SEC Launches New Crypto Crime Fighting Unit

The Securities and Exchange Commission is launching a new organization tasked with combatting crypto-related crime. 

In a Thursday announcement, Wall Street’s top regulator said the new Cyber and Emerging Technologies Unit will work with the SEC’s crypto task force to “root out those seeking to misuse innovation to harm investors and diminish confidence in new technologies.”

It will replace the Crypto Assets and Cyber Unit and will be made up of around 30 fraud specialists and lawyers from across the SEC, the statement noted. SEC attorney Laura D’Allaird will lead the new unit. 

Back in 2020, D’Allaird was one of the attorneys who worked on the SEC’s case against messaging service Kik Interactive, which the SEC alleged offered its Kin digital tokens in violation of the federal Securities Act.

Back in 2017, Kik sold $50 million in Kin tokens as part of a private pre-sale to 50 investors. As part of this “Simple Agreement for Future Tokens,” or SAFT, investors understood they were getting in at a discount. They explicitly agreed that they were buying a security.

Now, D’Allaird’s new crypto task force will work with the regulator’s new crypto unit dedicated to working on digital asset regulation. Under the Biden Administration, the SEC cracked down hard on the space as its former Chair Gary Gensler repeatedly said that the vast majority of digital assets fell under the definition of a security.

But following the election of Republican President Donald Trump—a far more crypto-friendly candidate—the regulator has said it wants to take a different approach to overseeing the industry. 

Acting SEC Chairman Mark T. Uyeda said in Thursday’s statement that “the [Cyber and Emerging Technologies Unit] will not only protect investors, but will also facilitate capital formation and market efficiency by clearing the way for innovation to grow.”

The statement added that the new unit will combat fraud involving blockchain technology, cryptocurrencies, and artificial intelligence; fight hackers working to obtain material nonpublic information; and target criminals using social media, the dark web, or false websites to con retail investors.

Crime in the crypto space is rife. Last year, the SEC brought 33 enforcement actions against companies and individuals related to cryptocurrency fraud. In fact, a $4.5 billion of $8.2 billion the SEC secured in penalties came from its one case against blockchain project Terraform Labs and its founder, Do Kwon.

Commissioner Hester Peirce, who leads the SEC’s crypto task force, said earlier this month that the regulator would work hard to clear up the “mess” created by the previous administration’s chair in an emphatically new approach to managing the fast-moving and complex industry.

Edited by Stacy Elliott