John Reed Stark, a former official at the Securities and Exchange Commission (SEC), says that crypto exchanges are under U.S. regulatory siege and that “this has only just begun.”
In a lengthy tweet on Thursday, Stark said that digital asset investors should “get out of crypto platforms now.”
Stark, who founded the SEC’s Office of Internet Enforcement and spent 11 years as its chief, said the regulator’s recent crypto enforcement actions have been spot on.
“With traditional SEC-registered financial firms, the SEC has unlimited and instantaneous visibility into every aspect of operations. With crypto trading platforms, the SEC lacks any oversight and access — and has scant ability to detect, investigate and deter fraudulent conduct,” Stark explained in the tweet.
Stark said he believes there is a “chasm” of necessary investor protections at crypto exchanges, resulting in a lack of requirements regarding record-keeping, cybersecurity, codes of conduct, customer complaints, and order flow transactions.
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“No matter what the carnival barkers promise, it is axiomatic that crypto trading platforms are high-risk, perilous, and inherently unsafe,” he added.
On Monday, the SEC initiated legal proceedings against Binance and its CEO Changpeng “CZ” Zhao, alleging multiple infractions of U.S. securities regulations.
Binance later issued a statement saying that the SEC’s action was an attempt to rush to claim jurisdictional ground from other regulators and was devoid of any concerns for investors.
Coinbase Global, Inc. COIN also similarly faced the wrath of the SEC. The agency sued the company in a New York federal court for allegedly illegally enabling the purchase and sale of crypto asset securities since 2019. SEC alleges that the company has been intertwining the roles of an exchange, broker, and clearing agency without proper SEC registration, leading to transactions amounting to billions of dollars.
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