Was FTX Gary Gensler’s Fault? Unclear Laws Created a ‘Haven for Bad Actors’, Says Hester Peirce

Less than a day after the SEC formally dismissed its lawsuit against Coinbase, the chief of the agency’s new crypto task force appeared to blame the policy developed by the agency’s former chair, Gary Gensler, for the proliferation of fraud in the industry over the last several years.

In a statement published Friday, SEC Commissioner Hester Peirce argued that by targeting the crypto sector with far-reaching enforcement actions and pointedly declining to create industry-specific rules, the agency actually increased the proliferation of fraud and malfeasance under former President Joe Biden. 

“The decision by the previous Commission to shift [its regulatory] function to the Division of Enforcement by engaging in a large-scale regulation-by-enforcement initiative harmed the American public, adversely affected the industry, and impeded the ability of the Commission’s skilled and dedicated professional staff to use their expertise as it was intended to be used,” Peirce said.

The commissioner went on to imply that the numerous headline-grabbing crypto scandals of the last four years—most notably the $32 billion implosion of FTX—might not have happened if not for Gensler’s aggressive anti-crypto policies.

“The American public suffered because environments in which the law is unclear are havens for bad actors and hostile territory for law-abiding people legitimately trying to solve society’s problems and meet its needs,” Peirce added. 

Over the last two weeks, Peirce and her colleagues have unwound the bulk of Gensler’s crypto caseload, dismissing lawsuits and ending investigations into the likes of Robinhood, Uniswap Labs, OpenSea, Consensys, and Coinbase.

After the SEC filed to dismiss its suit against Coinbase on Thursday, the agency suggested in a statement that it has opted to effectively wipe the slate clean and start fresh with its assessment of how crypto companies should best comply with federal securities laws.

While that reevaluation looks poised to favor the crypto industry—and already has benefited its top exchanges and secondary marketplaces—legal experts told Decrypt earlier this week that some token issuers are still likely to face scrutiny from the regulator.

Indeed, Peirce reiterated today that the public shouldn’t expect the SEC to pull back entirely, nor should fraudsters expect to act with impunity: “[It] does not signal an end to the Commission’s use of its enforcement tool in appropriate cases,” she said.