risks confronting today’s financial markets.”

“Increasingly, we are seeing bad actors using new technology to perpetrate frauds, including securities offering frauds. In response to these risks, last year Enforcement created a Cyber Unit to focus on cyber-related misconduct.”

The aforementioned Cyber Unit has been actively engaged in SEC enforcement actions regarding alleged acts of fraud regarding cryptocurrencies and initial coin offerings (ICOs). Clayton stated;

“We have not acted alone in this area. The Commission has filed multiple actions this year concerning allegedly fraudulent Initial Coin Offerings, and has frozen tens of millions of dollars of assets raised in allegedly unregistered Initial Coin Offerings, while working in parallel with federal criminal authorities. In addition, we have worked closely with other regulators to provide clarity on the application of our laws and regulations to new and emerging products. I know cyber-enabled crime is an area of focus that the SEC shares with many others on this Task Force.”

Clayton pointed to an ICO scam that was shut down by the SEC this past January that claimed to have raised $600 million. The ICO in question was referencing AriseBank, an offering that was pumped by Boxing Champ Evander Holyfield. The SEC never took any action against Holyfield.

“Not only did we stop the alleged scheme, but we successfully prevented dissipation of investor funds by obtaining a freeze of the digital assets and a court-appointed receiver to secure various cryptocurrencies held by the defendant.”

According to the Administration’s Executive Action;

“The Attorney General shall establish within the Department of Justice a Task Force on Market Integrity and Consumer Fraud …

… in order to strengthen the efforts of the Department of Justice and Federal, State, local, and tribal agencies to investigate and prosecute crimes of fraud committed against the U.S. Government or the American people, recover the proceeds of such crimes, and ensure just and effective punishment of those who perpetrate crimes of fraud”

The Task Force is to provide guidance for the investigation and prosecution of cases involving fraud on the government, the financial markets, and consumers, including cyber-fraud and other fraud targeting the elderly, service members and veterans, and other members of the public. This includes a long list of potential areas for fraud including  digital currency fraud and money laundering.

This new Task Force replaces the Financial Fraud Enforcement Task Force created by Executive Order 13519 from 2009.

Members of the Task Force include;

  •  the Deputy Attorney General, who shall serve as the Chair
  • the Associate Attorney General, who shall serve as the Vice Chair
  • the Assistant Attorney General (Criminal Division)
  • the Assistant Attorney General (Civil Division)
  • the Assistant Attorney General (Tax Division)
  • the Assistant Attorney General (Antitrust Division)
  • the Director of the Federal Bureau of Investigation
  • United States Attorneys designated by the Attorney General
  • such other officers or employees of the Department of Justice as the Attorney General may from time to time designate.

Additional Participation for Specified Functions include the following officials;

  • the Secretary of the Treasury
  • the Secretary of Defense
  • the Secretary of Health and Human Services
  • the Secretary of Housing and Urban Development
  • the Secretary of Energy
  • the Secretary of Education
  • the Secretary of Veterans Affairs
  • the Secretary of Homeland Security
  • the Administrator of the Small Business Administration
  • the Chairman of the Board of Governors of the Federal Reserve System
  • the Commissioner of Social Security
  • the Administrator of the United States Agency for International Development
  • the Director of the Bureau of Consumer Financial Protection
  • the Chairman of the Federal Trade Commission
  • the Chairman of the Securities and Exchange Commission
  • the Administrator of General Services
  • the Chairman of the National Credit Union Administration
  • the Chairman of the Commodity Futures Trading Commission
  • the Chairperson of the Board of Directors of the Federal Deposit Insurance Corporation
  • the Director of the Federal Housing Finance Agency
  • the Comptroller of the Currency
  • the Chief Postal Inspector for the Postal Inspection Service.
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