US SEC forms cross-border task force to tackle international fraud

The United States Securities and Exchange Commission (SEC) has announced the formation of a new cross-border task force to tackle issues related to international fraud, including pump and dump schemes and other vices in the financial investment sector.

According to its press release, the agency mentioned that it is taking the fight against fraud to a new height, formulating a cross-border task force to strengthen the efforts of the Division of Enforcement. In addition, the agency will help them take the fight to the individuals and entities targeting United States residents, combating cross-border fraud that harms investors.

SEC announces formation of cross-border task force

In its press release, the agency mentioned that the cross-border team will be charged to initially focus on investigating potential US federal securities law breaches on the part of foreign-based companies. This will include potential market manipulations such as pump-and-dump and ramp-and-dump schemes.

Pump-and-dump schemes are situations where the team behind an investment, or in some cases, a token, uses false or misleading rumors to create a buying rush that pushes the price of the token up. When the price of the token has attained the highest possible figure, the team then sells their portion of the token, which in turn pulls the price of the token down, making it useless for regular investors.

Over the last few months, several regulators, including the United States Commodity Futures and Trading Commission (CFTC), have warned traders and investors, especially those in the crypto industry, about a series of pump-and-dump schemes. The agency has warned retail traders, who are often the victims in this case, to avoid investments that look like such schemes, giving them clear ways to identify such investments.

Although the commission has warned investors about the need for due diligence and carefulness when patronizing projects in the crypto space, it noted that the task force will not hesitate to go after those who breach its rules. In addition, it said its task force will be charged to focus its enforcement on gatekeepers, especially auditors and underwriters, who help these companies gain access to the United States capital markets.

Task force to focus on securities law violations

According to the agency, the task force will also examine potential securities law violations related to companies from foreign jurisdictions such as China, where governmental control and other factors pose unique risks to investors. Speaking about the new development, Paul Atkins, the SEC Chairman, said the United States welcomes companies around the world seeking access to the US capital markets.

“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,” he added.

Atkins also noted that he has ordered that he has directed other SEC divisions and offices to join hands in this battle. “I have also directed the staff in other SEC divisions and offices, including the Divisions of Corporation Finance, Examinations, Economic and Risk Analysis, and Trading and Markets, as well as the Office of International Affairs, to consider and recommend other actions that would better protect U.S. investors, including new disclosure guidance and any necessary rule changes,” he said.

Division of Enforcement Director Margaret Ryan also talked about the task force and what is expected of the individuals who will make up the group. “The Cross-Border Task Force will leverage the Division of Enforcement’s resources and expertise to combat international market manipulation and fraud. We are pleased to be part of this critical effort to enforce the federal securities laws and protect U.S. investors,” she said.

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