SEC enforcement official warns more charges are on the horizon, including for DeFi protocols

Speaking at the SEC’s Securities Enforcement Forum Central, the Commission’s head of crypto enforcement warned that more companies and projects are under investigation and that more charges could be expected. The comments were first made public by CoinDesk.

David Hirsch, Chief of the Crypto Asset and Cyber Unit of the SEC’s Division of Enforcement, said that the agency intends to “continue to bring … charges” following the cases that it initiated against Coinbase and Binance in June.

Hirsch said that his agency has sights on numerous companies that operate in similar ways, including companies that are not high-ranking exchanges. He said:

“We’re going to continue to be active as to intermediaries… That can be brokers, dealers, exchanges, clearing agencies or any others who are active in this space, are within our jurisdiction and not meeting their obligations, either through registration or failure to provide adequate or complete disclosures.”

Despite the SEC’s apparent interest in regulating the crypto industry, Hirsch acknowledged the limits of the SEC’s enforcement capacities. He observed that 25,000 tokens and countless exchanges currently exist and admitted that there are more operational projects than the SEC or any agency can pursue with limited resources.

SEC will focus on DeFi in the future

Hirsch also stated that the SEC will target decentralized finance projects, noting that simply “adding the label of DeFi” will not stop the agency from taking action.

However, recent actions from the SEC and other agencies have demonstrated that the Commission does not consider DeFi out of the scope of its jurisdiction. In 2022, the CFTC attempted to serve papers to numerous members of a DeFi project called Ooki DAO. Though it was not entirely successful in that regard, it ultimately won the case and forced Ooki DAO and third-party hosts to halt operations.

The CFTC also charged and settled with three DeFi platforms in September 2023, though those projects had associated companies despite their DeFi models.

Another DeFi project, SushiSwap, and its lead member were also subpoenaed by the SEC this year. The SEC has not filed charges against SushiSwap at present; the project also appears to have associated companies that could be targeted directly.

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