Key Takeaways
- According to sources with firsthand knowledge, the SEC is conducting an industry-wide inquiry into alleged insider trading activities of cryptocurrency exchanges.
- Insider trading occurs when a corporate insider trades in the securities of his corporation on the basis of material nonpublic information or an outsider misappropriates confidential information for securities trading purposes, in breach of a duty owed to the source of the information.
- The SEC’s reported inquiry is consistent with the SEC’s increased scrutiny of cryptocurrency.
- As part of its enforcement push, the SEC has recently doubled the size of its Crypto Assets and Cyber Unit and announced several major enforcement actions against actors in the cryptocurrency industry.
According to media reports who have spoken to individuals with firsthand knowledge of the situation, the Securities and Exchange Commission (“SEC”) is reportedly conducting an industry-wide inquiry into the policies and safeguards of cryptocurrency exchanges on matters relating to insider trading prevention.1 The SEC has reportedly contacted at least one major cryptocurrency exchange seeking information about the organization’s insider trading policies. Since the SEC does not comment on its investigations, we would not expect the SEC to confirm or even deny these reports.
Given the volatility in the cryptocurrency market, as well as the potential for astronomical gains or losses trading cryptocurrencies and other digital assets, the alleged sweep may signal yet another aspect of the SEC’s continued regulatory scrutiny of the cryptocurrency industry.
The Lead Up to the SEC’s Reported Investigation
As background, as has been the case with capital markets throughout the world, the global cryptocurrency market declined significantly in overall value during recent months. These declines have included sharp drops in the value of several well-known cryptocurrencies. Recent months have also seen several…
