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SEC Chairman Gary Gensler, Crypto Firms Must ‘Comply’

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US Securities and Exchange Commission (SEC) Chairman Gary Gensler speaks with Senator Elizabeth Warren (D-MA) before testifying before an oversight hearing of the Senate Banking, Housing, and Urban Affairs Committee on the SEC on Capitol Hill in Washington, USA, September 14, 2021.

Evelyn Hockstein | Reuters

WASHINGTON – Securities and Exchange Commission Chairman Gary Gensler on Wednesday pushed back on criticism that the agency failed to enforce rules that prevent misconduct by cryptocurrency firms, such as illegal trading that led to the disappearance of the cryptocurrency exchange giant FTX.

Gensler said the SEC has filed more than 100 compliance cases in the crypto space, directly challenging questions from lawmakers about agency oversight.

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In November, Sen. Elizabeth Warren, D-Massachusetts, called on the SEC to “dress up” following the failure of FTX, arguing that the agency has “lagged behind” in the cryptocurrency industry. Members of the House Financial Services Committee also asked Gensler to answer questions about what he knew before the FTX collapse.

“We are already equipped,” Gensler told Yahoo Finance.

The SEC chief said that cryptocurrency companies should be held accountable for compliance with existing rules.

“You could think of them as the casinos where the investing public is looking for a better future,” Gensler said. “And because most of these tokens are securities, that means that…casinos have to abide by our time-tested laws.”

“Their business model right now is offering the public, they say, a return of interest in crypto… and then possibly trading against their customers, trading before their customers, lending that out,” he added. “Everywhere else in finance, these conflicts are not allowed and they are separate.”

Bankman-Fried’s firm, Alameda Research, used billions of dollars in FTX client assets to trade, a practice that Gensler says violates a federal statute. The company filed for bankruptcy on November 11 and Bankman-Fried resigned as CEO as the company faced a liquidity crisis.

Bankman-Fried has denied committing fraud.

Lawmakers have noted that federal oversight of FTX was hampered because the company is based in the Bahamas.

Gensler said that the SEC has successfully deterred other suspicious activities by crypto companies. He cited charges against Poloniex and Coinbase for unauthorized trading as examples.

“We filed actions against crypto lending platforms, including BlockFi, and we will continue to be a vigorous securities regulator, but I really suggest these brokers, these storefronts, these casinos, if they want to, to comply, work with the SEC to come into compliance. , unbundle these businesses,” he said.

Gensler said the SEC would take further enforcement action if cryptocurrency exchanges do not comply, but did not elaborate on what those would be.

“We can use some exempt authority to tailor things… but it’s not to remove basic protections: separate these businesses into a separate exchange,” he said.

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