Crypto Enforcement Still Has a Pulse

The contrast between the Trump Administration’s ostentatious embrace of cryptocurrency and the prior administration’s chilly skepticism has led some to suggest that the multi-billion-dollar industry is at the dawn of an enforcement-devoid free for all.
In heralding its new, supportive approach, the administration’s Jan. 23, 2025 executive order “Strengthening American Leadership in Digital Financial Technology,” among other initiatives, directs the Treasury and Justice Departments and the Securities and Exchange Commission to identify policies that affect the digital asset sector and, within 60 days, submit recommendations for revisions.
A more recent, lower key announcement, however, indicates that enforcement still has a pulse, and can be expected to play a part in that new approach.
On Feb. 20, 2025, the SEC announced the creation of a Cyber and Emerging Technologies Unit within its enforcement division that will prioritize combatting bread-and-butter fraud to “protect retail investors from bad actors in the emerging technologies space.”
The Justice Department issued analogous guidance just this week, stating that it would shift its focus to “prosecuting individuals who victimize digital asset investors” or use digital assets in furtherance of terrorism, narcotics, hacking and other crimes.
Indeed, those priorities echo guidance issued under former Trump Administration SEC chair and current Southern District of New York United States Attorney-nominee Jay Clayton, and as discussed below, are reflected in DOJ and SEC cases brought during the first Trump Administration and thereafter.
The newly led SEC has dropped a number of high-profile enforcement proceedings and investigations against industry leading firms, but as far as can be seen, the common thread among them was the absence of a fraud claim.
Rather, those now-dropped matters contended that firms failed to register certain digital assets as securities or acted as unauthorized securities exchanges. Such claims hinged on the fundamental question of whether specific digital assets qualify as a “security” under SEC v. W.J. Howey Co., 328 U.S. 293 (1946), a complex, fact-intensive inquiry that often divides experts.
While many of the Trump Administration’s actions with respect to law enforcement and the legal system have appropriately warranted the strongest criticism, the creation of a task force mandated to develop a clear regulatory framework governing digital assets to replace the piecemeal “regulation through enforcement” regime that has prevailed up to now is not one of them.
The shift in enforcement focus from registration violations to bread-and-butter fraud can be expected to benefit established, compliance-minded players in the digital asset space.

The SEC’s Regulatory Approach 

From the first week Trump took office, the SEC has taken action to change its approach to crypto regulation. On Jan. 21, 2025, SEC Acting Chairman Mark T. Uyeda launched a Crypto Task Force with a mission to “develop[] a comprehensive and clear regulatory framework for crypto assets,” under Commissioner Hester Pierce’s lead.
Recognizing that “to date, the SEC has relied primarily on enforcement actions to regulate crypto retroactively and reactively,” the Task Force’s goal is to set “clear regulatory lines, provide realistic paths to registration, craft sensible disclosure frameworks, and deploy enforcement resources judiciously” to promote growth and innovation in the market.
The approach aligns with the pro-digital asset directives stated in the Jan. 23, 2025 Executive Order, as well as the administration’s appointment of tech-investor David Sacks, as “AI and Crypto Czar,” and nomination of Paul Atkins, a cryptocurrency advocate and former SEC Commissioner during the George W. Bush administration, as SEC Chair.
The Commission’s existing framework for determining whether a digital asset is subject to the securities laws, published in 2019, focuses on whether an asset meets the Howey test, which considers if: a) there is an investment of money; b) in a common enterprise; and c) with a reasonable expectation of profits derived from the efforts of others. “Framework for ‘Investment Contract’ Analysis of Digital Assets,” last updated July 5, 2024.
Under the existing Framework, the SEC brought numerous federal enforcement actions involving digital assets based on an expansive interpretation of Howey. In May 2024, voting 269-136, the House passed H.R. 4763, which laid out a new framework for the regulation of digital assets.
Former Chair Gary Gensler adamantly opposed the bill, testifying before Congress that the existing framework, namely Howey, was adequate.
The new administration appears poised to reconsider the House bill, which the Senate did not act upon. The SEC’s Task Force intends to gather input from a wide range of interested parties and thereafter coordinate with Congress to make any necessary statutory changes.
The Task Force held its first roundtable on March 21, 2025, focused on “foundational questions” such as the challenges in defining digital assets as “securities,” and not surprisingly, Task Force leaders indicated that they would re-assess the application of the Howey test to digital assets. Four more industry roundtables are scheduled.

