- SEC’s follow-on actions duplicate DOJ cases, straining resources without added value.
- Crypto executives argue SEC enforcement prioritizes headlines over investor protection.
- Critics urge SEC to focus on fraud cases instead of redundant cryptocurrency lawsuits.
The Securities and Exchange Commission (SEC) faces criticism for pursuing enforcement actions that mirror the Department of Justice’s (DOJ) cases, raising concerns about resource wastage. Ripple’s chief legal officer, Stuart Alderoty, has pointed out that these follow-on actions add little value, often leading to uncollectible penalties and failing to protect investors.
His remarks highlight growing frustration with the SEC’s approach to cryptocurrency enforcement, which some argue prioritizes headlines over meaningful regulation.
One major source of waste at the SEC is its habit of filing 'follow-on' actions after the DOJ has prosecuted claims (see FTX). These cases add little value, often result in uncollectible penalties, and are more about headlines than investor protection. The SEC should focus on its…
— Stuart Alderoty (@s_alderoty) February 18, 2025
SEC’s Repetitive Actions Raise Concerns
Alderoty has criticized the SEC’s tendency to file civil charges after the DOJ has already prosecuted financial crimes. He cited the case of FTX, where the DOJ charged former CEO Sam Bankman-Fried with wire fraud, while the SEC later pursued securities fraud charges.
However, the SEC’s actions did not result in significant investor protection or additional consequences for the accused. This pattern, according to Alderoty, reflects a broader inefficiency in the agency’s enforcement strategy.
Besides the FTX case, the SEC has pursued similar actions in other cases, such as the Coinbase insider trading lawsuit. In 2022, the DOJ charged an individual linked to Coinbase with wire fraud, while the SEC followed up with securities fraud charges. Critics argue that these efforts duplicate legal proceedings without offering new enforcement benefits, straining resources that could be used elsewhere.
Ripple and Coinbase Executives Push for Reform
Alderoty has urged the SEC to shift its focus toward its core mission instead of engaging in redundant enforcement. He believes the agency should prioritize genuine fraud cases rather than pursuing non-fraud cryptocurrency-related lawsuits.
His stance has received support from Paul Grewal, chief legal officer at Coinbase, who also questioned the necessity of SEC charges when the DOJ had already decided against pursuing securities fraud.
Moreover, Ripple’s legal team has long been vocal about what they see as regulatory overreach. Last year, Alderoty advocated for dropping non-fraud cryptocurrency cases altogether, arguing that such enforcement actions create uncertainty in the market. Many industry leaders share this view, suggesting that the SEC’s aggressive stance could hinder innovation rather than provide effective oversight.
