The SEC's budget proposal for fiscal year 2025 is asking for an additional $158 million to address the complexities in the financial markets, especially challenges from the crypto sector, increasing the total budget to $2.594 billion. The agency also wants to expand its workforce and improve its capabilities to tackle crypto market noncompliance, described by Gary Gensler as the "Wild West."
Meanwhile, the SEC is facing some serious scrutiny for misconduct in a court case against Debt Box, with a judge criticizing the agency for misleading actions and imposing sanctions for abuse of power. Additionally, an Arkansas Representative French Hill, known for his work on digital assets and financial technology, plans to chair the House Financial Services Committee, focusing on crucial issues like terrorism financing and money laundering in the crypto industry.
SEC's Budget Proposal Targets Crypto Compliance
The United States Securities and Exchange Commission (SEC) is seeking an additional $158 million for its 2025 budget to cope with the rapid transformation and complexities in the financial markets. Specifically the challenges posed by the crypto sector. This request increases the SEC's budget proposal to $2.594 billion for the fiscal year 2025, up from $2.436 billion in 2024.
SEC Chair Gary Gensler stressed the urgency of adapting to technological advancements and the shift in investor communication methods, including the influence of social media platforms and celebrities. The SEC plans to counter the proliferation of noncompliance in the crypto markets, which Gensler described as the "Wild West," because of its investment risks and speculative activities.
To address these challenges and improve its regulatory capabilities, the SEC also plans to expand its workforce to 5,621 positions in 2025, an increase from the 5,473 positions targeted in 2024. This expansion includes adding staff across various divisions, with the Division of Examinations aiming to fund 23 more positions to boost its ability to manage risks related to crypto assets and emerging financial technologies. Additionally, the Office of Investor Education and Advocacy wants to add a position focused on addressing fraud involving crypto asset securities. The Office of the General Counsel also plans to increase its staff to support litigation efforts and the SEC's whistleblowing program, which, as most people will know by now, has experienced quite a surge in volume.
The SEC's 2023 performance report revealed that the agency met or exceeded most of its performance targets, achieving success in 28 out of 36 areas. The SEC conducted 46 crypto-related enforcement actions in 2023, more than double the number during Gensler's first year as chair.
SEC Sanctioned for Abuse of Power
Meanwhile, the SEC finds itself in the hot seat in its Debt Box case. In fact, a United States district court has imposed sanctions against the SEC for acting in bad faith during its lawsuit against Debt Box, a company accused of orchestrating a $50 million fraudulent crypto scheme. Judge Robert J. Shelby criticized the SEC for misleading the court to secure a temporary restraining order (TRO) and freeze assets of Debt Box last August. The judge's decision shed some light on the SEC's presentation of critical evidence that "lacked any basis" and was advanced in "deliberately false and misleading ways."
The SEC initially wanted to dismiss the case without prejudice, a motion which Judge Shelby denied after revealing some of the regulator's gross abuse of power and undermining of the judicial process. The controversy mainly centers around the SEC's claim that Debt Box was involved in illegal activities and had transferred $720,000 overseas, suggesting a flight risk. However, it later came out that this transfer was domestic, within the United States, contrary to the SEC's claims.
In response to this misconduct, Judge Shelby issued a "show cause order" in December of last year, demanding the SEC to justify its actions. Although the SEC admitted its lack of forthrightness, it argued against the imposition of sanctions. Judge Shelby condemned SEC attorney Michael Welsh for knowingly misleading the court and attempting to obscure the truth.
The case has drawn a lot of attention to the need for accountability within the SEC, with critics like Austin Campbell, the founder of Zero Knowledge Consulting, calling for the termination of the involved staff and suggesting that SEC lawyers should bear personal liability for misleading actions like this.
Crypto-Focused Lawmaker Aims for Financial Services Chairmanship in 2025
In other crypto legal news, Arkansas Representative French Hill plans to pursue the chairmanship of the United States House Financial Services Committee, after the announcement by the current chair, Patrick McHenry, that he will not seek reelection after two decades in office.
Hill, who has been at the forefront of the committee's engagement with digital assets and financial technology as the chair of its dedicated subcommittee since January of 2023, is leveraging his extensive experience in both public and private financial services sectors to build support for his candidacy.
Hill's tenure as vice chair of the full committee and chair of the Subcommittee on Digital Assets, Financial Technology, and Inclusion has been marked by proactive investigations into the cryptocurrency industry, addressing very important issues like terrorism financing and money laundering.
The future leadership of the House Financial Services Committee, under which Hill hopes to serve as chair, hinges on the Republican Party's ability to maintain control of the House of Representatives after the 2024 elections.
