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SEC Chair Gary Gensler Says Crypto ‘’Rife with Fraud’’ and “Hucksters,’’ Warns Investors That Some Exchanges Trade Against Them

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SEC Chair Gary Gensler
SEC Chair Gary Gensler

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SEC Chair Gary Gensler said the crypto industry is “rife with fraud“ and “hucksters“ and warned investors that some crypto exchanges trade against them.

Crypto investors should not assume that they’re protected by securities laws, and they’re not getting full, fair and truthful disclosures, he said in an interview with Bloomberg Television. And some platforms and intermediaries do things that would never be allowed on Nasdaq or the New York Stock Exchange, he added.

“The platforms often are comingling and trading against you and have market makers that are on the other sides of your trades,’’ he said. “We don’t allow that in the rest of our securities markets. Investors should be aware it’s not only a highly speculative asset class, it’s also one that they currently should not assume that they’re getting the protections of the securities laws.’’

SEC’s ‘Crusade’ Against Crypto Industry

The SEC’s crackdown on crypto companies this year has prompted a strong reaction from the industry, as well as politicians including Ritchie Torres, who said the SEC is an ”overzealous traffic cop” conducting a ”crusade” against the industry.

Opponents argue that Gensler’s regulation-by-enforcement strategy is damaging a high-growth industry by forcing companies to move jobs overseas and stifling innovation. Others say a crackdown is needed to root out bad actors to establish stronger foundations for future growth.

The crypto industry got a big boost earlier this month when, in a case brought by the SEC, Ripple Labs, Inc. won a landmark partial victory via a ruling that said its payments token, XRP, is not a security when sold to the public. XRP and the crypto markets surged on the news.

Gary Gensler had previously expressed his disappointment with the decision but indicated in the Bloomberg interview that no decision had been made whether to appeal it.

Asked by Bloomberg about money manager BlackRock’s recent application to launch a spot bitcoin ETF, Gensler was non-committal while remaining critical of the crypto industry. Crypto is a field where there’s ‘’lots of non-compliance’’ with ‘’time-tested protections against fraud and manipulation,’’ he said.

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