SEC hoists white flag in ‘crypto’ litigation

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In a clear sign of its new regime in action, the U.S. Securities and Exchange Commission (SEC) appears determined to rid itself of litigation launched under former chairman Gary Gensler’s tenure.

• SEC pauses crypto litigation
• ‘So this is how the SEC dies’
• Peirce says memecoins not SEC’s concern
• CFTC gets a new sheriff
• Ex-Bitfury exec Gould to run OCC
• Ripple, Galaxy rode to TRUMP’s rescue
• BTC no inflation hedge
• WLF reserve plan more plan than reserve

On February 10, the SEC and attorneys representing both the Binance digital asset exchange and its Binance.US offshoot filed a joint motion to stay their legal dustup for a period of 60 days. The motion says the SEC proposed the pause to the defendants in the interest of “judicial economy” and with the suggestion that some kind of “early resolution” of the suit might be possible.

In June 2023, the SEC filed a complaint against Binance for selling unregistered securities, masking manipulative trading on Binance.US, and allowing U.S. customers to illegally access the Binance.com site. While other federal agencies reached a $4.3 billion settlement with Binance in November 2023, the SEC wasn’t a party to this deal, and the agency filed an amended complaint last October.

But Gensler is gone, and acting chair Mark Uyeda holds a far rosier view of crypto operators. Uyeda has overseen the launch of the SEC’s new Crypto Task Force, and the SEC’s motion to stay the proceedings claims this new body “may impact and facilitate the potential resolution of this case.” The parties have agreed to update the court at the end of the 60-day pause period.

On February 12, a different federal court granted a joint request by the SEC and Lejilex, a Texas-based firm that filed an anticipatory suit against the SEC in February 2024 ahead of plans to launch its Legit.Exchange platform. Lejilex had challenged the SEC’s view that most crypto transactions involve investment contracts as defined by the Howey test.

The parties were scheduled for oral arguments on February 20, but the SEC requested that this be delayed until April 11. As with the Binance suit, the SEC’s motion cites the agency’s leadership “transition” and suggests a resolution is in the offing.

In Illinois, the SEC has asked for a similar pause in its suit against market-maker Cumberland DRW, which stood accused of “operating as an unregistered dealer in more than $2 billion of crypto assets offered and sold as securities.” The SEC faced a February 19 deadline to respond to Cumberland’s motion to dismiss but requested a delay until March 21 due to (again) a “potential resolution” of the matter.

‘So this is how the SEC dies’

Taken together, the motions suggest the SEC wants to purge all Gensler-era litigation, likely including one of its most high-profile suits against the Coinbase (NASDAQ: COIN) exchange. In June 2023, the SEC accused Coinbase of operating as an unregistered securities exchange, broker, and clearing agency violating the Exchange Act and the Securities Act.

Coinbase has scored some procedural victories against the SEC, including a ruling last month that allowed the exchange to appeal a failed motion to dismiss the suit. The SEC was given until February 14 to respond to this ruling. It now seems almost a given that the agency will seek a similar ‘pause’ while negotiating a ‘resolution’ that lets Coinbase off the hook.

As a further sign of just how disdainfully the SEC’s new leadership views the crypto litigation still in play, the Wall Street Journal reported earlier this month that its primary crypto litigator, Jorge Tenreiro, had been reassigned to the agency’s IT department. The SEC also reassigned Natasha Guinan, who helped write the since-repealed crypto accounting rule SAB121, to an unspecified role.

The Associated Press quoted former SEC official Corey Frayer expressing dismay at the ‘pause’ in the Binance suit, saying the SEC “delaying what appears to be a slam dunk case in Binance while welcoming crypto’s return to its pre-FTX days is a bad omen for any other ongoing crypto litigation.”

As former SEC enforcement director John Reed Stark observed, “halting litigation after an election is not just unusual—it is wholly unprecedented in SEC history.” While Stark wished “all the best” to crypto fans, the SEC’s surrender “will make matters a lot worse not only for investors but for everyone everywhere.”

With new access to banking and other traditional finance channels, “the crypto-contagion will spread like a plague and infect all aspects of global securities markets—including those who have nothing to do with, and want nothing to do with, digital assets. So when the cryptoverse implodes, ask not for whom the bell tolls, it tolls for thee (especially the SEC, who will bear the brunt of the wrath and blame).”

SEC’s Peirce doesn’t seem to want this job

In yet another harbinger of just how ‘wild west’ the crypto sector is about to become, SEC commissioner Hester Peirce—who leads the new crypto task force—isn’t sure memecoins fall under the SEC’s purview.

Earlier this week, Peirce told Bloomberg that “[t]here are lots of people introducing memecoins right now, [and] facts and circumstances matter. But many of the memecoins that are out there probably do not have a home in the SEC under our current set of regulations.”

