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What is the SEC? | Blockchain and Cryptocurrency Course: What You Need to Know | 2019 - YouTube
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well if we have so many examples of
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unregistered sales of securities
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and we have so many examples of
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situations where there appears to be
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significant fraud associated even with
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the largest of these initial coin
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offerings a reasonable question to ask
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is where's the sec what are they doing
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about this
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it's a darn good question i wish i had a
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good answer
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by my count the securities and exchange
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commission has brought only six
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enforcement actions as of july of 2018
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in a situation where there are thousands
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of examples of securities fraud
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violations involving billions of dollars
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i've been publicly quoted as saying this
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is the largest violation of the federal
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securities laws since the code of
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hammurabi interesting question
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why is the sec doing nothing
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well there's several possible
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explanations and i don't know that any
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of them is satisfactory
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one is that the sec doesn't understand
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the magnitude or the nature of this
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problem
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i find that hard to believe
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they read the same newspapers that we do
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they can read the same research reports
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out of the university of pennsylvania
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they can look at the same studies that
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the wall street journal has done so the
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possibility the sec is include in as to
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the nature of these issues strikes me as
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implausible
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the second possibility is that
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developing these cases takes time
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if we look at the history of sec
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enforcement actions it turns out that on
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average from the time the sec begins an
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investigation to the time that they
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actually bring a proceeding is about 22
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months
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so it may be that the sec is hard at
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work behind the scenes developing a
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large number of these cases and that at
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some point in the future we're going to
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see a deluge of litigation against some
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of these icos that haven't been
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registered or that are fraudulent
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a piece of me hopes that's the case
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but i wouldn't exactly bet the farm on
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it
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third possibility is what i call
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strategic surrender by the sec
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the sec could stand back and the sec
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could say wait a minute
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if we brought these cases and if we
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prevailed what would we get
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we would typically get an injunction
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that tells these people not to do it
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again
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and then we'd get an order that says
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return the money
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but if many of these people are outside
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our jurisdiction
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and if it's in crypto in the form of
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bitcoin or ether and if we don't have
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the ability to track it
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then what good is the remedy
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well i'm going to argue there are other
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ways that we could go at these people
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but i understand the sec's argument that
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wait a minute
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we may not have an effective remedy and
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rather than pursue all of these people
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in court and get hollow victories
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with injunctions that we really can't
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enforce we'll use our resources for
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something else
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another theory is that the sec says hey
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wait a minute let the states deal with
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it well that's interesting the states
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have in fact brought approximately 70
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actions
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the states have been about 10 times more
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active in this area than the securities
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exchange commission
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but i would ask wait a minute
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a lot of this activity is international
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a lot of it is national as a practical
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matter none of it is localized to texas
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or massachusetts you don't find internet
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offerings limited to people in austin or
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topeka
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it's a national phenomenon and if it's a
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national phenomenon shouldn't the sec be
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on the case
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other possibility resource allocation we
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only have so many lawyers at the sec
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there are only so many frauds that we
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can chase you know at any one point in
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time so we're going to follow other
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things we're going to pursue other
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people
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that's an interesting point and the
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question that i would pose to the sec is
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what else are you doing that's so much
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more important than pursuing these large
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and obvious frauds
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which are hitting many people who are
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basically mom and pop on main street
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don't understand what goes on in the
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world in crypto and want to catch a
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little piece of the magic all right you
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know they want to be as rich as the
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people who got in on bitcoin when it was
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a nickel and it rose up to twenty
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thousand dollars only now to collapse
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down to six right they want a piece of
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that too and many of them are losing
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everything as they're chasing that dream
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another possible explanation has a moral
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dimension
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look at what's going on here
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what we have is a bunch of libertarian
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crypto anarchists ripping off another
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bunch of libertarian crypto anarchists
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and we as the united states government
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don't want to get in the middle of
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one bunch of libertarian crypto
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anarchists ripping off other libertarian
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crypto anarchists so you guys have fun
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i take a little bit of a different
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approach here
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from my perspective i think it's
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important for the sec to assert its
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jurisdiction where it legitimately
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exists in this area
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and if we're up to me and it's not
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i'd be filing lots of actions making
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relatively straightforward claims that
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these are securities they should have
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been registered they weren't registered
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but in addition to the traditional
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remedies of getting the injunction and
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an order that says pay back the money
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and i know the money's not coming back
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i would borrow some techniques from
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intellectual property lawyers that
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litigate copyright cases over the
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internet with great frequency
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and what i would do is i'd get a
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provision of the injunction
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that limits the abilities
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of
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providers on the internet
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right of hosts and of search engines to
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post information relating to these
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frauds
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so you can get a court to issue the
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equivalent of a takedown order
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saying if this white paper by this
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organization
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violates this injunction
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you then won't be able to find it if you
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search for it on google
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it won't be allowed to be hosted on
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these different places on the internet
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all right now
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that doesn't stop the fraud i get that
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but what it does is it makes the search
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costs to find the fraud much higher
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and if those search costs are increased
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then the number of people who will wind
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up investing in that particular fraud
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will go down
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i agree we're not going to be able to
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stop this kind of fraud
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but if we make it more difficult and
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more expensive for people to perpetrate
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the fraud by directing these offers into
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the united states
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we can take steps to protect people from
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obvious scams that are out there
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