Approach to Enforcement

On the enforcement side, the SEC has demonstrated its revised approach by withdrawing existing lawsuits and investigations against some of the biggest names in crypto.
On Feb. 10, 2025, in SEC v. Binance Holdings Limited, the SEC filed a motion for a 60-day stay to determine whether the new Task Force could “impact and facilitate the potential resolution” of the enforcement proceeding. No. 23-cv-1599, Dkt. No. 296 (D.D.C. Feb.10, 2025).
The SEC filed the case two years earlier, charging Binance entities and the company’s founder, Changpeng Zhao with a variety of securities law violations, including operating unregistered exchanges, broker-dealers, and clearing agencies.
DOJ also had criminally prosecuted Binance and Zhao for failing to maintain an effective anti-money laundering program and operating an unregistered money transmitting business, resulting in guilty pleas from both in November 2023, and Binance’s agreement to pay over $4 billion in forfeiture and fines.
The foundation of the SEC’s case rested on the application of the Howey test to Binance’s crypto assets, which defendants disputed in motions to dismiss. The D.C. district court largely rejected defendants’ arguments prior to granting the SEC’s stay request and ordering the parties to file a joint status report by April 14, 2025.
In the weeks following the SEC’s February 2025 motion for a stay in Binance, the Commission reversed course in several prominent lawsuits and investigations. On Feb. 24, 2025, executives from Robinhood Crypto, Gemini Trust Company, LLC, OpenSea, and Uniswap Labs reported that the SEC had dropped its investigations into the companies.
The companies each previously had received Wells Notices informing them that the SEC was considering bringing enforcement action for operating unregistered exchanges and/or issuing unregistered securities.
Days later, the SEC announced dismissal of its 2023 civil enforcement action in the Southern District of New York against Coinbase entities for allegedly trading in crypto tokens that it should have registered as securities.
On March 18, Ripple announced that the SEC had agreed to drop its appeal of Southern District of New York Judge Analisa Torres’ 2023 ruling that Ripple’s sales of crypto to retail exchanges did not violate federal securities laws.
A week later, Ripple’s CEO reported that the SEC will return $75 million of the $125 million-court ordered fine that the company placed in escrow last year relating to certain other sales, which was far below the nearly $2 billion in remedies the SEC had originally sought.
As for the Justice Department, on April 7, 2025, the Deputy Attorney General Todd Blanche issued a memorandum to DOJ employees entitled “Ending Regulation By Prosecution” disbanding the National Cryptocurrency Enforcement Team (NCET) and transferring responsibility for digital asset prosecutions to United States Attorney’s Offices.
The guidance directs prosecutors not to pursue, or to drop, prosecutions based on regulatory violations involving digital assets.

The Shifted Enforcement Focus

In the midst of the SEC’s dismissals, the Commission announced the creation of the Cyber and Emerging Technologies Unit, composed of approximately 30 fraud specialists and attorneys, to “focus on combatting cyber-related misconduct” and protect retail investors.
The new unit is a downsized rebranding of the prior administration’s Crypto Assets and Cyber unit, which counted 50 staffers by mid-2022.
The announcement lists seven enforcement areas that the CETU will prioritize:

1. fraud committed using emerging technologies, such as artificial intelligence and machine learning;
2. use of social media, the dark web, or false websites to perpetrate fraud;
3. hacking to obtain material nonpublic information;
4. takeovers of retail brokerage accounts;
5. fraud involving blockchain technology and crypto assets;
6. regulated entities’ compliance with cybersecurity rules and regulations;
7. public issuer fraudulent disclosure relating to cybersecurity.

