The United States Securities and Exchanges Commission (SEC) announced yesterday a new initiative to aid their Enforcement Division to address cyber-based threats.
A Cyber Unit is to be created that will “focus on targeting cyber-related misconduct,” including online market manipulation, hacking, or ICOs. Listing the Cyber Unit’s targets, SEC says it will focus on:
“Market manipulation schemes involving false information spread through electronic and social media. Hacking to obtain material nonpublic information. Violations involving distributed ledger technology and initial coin offerings. Misconduct perpetrated using the dark web. Intrusions into retail brokerage accounts. Cyber-related threats to trading platforms and other critical market infrastructure.”
They do not specify what sort of blockchain or ICO violations they have in mind, but in describing the Retail Strategy Task Force, SEC says:
“The Enforcement Division has a long and successful history of bringing cases involving fraud targeting retail investors, from everything involving the sale of unsuitable structured products to microcap pump-and-dump schemes. ”
The extent of their jurisdiction is not clear as CFTC recently undertook an enforcement action regarding bitcoin investments which, they allege, were fraudulently used for a ponzi scheme.
But SEC might focus more on “traditional” ICOs, such as token sales, which they have said must be registered with the SEC unless they limit the fund raising to the very wealthy only.
It is unclear at this stage whether the Cyber Unit’s main role is to target ICOs, or whether it’s established primarily to increase the SEC’s own cyber-security following a considerable hack of their filing system which allegedly led to insider trading based on the hacked information.
That took place back in 2016, but neither the public nor the SEC’s chairman was told about it until this summer in a practice that some say breaches the SEC’s own rules.
Hacking is mentioned only once in the Press Release, when the unit’s target areas are specified, followed closely by a mention of ICOs and blockchain technology.
The Trump appointed current SEC chairman, Jay Clayton, said this reflects “the division’s continual efforts to pursue new forms of misconduct while keeping a watchful eye out for our Main Street investors.”
While Steven Peikin, Co-Director of the SEC’s Enforcement Division, said:
“By dedicating additional resources and expertise to developing strategies to address misconduct that victimizes retail investors, the division will better protect our most vulnerable market participants.”