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Calls for accountability at the United States Securities and Exchange Commission (SEC) are growing as many industry think tanks believe there is a conflict of interest among the leadership of the regulator. Stuart Alderoty, the chief legal counsel at Ripple Labs Inc, is one of those calling for this accountability, noting recently that the words of Chairman Gary Gensler have legal consequences, a statement made in response to a tweet from Blockchain Association Policy Lead Jake Chervinsky.
This is a must read from the @BlockchainAssn. Chair Gensler's statements have legal consequences and the Commission should be held to account. https://t.co/LMDuk6YP8S
— Stuart Alderoty (@s_alderoty) June 29, 2023
Gensler's prejudgment
In Chervinsky's Twitter thread, he accused Gary Gensler of prejudging that every digital asset is a security and, as such, he needs to recuse himself from enforcement actions related to the nascent asset class.
In buttressing his point, Chervinsky noted that every enforcement action initiated by the market regulator must follow the Wells Process. Here, cases brought on by the staff of the SEC must be impartially assessed by the commissioners, who are meant to be neutral. Chervinsky posited that, as a senior official, Gensler is far from being a neutral arbiter, as he has regularly christened all cryptocurrencies besides Bitcoin as securities.
Many industry insiders, including Chervinsky, believe the position taken by the SEC chair is wrong and that the top regulator is unwilling to engage himself in the careful analysis that is required to determine whether each asset in the crypto industry is a security or not.
Weighing integrity of SEC crackdowns
The SEC has had a very busy year as enforcement actions have been brought on exchanges like Kraken, Bittrex, Coinbase and Binance. While fighting against crypto firms appears to be trending now, industry leaders have also called out the commission for playing favorites, especially as concerns the now bankrupt FTX derivatives exchange.
With even Binance CEO Changpeng "CZ" Zhao noting that FTX was not sued despite its illegal operations, the integrity of its enforcement proceedings has been questioned across the board.
Alex Dovbnya
Gamza Khanzadaev
Valeria Blokhina
