“Catch will be countless, perhaps even mammoth” – Former SEC Officials Says Crypto Disclosure Requirement Could Lead to Many Enforcement Actions

Yesterday, the Securities and Exchange Commission (SEC), Division of Corporate Finance, revealed a “sample” letter being sent to registered firms demanding heightened disclosure on crypto assets. The new request follows a series of bankruptcies and financial stress from firms in the digital asset industry. The bankruptcy of FTX appears to have become the last straw for the Commission as the SEC steps up scrutiny of affiliated risk to registered firms caused by crypto contagion.

Earlier today, John Reed Stark, a former SEC Official – and now consultant, posted his thoughts on the SEC’s sample letter. A longtime critic of the entire crypto asset ecosystem, Stark predicted the letter might be a precursor to cataclysmic events for firms participating in crypto.

To quote Stark:

“Under the auspices of “Guidance,” the Division of Corporation Finance of the US Securities and Exchange Commission (SEC) just told the world that SEC staff are going fishing for crypto-related enforcement referrals – and their catch will be countless, perhaps even mammoth.” [emphasis added]

He goes on to predict the “disclosure sweep” will trigger referrals to the SEC Enforcement Division as well as the US Department of Justice – alluding to possible criminal investigations.  Stark anticipates the heightened disclosure to “bear prosecutorial fruit.” Stark describes the letter as “pure genius.”


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