A few individuals who have had it good for a while are now experiencing challenging times. An increasing number of crypto enterprises may soon face consequences for purported illegal activities.
The Securities and Exchange Commission accused 11 individuals in connection with Forsage, describing it as a $300 million criminal scheme disguised as an intelligent contract system. This came just under a week after the NY Times disclosed that the Treasury Department was looking into cryptocurrency trading marketplace Kraken for breaching US Iranian sanctions. Just a few days earlier, the FBI and a US federal prosecutor in New York arrested and charged three ex-Coinbase staff members on charges of insider trading.
It is unclear which organization is in control of regulating crypto. Both the Commodities Futures Trading Committee and the Securities and Exchange Commission assert jurisdiction in this. The SEC, on the other hand, seems to be focused on going after virtual currency schemes that fall under its scope — which appears to be the vast majority of them.
Furthermore, the SEC is facing a constant barrage from all sides against virtual currency firms, John Stark, an information security specialist and ex-SEC compliance litigator, told Recode. Stark pointed out that the SEC has increased its virtual currency department and that SEC head Gary Gensler has made no concealment of his conviction that many cryptos are equities or that he aims to manage them as such.
Therefore, despite the fact that it is hot outdoors, we are in the midst of a virtual currency winter that might never end. Throughout the global epidemic, the virtual currency market grew to $3 trillion, aided by new systems that made investing accessible to almost anyone. Nevertheless, the industry has nosedived since last November. It is now worth roughly one-third of what it was at its maximum, and there is no indication it is going to recover considerably anytime soon. Some businesses operating in this environment have been devastated by the collapse, as have their clients.
The legal system is now starting to come for specific cryptocurrency businesses and their executives. However, it remains to be determined what, if any, ramifications many of these conglomerates and the individuals associated with them could face.
Unlike conventional banks, once virtual currency loan platforms fail, there are no safeguards in place to guarantee that investors are compensated. Celsius and Voyager, two digital asset loaning services, declared bankruptcy in July, and their clients may never see their funds again. Some safe cryptocurrency investments known as stablecoins, which are pinned to the price of a conventional currency such as the US dollar, have also been shown to be unreliable. Last May, the price of stablecoin Terra nosedived, negatively impacting the Luna cryptocurrency, whose price was connected to Terra’s, with it. Luna used to be worth up to $116. It is now only worth a small portion of a cent.
However, as investors’ deficits stack up and enforcers’ extensive blockchain arms go to work, it appears that a day of judgment is eventually approaching for a few of these organizations, which have been functioning in an unregulated environment. The blatant scams were clearly not adhering to the guidelines at all. However, a number of the more reputable companies are said to have cheated them as well.
The pride and arrogance in the cryptocurrency industry are simply beyond measure, Stark stated. They’re invariably confrontational and accusing the SEC of being shady.
He’s never witnessed anything like this in his 30 years of practice, he noted.
Once more, the SEC is only one of the many government entities pursuing cryptocurrency. When a large number of people end up losing a large sum of money, the government has to pay even greater attention. However, because crypto isn’t governed like banking institutions and equities, it may not be much help to certain people — this is something most virtual currency investors didn’t notice until it was already late.
With so much fresh money bolstering token values, many individuals wanted in without knowing anything about the environment, according to Matt Binder, a Mashable journalist who also publishes Scam Economy, a podcast devoted to cryptocurrency and Web3 scammers; and the sector took full advantage of many of them.
The Bottom Line
As crypto becomes more widely accessible, it is crucial that relevant rules are put in place to assure proper governance. With so much money in the industry, it’s absurd that no checks are currently in place.