On Feb. 20, the Securities and Exchange Commission announced the creation of the Cyber and Emerging Technologies Unit (CETU) stating its focus will be on “combatting cyber-related misconduct and to protect retail investors from bad actors.” CETU will replace the Crypto Assets and Cyber Unit created in 2017. The CETU will consist of approximately 30 fraud specialists and attorneys across multiple SEC offices.
In 2024, the SEC imposed monetary penalties of approximately $5 billion resulting from cryptocurrency-related enforcement actions and imposed the largest cryptocurrency-related monetary penalty in a crypto-related enforcement action in SEC v. Terraform Labs PTE Ltd. et al. According to Mark Uyeda, the Acting Chairman of the SEC, the “unit will not only protect investors, but will also facilitate capital formation and market efficiency by clearing the way for innovation to grow.”
The SEC’s press release indicates that the focus of the CETU will be to combat misconduct as it relates to securities transactions in the following areas:
- Fraud committed using emerging technologies, such as artificial intelligence and machine learning
- Use of social media, the dark web, or false websites to perpetrate fraud
- Hacking to obtain material nonpublic information
- Takeovers of retail brokerage accounts
- Fraud involving blockchain technology and crypto assets
- Regulated entities’ compliance with cybersecurity rules and regulations
- Public issuer fraudulent disclosure relating to cybersecurity
This new enforcement body in combination with the recent action by the SEC clarifying the crypto asset classification rules and updates to accounting guidelines for cryptocurrency will likely lead to a new regulatory landscape and movement within the crypto market.
