Commissioner Peirce Criticizes SEC Enforcement Action Against Crypto Company

SEC Commissioner Hester M. Peirce criticized the SEC for pursuing a federal case against a crypto asset company for registration failures which ultimately resulted in the "demise of the company."

Ms. Peirce's dissenting statement followed a decision by the U.S. District Court for the District of New Hampshire to enjoin the company from participating in unregistered offerings of crypto asset securities and to pay civil penalties. The outcome of the enforcement action led the company to announce that it would be shutting down and placing its assets in a receivership.

In her statement, Ms. Peirce questioned whether investors and the market were "better off" given that the SEC helped to drive a company "that had built a functioning blockchain with a real-world application running on top of it" out of business. Ms. Peirce argued that the "case illustrates the arbitrariness and real-life consequences of the Commission's misguided enforcement-driven approach to crypto."

Further, Ms. Peirce questioned the SEC's reasoning for bringing charges against the company in the first place, when there was no evidence of fraud in connection with the company's securities offerings. She said that despite the application of securities laws to token projects being unclear, the company provided "significant disclosures" including "information adequate to assess whether tokens were a good fit for [purchasers]." She argued that the SEC's initial requested monetary remedy of $44 million from the company was "entirely out of proportion to any harm." Ms. Peirce said that after a remedies hearing, the SEC lowered the requested amount and the U.S. District Court ordered the company to pay a civil monetary penalty of $111,614.