Tuesday, June 18, 2024

Former Chief of SEC Internet Enforcement Defends Chair Gensler, Calls for an End to Personal Attacks

John Reed Stark, a former official at the U.S. Securities and Exchange Commission (SEC) responsible for internet enforcement, has come forward to support SEC Chairman Gary Gensler’s regulatory approach toward the crypto industry. Stark emphasized the need for focusing on facts and legal arguments rather than resorting to personal attacks on Gensler or the SEC staff. He criticized such attacks as ineffective in a courtroom setting and likened them to an attempt to rally the masses without substance.

Stark’s Support for SEC Chair Gensler

John Reed Stark, currently the president of cybersecurity firm John Reed Stark Consulting, served as the founder and chief of the SEC Office of Internet Enforcement for 11 years. With an additional 15 years of experience as an SEC enforcement attorney, Stark holds deep insights into the regulatory landscape. Given his expertise, he defended SEC Chairman Gary Gensler against personal attacks from the crypto community, urging them to abandon such tactics.

Gensler’s Stance and Criticisms

Chairman Gensler has publicly expressed his belief that, apart from bitcoin (BTC), all other crypto tokens are securities. This viewpoint has raised concerns among some who perceive it as a biased judgment. However, when Congressman Patrick McHenry asked Gensler directly in April whether he considered ether (ETH) a security, Gensler evaded a conclusive answer, emphasizing his commitment not to pre-judge the matter.

Addressing Calls for Recusal

In response to demands for Gensler’s recusal from enforcement actions involving crypto, Stark pointed to SEC Commissioner Hester Peirce as an example. Known as “crypto mom” in the cryptocurrency community due to her pro-crypto stance, Peirce’s beliefs would not lead her to recuse herself. Stark highlighted how Peirce has often dissented from or criticized SEC efforts to curb the crypto industry. He compared her criticism of the SEC to “the CEO of Marlboro blaming the FDA for lung cancer caused by cigarettes.”

Stark’s Position and Recommendations

Expressing respect for Peirce, Stark believed her pro-crypto views endangered the very investors she was sworn to protect. He called on Peirce to relinquish her “crypto mom” role and join the ranks of computer scientists who question the legitimacy of crypto, decentralized finance (defi), non-fungible tokens (NFTs), and other aspects of web3. However, he firmly opposed the idea of recusal for either Peirce or Gensler.

Critiques and Open Dialogue

Gensler has faced criticism from many crypto advocates for his enforcement-focused approach to regulating the industry. Furthermore, his meetings with executives from the now-collapsed crypto exchange FTX, including its former CEO Sam Bankman-Fried, who is facing multiple criminal charges, have raised additional scrutiny.

Stark defended the rights of both Gensler and Peirce to express their viewpoints as members of the SEC, including engaging with cryptocurrency executives. He emphasized that this open communication was not regulatory capture but rather a means of fostering better understanding and education.

Experience and Responsibility

Drawing from his experience teaching a cybersecurity/securities regulation course at Georgetown and Duke Law Schools for two decades, Stark highlighted the separation between his classroom discussions and his role as an SEC enforcement lawyer. He argued that the same principle should apply to Chair Gensler, asserting that attacking the facts and legal positions of the SEC would be more productive than personal attacks.

Moving Forward with Facts and Unity

Stark concluded by reiterating the importance of focusing on facts and legal arguments rather than engaging in personal attacks against SEC Chair Gensler or the SEC staff. He deemed such tactics ineffective and characterized them as a transparent and amateurish attempt to manipulate public opinion.

Share your opinion

What are your thoughts on the statements made by former chief of SEC internet enforcement, John Reed Stark? Feel free to share your perspective in the comments section below.

Frequently Asked Questions (FAQs) about crypto regulation

What is the stance of SEC Chairman Gary Gensler on crypto regulation?

Gary Gensler has expressed his belief that, apart from bitcoin (BTC), all other crypto tokens are considered securities. However, he has evaded giving a direct answer on whether he considers ether (ETH) a security, emphasizing his commitment not to pre-judge the matter.

Why has former SEC official John Reed Stark defended Chair Gensler?

John Reed Stark, a former SEC official responsible for internet enforcement, has defended Chair Gensler to urge an end to personal attacks and emphasize the importance of focusing on facts in crypto regulation. Stark believes that attacking the facts and legal positions of the SEC is more productive than engaging in personal attacks.

What is the position of SEC Commissioner Hester Peirce?

SEC Commissioner Hester Peirce, often referred to as “crypto mom,” holds a pro-crypto stance and has frequently criticized or dissented from SEC efforts to regulate the crypto industry. However, despite her beliefs, former SEC official John Reed Stark does not expect her to recuse herself from enforcement actions concerning crypto.

Why has Chair Gensler faced criticism from the crypto community?

Chair Gensler has faced criticism from the crypto community for his enforcement-centric approach to regulating the crypto industry. Additionally, his meetings with executives from the now-collapsed crypto exchange FTX, including its former CEO facing criminal charges, have raised further scrutiny.

How does John Reed Stark view the engagement between SEC officials and crypto executives?

Stark believes that both Chair Gensler and Commissioner Peirce have the freedom to engage with cryptocurrency executives and consider it as good communication and education rather than regulatory capture. He emphasizes that such interactions are essential for understanding different perspectives and staying updated in the regulatory landscape.

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2 comments

SECWatchdog July 3, 2023 - 6:10 am

Gensler meetn wth execs of a collapsed exchange? Hmm, fishy. Transparency is key in regulation. SEC shld be scrutinized. We want fair treatment and no favoritism! #Accountability

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CryptoLawExpert July 3, 2023 - 10:28 am

Stark makes a gd point abt focusin on facts n law in crypto regulatn. Attakn SEC chair or staff is jus a wast of tym. We need sensible discussns n not mob mentality. #FactsMatter

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