Former SEC Lawyer Reveals How New SEC Leadership May Influence Ripple Case and Crypto Lawsuits

Marc Fagel, a former SEC lawyer, recently addressed how changes in the Securities and Exchange Commission’s (SEC) leadership might affect ongoing crypto lawsuits, including the prominent Ripple case. Fagel's insights come amid discussions about whether current enforcement actions are swayed by political shifts or recent scandals.

Enforcement Actions and Political Influence

In response to a query from Jungle Inc, a noted crypto influencer, about the potential impact of a pro-crypto president on SEC enforcement, Fagel explained that new SEC administrations generally do not interfere with ongoing enforcement actions. This means that changes in leadership are unlikely to alter the course of the Ripple case or other active lawsuits. Fagel stated:

“Generally enforcement is apolitical – a violation of the law is a violation of the law, and most enforcement recommendations are approved unanimously. Crypto might be different, and a new administration could take a different approach.”

Potential Changes in Case Priorities

Fagel acknowledged that while ongoing cases are likely to remain unaffected by changes in leadership, a new SEC administration might adjust priorities for future cases. If a more crypto-friendly administration comes into power, the settlement processes for cases like Ripple’s might become less contentious. Furthermore, such a shift could influence whether the SEC opts to appeal decisions in favour of blockchain firms.

Broader Implications for Crypto Lawsuits

Similar potential changes could impact other high-profile crypto lawsuits involving companies like Binance, Coinbase, and ConsenSys. However, the ultimate resolution of these cases will still depend on court decisions. Even under a pro-crypto administration, if misconduct is proven, regulatory action would still be necessary.

Current Enforcement Climate

Fagel discussed the SEC’s increased aggressiveness under the current Chairman, Gary Gensler, compared to the previous administration led by Jay Clayton. The SEC has intensified its scrutiny of the crypto industry, responding to major fraud cases involving FTX, Celsius, and Terra Luna. This heightened enforcement contrasts with the prior administration’s focus on more overt violations, such as those associated with initial coin offerings (ICOs).

Impact of Major Scandals

Fagel dismissed the idea that the SEC’s increased crackdown is solely due to political figures like Senator Elizabeth Warren. He attributed the stricter enforcement to substantial financial losses resulting from recent scandals. Fagel warned that a more lenient approach by the SEC could backfire if another significant scandal emerges. He cautioned:

“If they take a more hands-off approach on crypto, all it takes is one more FTX/Celsius, and they’re going to ratchet it up again.”

Conclusion

Marc Fagel’s analysis underscores the generally apolitical nature of SEC enforcement actions, while also highlighting that shifts in leadership could influence future regulatory priorities. The ongoing intensity of SEC scrutiny reflects broader concerns about fraud and misconduct in the crypto industry, with potential for future adjustments depending on administrative changes and emerging scandals.