• Former SEC official John Reed Stark believes that digital asset investors should “get out of crypto platforms now” as the regulatory siege against them will continue.
• Stark argues that there is a lack of necessary investor protections at crypto exchanges, which results in a lack of requirements and the inability for the SEC to detect fraud.
• The SEC recently launched a lawsuit against Binance and Coinbase, alleging they violated investor protection and securities laws.
Former SEC Official Warns Investors
John Reed Stark, who founded the Securities and Exchange Commission’s Office of Internet Enforcement and spent 11 years as its chief, has warned digital asset investors to “get out of crypto platforms now” as he predicts that the regulatory siege against them will continue.
Lack of Investor Protections
Stark notes that there is a “chasm” of necessary investor protections at crypto exchanges, which results in an inadequate level of requirements regarding record-keeping, cybersecurity, codes of conduct, customer complaints and order flow transactions. He also claims that exchanges currently have no reason to abide by US statutes and rules prohibiting manipulation, insider trading, trading ahead of customers and other fraudulent behavior by customers or employees. Additionally, he believes that the SEC currently lacks the ability to detect fraud at these exchanges due to their lack of oversight.
SEC Lawsuits Against Crypto Exchanges
The recent news broke that the SEC had launched a lawsuit against top global crypto exchange Binance and its CEO Changpeng Zhao for allegedly violating investor protection and securities laws. This was followed up shortly after with a similar suit filed against top US crypto exchange Coinbase on Tuesday for operating without registration as a securities exchange, broker or clearing agency.
High Risk Investment
According to Stark: “No matter what the carnival barkers promise, it is axiomatic that crypto trading platforms are high-risk, perilous and inherently unsafe.“ He cautions investors to be aware when investing in cryptocurrency due to these risks associated with potential fraud or manipulation inherent with unregulated exchanges.
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