SEC Launches Investigation Into Insider Trading On Crypto Exchanges

June 17, 2022 3:34 pm Comments

The SEC has reportedly launched investigations for insider trading within crypto exchanges which marks a long list of enforcement actions that the SEC has been taking on the crypto industry.

According to some sources, the SEC has sent a letter to a major crypto exchange and requested details on how the exchange plans to protect its users against insider trading.

So far, most of the exchanges have likely declined to comment as this may be seen as another attempt by the government agency to affect the business of crypto firms.

The SEC has already been accused by the crypto community for its over-regulation of crypto which ultimately prevents growth and innovation.

CoinTelegraph reports:

The nature of the inquiry is also unclear. The SEC could be seeking out leads to litigate against an exchange’s potential legal violations via the enforcement division, or it could be a routine compliance check through the Office of Compliance Inspection and Examinations.

Allegations of insider trading at the largest nonfungible token (NFT) marketplace, OpenSea, have caught the attention of the SEC in recent weeks.

Cointelegraph reported on June 3 that the commission could ultimately label NFTs as securities after charges of insider trading to OpenSea’s former product manager Nathanial Chastain surfaced.

Partner at the Hogan & Hogan law firm Jeremy Hogan told FOX Business that the SEC’s current interest in exchanges may stem from the allegations of insider trading on tokens that were scheduled for listing and were likely to see a price gain. Hogan said, “it’s that sort of trading that the SEC might be forewarning the exchange they need to get control of.”

There is also much debate on whether the SEC should have the jurisdiction of these crypto exchanges in the first place.

The proposed Digital Commodity Exchange Act of 2022 is a proposed act that would rescind the SEC of its ability to have such jurisdiction.

Instead, if the bill does get passed, that authority would be given to the CFTC instead which many believe will be able to regulate the industry in a much fairer way.

Lots of regulation activity has also happened recently which could have likely been caused by the recent collapse of the UST stable coin.

As a result, investors are expecting harsher regulation in the near future as a response to that incident. reports:

The SEC has been active in its scrutiny of the crypto space in recent months.

Most recently the regulator was reported to be looking into whether Terraform Labs, the firm behind UST and LUNA, violated investor protection rules in the way it marketed the tokens.

Reports have also suggested that federal investigators are looking into potential violations in Binance’s 2017 initial coin offering.

However, the SEC could be set to lose oversight of the sector if a new bill passes through the Senate, which aims to hand over authority to the Commodity Futures Trading Commission.

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