SEC's Global Task Force Aims to Stop Crypto Frauds Preying on U.S. Investors

The U.S. Securities and Exchange Commission (SEC) has announced the formation of a Cross-Border Task Force to address international financial fraud, with a focus on pump-and-dump schemes and gatekeeper fraud in the cryptocurrency market. Announced by SEC Chairman Paul S. Atkins on September 5, the task force will consolidate investigative resources across the agency to enforce U.S. securities laws against transnational misconduct. This effort aligns with the broader SEC Crypto initiative, aimed at improving safeguards for investors in digital assets.

According to the press release, the task force will initially target market manipulation by foreign-based companies, especially those operating in jurisdictions like China, where enforcement of investor protections can be more challenging. The initiative underscores the SEC’s commitment to ensuring that U.S. investors are not exploited by bad actors who use international borders to avoid accountability.

The task force will also scrutinize market gatekeepers such as auditors and underwriters who facilitate access to U.S. capital markets for foreign firms. Margaret A. Ryan, Director of the Division of Enforcement, emphasized that the initiative strengthens the SEC’s ability to enforce federal securities laws and protect American investors from schemes that exploit global financial systems.

The launch of the task force comes amid a surge in pump-and-dump schemes in the crypto sector, which often target low-liquidity tokens, including meme coins and hastily created altcoins. These tokens are typically inflated through aggressive marketing campaigns before insiders profit and leave retail investors with significant losses. For example, the so-called CR7 token on the Solana blockchain spiked to a market cap of over $5 million before plummeting to zero. A prior version of the token reportedly drained $143 million from investors. Similar incidents have involved celebrity-linked tokens, such as a project tied to rapper Kanye West, and larger-scale scandals like the LIBRA project, where losses totaled nearly $200 million.

The SEC’s Cross-Border Task Force aims to address these issues by leveraging the Division of Enforcement’s expertise and collaborating with other SEC divisions, including the Office of International Affairs. Atkins has directed these divisions to recommend actions, such as new disclosure guidance and rule changes, to better protect U.S. investors. The task force’s formation also coincides with a joint roundtable with the Commodity Futures Trading Commission (CFTC) scheduled for September 29 to discuss regulatory harmonization priorities.

The task force reflects a broader trend in global financial oversight, as regulators increasingly recognize the need for international cooperation to combat cross-border fraud. This is particularly relevant in the cryptocurrency space, where market participants can quickly exploit regulatory gaps. The SEC’s initiative complements efforts by the European Central Bank and other international bodies to establish robust frameworks for stablecoin and crypto asset regulation. For example, the ECB has emphasized the importance of equivalent regulatory standards for both EU and non-EU stablecoin issuers to prevent destabilizing runs on reserves.

While the SEC’s task force is a significant step in addressing global financial misconduct, it also highlights the evolving challenges of regulating decentralized and borderless markets. The SEC’s focus on gatekeepers and foreign-based fraud underscores a shift in enforcement strategy, emphasizing proactive collaboration and systemic risk mitigation.

Source:

[1] SEC Forms International Task Force to Crack Down on Pump-and-Dump Schemes (https://coingape.com/sec-forms-international-task-force-to-crack-down-on-pump-and-dump-schemes/)

[2] US SEC forms cross-border task force to tackle Pump and Dump schemes (https://cryptorank.io/news/feed/2a3b2-sec-cross-border-task-force-fraud)

[3] SEC Announces International Fraud Task Force Targeting 'Pump-And-Dump' Schemes (https://finance.yahoo.com/news/sec-announces-international-fraud-task-214447032.html)