The volume of new memecoins exploded following last year’s launch of Pump.fun, allowing users to create and distribute new tokens in minutes. While primarily active on the Solana network, Pump.fun also supports Coinbase’s Ethereum’ layer 2′ network Base, and both networks have been flooded with millions of new utility-free sh*tcoins.

Peirce didn’t explain precisely why memecoins wouldn’t qualify as securities, but she did say that the new-look SEC has “an innovation policy that allows people to innovate, that allows people to try new things.” Peirce described herself as a “freedom maximalist” and said she believes “government is there to serve the American people, not to stymie them when they’re trying new things.”

Peirce went on to suggest that Congress or the Commodity Futures Trading Commission (CFTC) might want to tackle memecoin oversight, but most tokens “probably are not within [SEC] jurisdiction.”

Paul Atkins, President Donald Trump’s nominee for permanent SEC chair, has yet to be grilled by the Senate’s ‘advise & consent’ brigade, as agency chiefs traditionally take a backseat to cabinet-level nominees. Peirce said Tuesday that the SEC would wait until Atkins is fully installed in the corner office before establishing its full crypto agenda.

CFTC gets its man

Speaking of the CFTC, a February 12 Bloomberg report revealed that Trump wants Brian Quintenz as the regulator’s new permanent chair. Quintenz is most definitely a crypto ally, given his current role as head of policy at venture capital group a16z, a major investor in crypto projects, many of which have their own native (and useless) tokens.

Quintenz served as a CFTC commissioner between 2016-2020, and his tenure was marked by his strong support for the CFTC adding digital assets to its oversight mix. The CFTC is expected to be granted primary oversight of crypto should the current Congress approve legislation that mirrors the FIT21 market structure bill passed by the House of Representatives in the previous Congress.

Quintenz tweeted his “great honor to be nominated” by Trump, who was president during Quintenz’s stint as CFTC commissioner. Quintenz went on to claim that the CFTC is “well poised to ensure the USA leads the world in blockchain technology and innovation.”

Later that day, Fox Business reporter Eleanor Terrett reported that the CFTC and SEC are mulling ways to “effectively collaborate on crypto regulation.” This could include reviving the CFTC-SEC joint advisory committee that was launched in 2010 but went dormant not long thereafter.

Gould as gold?

On February 11, Trump made yet another crypto-friendly nomination to an influential post in his administration. Trump picked Jonathan Gould to lead the Treasury Department’s Office of the Comptroller of the Currency (OCC) after appointing Rodney Hood as acting OCC chief last week.

Currently a partner at D.C.-based law firm Jones Day, Gould briefly served as chief legal officer at blockchain infrastructure/block reward mining hardware firm Bitfury from February to September 2022. Gould isn’t a stranger to the OCC’s ways and means, having served as senior deputy comptroller/chief counsel during Trump’s first term.

However, it remains to be seen how long Gould will have this job, as the Wall Street Journal reported this week that the Trump administration was considering combining the OCC’s role with that of the Federal Deposit Insurance Corporation (FDIC). The idea is for there to be one leader of both the OCC and FDIC, with the OCC taking over bank supervision efforts from the FDIC.

Trump is also reportedly mulling to fold FDIC’s operations into the Treasury, effectively scrapping FDIC as a separate entity. That would require Congressional approval while putting one man atop a combined OCC/FDIC org chart could be done by executive order alone.

The FDIC recently welcomed its own new acting boss in Travis Hill, whose appointment was hailed by the digital asset sector thanks to his being on board with their unproven allegations of getting ‘debanked’ under the Biden administration.

Destination Moon(pay)

Sticking with Trump, among the tokens that the SEC’s Peirce suggested might not require SEC scrutiny are $TRUMP and $MELANIA, the memecoins launched by Trump and his wife shortly before his inauguration last month.

Execs at the Moonpay fiat-to-crypto onramp—which reportedly contributed $1 million to Trump’s 2025 inaugural committee—were caught flat-footed by the retail demand for TRUMP purchases. Moonpay has a deal with Moonshot, which has a deal to sell the TRUMP/MELANIA tokens via Gettrumpmemes.com.

While Trump is all about the crypto nowadays, his base isn’t necessarily blockchain-savvy, making Moonshot/Moonpay’s ability to facilitate token sales via credit/debit cards and mainstream payment apps all the more crucial to TRUMP’s success.

Speaking to the When Shift Happens podcast, Moonpay’s president of enterprise, Keith Grossman, said that the early $TRUMP volume on Saturday (January 18) was so massive it almost completely drained the company’s liquidity. With much of their assets “locked” in accounts at Wall Street investment firm BlackRock (NASDAQ: BLK), there was no way to access this capital until the 21st (the 20th being a federal holiday).

