Former Securities and Exchange Commission (SEC) official John Reed Stark has warned cryptocurrency owners to exit their investments, stating that crypto trading platforms are under intense scrutiny from U.S. regulators.
The message came in a series of tweets, where Stark made clear his views on the lack of investor protection on cryptocurrency platforms. Stark's warning follows recent legal actions by the SEC against major crypto exchanges, including Binance and Coinbase, signifying an intensified crackdown on the digital asset sector.
In his tweet thread, Stark argued that crypto trading platforms present high-risk and unstable environments for investors. Having served nearly two decades in the SEC Enforcement Division, Stark emphasized the importance of SEC registration for financial firms, which requires proper handling of investor funds.He claimed that crypto trading platforms, unlike SEC-registered firms, operate without much oversight, offering poor customer protection and risk detection measures.
According to Stark, the current regulatory vacuum surrounding crypto exchanges means customers face a significant lack of protection. Unlike SEC-registered firms, crypto platforms lack requirements for recordkeeping and archiving operations, communications, trading or any other aspects of business, alongside no stipulated standards for cybersecurity or internal compliance.
Interestingly, Stark's warning comes not long after he expressed concerns about Binance's future, flagging several issues around the exchange such as a Commodity Futures Trading Commission (CFTC) action alleging regulatory violations, allegations of commingling customer funds and a lack of proof of reserves and audited financials.