SEC announces cross-border task force to combat fraud

The Securities and Exchange Commission has formed a new cross-border task force to combat transnational fraud, including pump-and-dump schemes.

The United States Securities and Exchange Commission will take the fight against fraud to foreign-based companies with a new cross-border task force, the agency said in a press release.

The SEC’s Cross-Border Task Force, the securities watchdog said on Friday, will initially focus on investigating potential violations of U.S. federal securities laws by offshore companies. Areas of attention will include market manipulation, with the SEC noting aspects such as “pump-and-dump” schemes.

Regulators, including the U.S. Commodity Futures Trading Commission, have repeatedly advised investors and market participants, including those in the crypto space, to be cautious about potential pump-and-dump schemes.

Pump-and-dump schemes in crypto

Across the ecosystem, pump-and-dump scams involve thinly-traded altcoins and meme tokens, often by insiders or malicious actors that artificially inflate prices, heavily promote the projects or tokens before dumping on unsuspecting buyers.

Retail users are the biggest victims of the deceptive actions that precede collapses.

While investors must conduct due diligence and remain wary of hype, the SEC says its task force, aimed at strengthening and enhancing the Division of Enforcement’s efforts, will go after entities and individuals whose fraudulent activities harm U.S. investors.

In addition to pump-and-dump schemes, the task force will focus on gatekeepers, including auditors and underwriters, whose efforts make it possible for bad actors to access U.S. capital markets.

“We welcome companies from around the world seeking access to the U.S. capital markets,” SEC chair Paul Atkins said. “But we will not tolerate bad actors – whether companies, intermediaries, gatekeepers or exploitative traders – that attempt to use international borders to frustrate and avoid U.S. investor protections. This new task force will consolidate SEC investigative efforts and allow the SEC to use every available tool to combat transnational fraud.”   

Staff across the agency will collaborate to support the initiative, Atkins added, with the Commission welcoming recommendations of other actions that can enhance protection for U.S. investors. The SEC chair said the regulator will weigh actions such as new disclosure guidance and necessary rule changes.