45th president of the United States, Donald J. Trump signed an executive order which will help establish a task force on market integrity and consumer fraud. With this order Trump declared that, among others, crimes committed with cryptocurrency will become a part of the special consumer protection entity that will operate within the US Department of Justice (DOJ). The entity bears the name of “Task Force on Market Integrity and Consumer Fraud” and will look to handle enforcement of the law which regulates procurement and grant fraud, securities and commodities fraud, digital currency fraud, money laundering, health care fraud, tax fraud and other financial crimes.
The signing of the order has been reported by US Deputy Attorney General Rod Rosenstein. Consumer financial protection bureau, SEC, FTC and other local, state, federal and international law enforcement agencies and departments will be operating within/together with this task force. The task force will be a continuation and expansion of similar efforts made during Obama administration which were initiated in the wake of the global financial crisis of 2008.
“This task force will bring together U.S. attorney’s offices and other compartment components with essential help from our enforcement agency partners, to fight fraud that affects American citizens. We will pursue our mission with determination, fairness, and the coordinated resources of all of our federal law enforcement agencies. We expect to focus on cases involving fraud against the government, the financial markets, and consumers; procurement and grant fraud; securities and commodities fraud; digital currency fraud; money laundering; health care fraud; tax fraud; and other financial crimes,“ said Rosenstein during a public announcement conference held at the DOJ headquarters in Washington on July 11th.
Jay Clayton of the SEC took the stage after Mick Mulvaney from the consumer financial protection bureau and went on to explain the past and the future of SEC’s involvement in the financial law enforcement activities:
“Last year, our division of enforcement formed an internal retail strategy task force to bolster our capabilities and focus on protecting main street investors. This effort draws on expertise from across the S.E.C. to develop strategies and techniques for addressing the types of misconduct that most affect retail investors. These include microcap pump and dump schemes, ponzi schemes, the sale of unsuitable and complex products, which frequently target the most vulnerable members of our investing public.”
After reiterating that the importance of proper punishment for fraudsters is only second to returning the stolen funds to defrauded people, Clayton went on to address SEC’s activities within the cryptosphere:
“In January of this year, we shut down an alleged fraudulent initial coin offering that claimed to have raised over $600 million. Not only did we stop the alleged scheme but we successfully prevented the participation of investor funds by obtaining a freeze of the digital assets at a court appointed receiver to secure various crypto currencies held by the defendants.”
The quote above references the SEC shutdown of a project called AriseBank. Among similar efforts was the shutdown of Bitconnect, a Ponzi scheme that was unceremoniously shut down in late January and is currently subject to multiple class action law suits. Clayton then acknowledged how cyber threats represent some of the greatest risks that the current financial markets are currently facing. He said that the SEC sees how new (blockchain) technologies are being used to revive old scamming tactics, which include securities offering frauds. He concluded his speech with the following words:
“The commission has filed multiple actions this year concerning alleged fraudulent initial coin offerings and has frozen tens of millions of assets raised in allegedly unregistered initial coin offerings. In addition, we’ve worked closely with other regulators to provide clarity on the application of our laws and regulations to these new and emerging products.”
It is clear that cryptocurrencies will be included into the activities of this task force under the “digital currency fraud” section. ICO’s and status of cryptocurrencies as securities will clearly be the main area of concern. DOJ created a related cyber-security task force in January which focused on analyzing crypto markets and creating strategies to deal with crypto market fraud. Later on in May it was reported that the U.S Department of Justice is working with the U.S. Commodity Futures Trading Commission [CFTC] to launch a criminal investigation into illegal price manipulation on the crypto markets. All of this implies that US government agencies are getting closer to launching actual crypto regulatory framework and we should expect it coming sooner rather than later.