SEC Chair Gary Gensler testified before the Subcommittee on Financial Services and General Government about the SEC’s FY 2024 budget request. This is the first public comment from Gensler in an official capacity since the most recent enforcement actions against cryptocurrency exchanges. Tensions remain over how the SEC has conducted its regulatory guidance over the past few years. Gensler emphasized the importance of the SEC in protecting investors and issuers, and highlighted the rapid growth and change in the markets, including the Wild West of the crypto markets.
- The SEC received over 35,000 tips, complaints, and referrals related to crypto in FY 2022.
- The Division of Enforcement brought over 750 enforcement actions in FY 2022, resulting in $6.4 billion in penalties and disgorgement.
- The Division of Examinations conducted over 3,000 examinations in FY 2022, including in the crypto space, and requested additional funding to address risks in the crypto markets.
- The Division of Corporation Finance oversees the disclosures of public companies and requested additional funding to serve investors as markets grow and evolve.
- The Division of Trading and Markets oversees more than 3,500 broker-dealers and is responding to an increasing number of public inquiries, including related to crypto.
Gensler requested $2.436 billion for the SEC, which is deficit-neutral and offset by transaction fees. He emphasized that the SEC needs to grow along with the expansion and increased complexity in the capital markets, and that the FY 2024 budget request would give the agency resources to better protect the American public. As the crypto market continues to evolve, it is likely that the SEC will play an increasingly important role in regulating this asset class.
Gensler is scheduled to testify in front of the House Financial Services Committee on April 18, according to HFSC chairman Patrick McHenry (Republican), in the first oversight hearing with the SEC. McHenry signaled that the committee will be asking about SEC approach to rule-making and digital assets.
Securities and Exchange Commission (SEC) has charged crypto asset trading platform Beaxy.com and its executives for failing to register as a national securities exchange, broker, and clearing agency. The company’s founder, Artak Hamazaspyan, and a company he controlled, Beaxy Digital, were also charged with raising $8 million in an unregistered offering of Beaxy tokens (BXY), with Hamazaspyan misappropriating at least USD $900,000 for personal use. As of publication time, Beaxy.com has ceased operations.
- The SEC alleged that market makers on the Beaxy Platform were operating as unregistered dealers.
- The SEC claimed that Beaxy violated the Securities Exchange Act of 1934 because it brought together the orders for securities of multiple buyers and sellers using established non-discretionary methods under which such orders interacted.
- Beaxy allegedly acted as an intermediary in making payments and deliveries upon matching sell and buy orders, maintained custody of customer assets, and should have registered as a clearing agency.
- Windy, a company managed by Nicholas Murphy and Randolph Bay Abbott, provided the Beaxy Platform as a web-based trading platform that facilitated buying and selling of crypto assets that were offered and sold as securities.
- Beaxy and its affiliates allegedly performed the functions of an exchange, broker, clearing agency, and dealer without registering with the Commission and complying with clear, time-tested rules governing those activities.
- It is the third crypto exchange to be targeted by a U.S. federal agency in less than two weeks.
The SEC’s charges against Beaxy and its executives raise serious concerns about the transparency and accountability of cryptocurrency exchanges. As regulators continue to scrutinize the crypto industry, more exchanges and other crypto-related companies may face legal issues if they fail to comply with regulations designed to protect investors. Companies must ensure that their business models comply with the law and prioritize the protection of investors.