These categories echo the areas prioritized by the original Cyber Unit created by former Chair Jay Clayton in September 2017 during the first Trump administration: market manipulation, hacking, intrusions into retail brokerage accounts, and cyber-related threats to trading platforms.
The similarities suggest that the new unit will likely follow the original Cyber Unit’s approach of trying to keep the industry credible and safe for compliant actors by attacking blatant frauds and other established forms of misconduct related to digital technology.
Acting SEC Enforcement Division Director Samuel Waldon confirmed this approach in March 24, 2025 comments at the Securities Industry and Financial Markets Association’s Compliance & Legal Seminar, noting that “creative” enforcement cases will be uncommon and fraud will be the focus.
Similarly, the DOJ’s narrowed enforcement guidance directs prosecutors to focus on protecting investors and consumers, rather than pursuing digital asset platforms, and not to charge violations including acting as an unlicensed money transmitter, violations of the Bank Secrecy Act, or violations of securities or commodities law registration requirements unless the violations were willful.
Prosecutors are directed to use alternative criminal statutes like mail and wire fraud, and not to charge crimes that require proving that an asset is a security or a commodity, except that prosecutors may take the position that bitcoin or ether is a “commodity” under the Commodity Exchange Act.

The Future of Enforcement

Past cases brought by the DOJ and by the original Cyber Unit during the first Trump administration provide further perspective on the enforcement activity we may see going forward.
The successful criminal prosecution filed in 2018 in the Southern District of New York against the founders of Centra Tech Inc. would likely fit the updated enforcement criteria of “fraud involving blockchain technology and crypto assets” and “use of social media, the dark web or false websites to perpetrate fraud.”
Prosecutors alleged that defendants claimed to offer cryptocurrency-related financial products, including a debit card, to purportedly allow users to spend cryptocurrency at establishments that accepted credit card payment, and solicited investors by disseminating fictitious information in offering materials via the internet.
Another example of conduct that appears to fit the updated criteria is the District of New Jersey’s ongoing criminal prosecution of Matthew Goettsche, creator of BitClub Network, and his co-defendants, for allegedly soliciting money from investors in exchange for shares of purported mining pools in a claimed Ponzi scheme.
The 2017 prosecution of Joseph P. Willner, a day trader who generated illicit profits by accessing more than 100 brokerage accounts to make unauthorized trades and then attempted to mask his scheme by transferring his proceeds to a digital currency company, filed in the Eastern District of New York, appears to fit the enforcement categories of “takeovers of retail brokerage accounts” and “hacking to obtain material nonpublic information.”
Willner pled guilty in 2019 to conspiring to commit securities fraud and illegal profiting from coordinated trades involving the hacked accounts.
Another example that appears to fit the updated criteria is the SEC Division of Enforcement’s recent charges against two investment advisers, Delphia (USA) Inc. and Global Predictions Inc., for marketing their investment process based on false claims regarding their use of AI and machine learning.
Toronto-based Delphia resolved the charges, paying $225,000 in civil penalties, while Global Predictions paid a $175,000 penalty to settle.
Acting Chair Uyeda’s and Commissioner Peirce’s criticism of the SEC’s late 2024 charges against four companies that allegedly made misleading disclosures of cybersecurity risks and intrusions offer further guidance regarding the SEC’s revised enforcement approach to cybersecurity disclosures. See, “Statement Regarding Administrative Proceedings Against SolarWinds Customers,” Oct. 22, 2024.
As reflected in this criticism, the new administration is likely to focus on company statements that are clearly false or misleading, rather than insisting on the disclosure of information of dubious materiality.

Conclusion

Creating a revised framework for the regulation of digital assets will be challenging, but this Administration’s expressed intention to write clear rules and move away from regulation by enforcement is a step in the right direction.
Coupling clear rules with civil and criminal enforcement focused on true frauds and other clear abuses can only help build the credibility of the crypto industry and compliance-minded actors within it.
Whether this Administration can carry out its streamlined enforcement program free of favoritism or improper political considerations that would undermine its integrity and effectiveness, however, is an open question.