Moonpay was faced with the need to buy $100 million worth of USDC, the dollar-denominated stablecoin issued by Circle, to purchase $TRUMP on behalf of retail clients via Solana. They called Mike Novogratz, founder of Galaxy Digital Holdings, who, after getting certain guarantees from Moonpay staff and some Blackrock staff willing to work weekends, gave Moonpay the money.

The next day, these funds were exhausted, but $TRUMP buyers weren’t. So Moonpay hit up Brad Garlinghouse, CEO of XRP-issuer Ripple Labs. Yada yada yada, Ripple sent $60 million to Galaxy, which then relayed the cash to Moonpay. Grossman said Moonpay repaid the total amount borrowed by Tuesday afternoon.

Grossman added that Moonpay had onboarded 750,000 new users during the TRUMP frenzy. That number is uncomfortably close to the 800,000-plus wallets that collectively lost $2 billion when the token’s value plummeted after peaking around $74 (and is struggling to stay above $15 as this is written).

So the next time someone tries to tell you ‘crypto’ has no practical use case, just remember the three-quarters-of-a-million Trump fans who might have thought twice about buying $TRUMP if they’d had a few more days to think about this impulse purchase. With crypto, it was straight to the front of the line, baby!

Trimming BTC’s inflation hedge

Trump has yet to deliver on his election campaign pledge to create a ‘national digital asset stockpile,’ having thus far only committed to studying the concept. That’s a far cry from the ‘strategic bitcoin reserve’ that many BTC maximalists thought they’d be getting (and hoped would light a fire under BTC’s stagnant fiat price).

Whatever you want to call it, opponents of using taxpayer dollars to buy speculative tokens got a boost on February 12 via the federal government’s latest consumer price index (CPI) stats.

The CPI data showed inflation ticking higher from December to January, and the result was a swift crash in BTC’s fiat price—from $96,500 to $94,000—in a matter of minutes. Perma-bulls with credit cards like Michael Saylor appear to have swiftly ridden to BTC’s rescue (back to $96,600 as we speak), but absent that emergency ‘fix the narrative’ interventions, the argument for BTC as a hedge against inflation now seems even more hollow.

WLF reserve plans more plan than reserve

Not everybody has given up on their ‘reserve’ plans, however. The Trump family’s decentralized finance (DeFi) project, World Liberty Financial, just made good on its plans to establish a strategic reserve. Sort of.

On February 11, WLF’s official X account announced the unveiling of “the Macro Strategy, our strategic token reserve designed to bolster leading projects like Bitcoin, Ethereum, and other cryptocurrencies that are at the forefront of reshaping global finance.”

The purpose of this “transformative initiative” is, like WLF’s non-existent DeFi applications—coming soon, we promise!—more than a little murky, beyond serving as “a robust financial backbone” for WLF.

The WLF digital wallets currently contain less than $40 million worth of assets after transferring over $350 million worth of tokens (mostly ETH) to Coinbase for what they insist are “ordinary purposes.” Half of the remaining stash is comprised of USDC and the Tron network’s native TRX (Tron founder Justin Sun is a WLF adviser).

WLF did say it was “actively engaging with esteemed financial institutions to contribute tokenized assets to our reserve.” Esteemed or not, one of these institutions is Ondo Finance, with which WLF announced a ‘strategic collaboration’ earlier this week. (Ondo was another $1 million donor to Trump’s inaugural.)

The goal of this pair-up is “to advance the adoption of tokenized real-world assets (RWAs) and bring traditional finance onchain.” WLF is “exploring the integration of Ondo’s tokenized assets into the WLFI network as treasury reserve assets.”

Ondo boasts its own tokenization platform, its own Layer-1 blockchain, bespoke tokens and more. WLF’s ‘web3 ambassador’ Donald Trump Jr. called the new collaboration “a significant step forward in aligning traditional financial systems with blockchain innovation.” Perhaps, but only if WLF actually DOES SOMETHING.

The day after this reserve announcement, WLF was busy doing damage control when the X account of WLF co-founder Zach Witkoff was allegedly hacked to promote a memecoin (BARRON) claiming to be issued by Trump’s son Barron. The alleged hacker(s) claimed, “Trump should confirm the news soon.”

The official WLF X account quickly announced that Witkoff’s account “was compromised, and a fake Barron meme was posted. Please do not engage. We are resolving the issue ASAP.” But not before BARRON’s market cap briefly topped $73 million, then lost 99% of its value.

Assuming WLF’s hacking claim is legit—not everyone is convinced it is—this isn’t Barron’s first brush with fake memecoin infamy, following last June’s rumors that Barron was behind the launch of TrumpCoin (DJT). The real creator was later exposed as Martin’ Pharma Bro’ Shkreli, who claimed to have had help from professional misogynist Andrew Tate in pumping DJT before pulling out the rug. The company you keep…

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