On November 6, 2019, the SEC’s Division of Enforcement published its 2019 Annual Report (“Report”). This Report highlighted many of the Division’s 2019 actions. Notably, it mentioned the Division’s recent actions against fraudulent issuers of cryptocurrency—digital assets designed to work as a mediums of exchange that use cryptography, or the computerized encoding and decoding of information, to secure their transactions.
The report specifically noted that the Division brought actions against a number of issuers of digital assets for engaging in fraud, for violating the registration provisions of the federal securities laws, and for unlawfully operating as a national securities exchange without being registered with the Commission. See Report at 6. Based on these actions, the Division of Enforcement reaffirmed that many cryptocurrencies are covered under federal securities laws because “if a product is a security, regardless of the label attached to it, those who issue, promote, or provide a platform for buying and selling that security must comply with the investor protection requirements of the federal securities laws.” Id. This explanation is in line with recent judicial decisions and regulations, both of which have held that various cryptocurrencies were subject to federal securities laws.
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