"Vendetta" Against SEC Staff in Crypto Enforcement: "I’ve Never Seen Anything Like It”

‘Italian vendetta’: SEC targeted by triumphant crypto industry

But staff are already feeling the fallout: One former SEC employee, who was granted anonymity over concerns of retaliation from the industry, said they are aware of at least one instance where a law firm declined to move forward with interviewing an individual at the agency because of the firm’s work in crypto. In another case, the former employee said, a law firm pulled an offer.

“You’re penalizing people who were basically doing their jobs,” said William McLucas, a former enforcement director at the SEC who called the attacks on staff “totally inappropriate.” “If they want to rail about the prior commission and its leadership, go ahead. But singling out lawyers and saying, ‘We want their names out there, we want them labeled as pariahs’ — I’ve never seen anything like it.”

The U.S. War on Crypto Isn’t Over

But even if state regulators are hemmed in by new legislation, that legislation would not limit the ability of state Attorneys General to file lawsuits alleging fraud by crypto-related businesses. State AGs previously brought those lawsuits when the SEC’s “regulation by enforcement” crusade was in full swing. In 2023, New York Attorney General Letitia James filed a lawsuit alleging that a crypto trading platform falsely represented itself as an exchange. Later that year, the platform settled for $22 million and agreed not to do business with New Yorkers going forward.

To be sure, a national regulatory framework and having pro-crypto regulators in Washington will provide more certainty and predictability for the crypto industry. But anyone who believes that “regulation by enforcement” is at an end is naïve. You can still expect aggressive lawsuits and regulator activity in the years to come. The venue may move from the SEC to the states, but the impact on crypto businesses and their customers will remain.

SEC’s New Barrier to Formal Investigation Orders May Slow Pace

The Securities and Exchange Commission published a final rule last week reversing a 15-year-old policy that permitted the director of enforcement to issue formal orders of investigation. The rule returns the SEC to its pre-2009 methodology, in which requests for formal orders of investigation must be presented to and approved by a vote of the commissioners.

The rule, issued March 10, will likely have several ripple effects—including investigations that stay in the informal stage for longer periods of time and changes to the pace and scope of SEC investigations—but in most cases will result in compliance with the staff voluntary requests to avoid negative consequences of not cooperating.

Highest Number of S&P 500 Companies Citing “AI” on Earnings Calls Over Past 10 Years

Artificial intelligence has been a focus topic for the market for several quarters. Given the heightened interest, have more S&P 500 companies than normal commented on “AI” during their earnings conference calls for the fourth quarter?

The answer is yes. FactSet Document Search (which allows users to search for key words or phrases across multiple document types) was used to answer this question. Through Document Search, FactSet searched for the term “AI” in the conference call transcripts of all the S&P 500 companies that conducted earnings conference calls from December 15 through March 14.

Of these companies, 241 cited the term “AI” during their earnings call for the fourth quarter. This number is well above the 5-year average of 105 and the 10-year average of 67.