New York to reduce crackdown on ‘crypto’ crime

In recent years, the United States Attorney’s Office for the Southern District of New York (SDNY) has been one of the toughest in the country on digital asset crime. However, as Donald Trump takes power after his election victory, the office will allocate fewer resources to the sector to focus on higher priority areas, one senior prosecutor has revealed.

Scott Hartman, co-chair of SDNY’s Securities and Commodities Fraud Task Force, admitted that the office would reduce its focus on ‘crypto’ crime after five years of intense crackdowns.

“We brought a lot of big cases in the wake of the crypto winter – there were a lot of important fraud cases to bring there. But we know our regulatory partners are very active in this space, and we don’t have a lot of people,” stated Hartman in his presentation at the Practicing Law Institute’s 56th Annual Institute on Securities Regulation.

One of the SDNY’s landmark actions was against Sam Bankman-Fried, the founder of the collapsed FTX exchange. The courtroom battle between SBF’s lawyers and the SDNY attorneys lasted over a year, ending in a 25-year prison sentence for the California native.

The office also has outstanding cases against ‘crypto’ crooks, whose fate now hangs in the balance, including against Celsius founder Alex Mashinsky. However, it’s most likely that the prosecutors will conclude the ongoing cases but be very selective on whom to pursue moving forward.

However, when Trump assumes office in January, the SDNY will reallocate its resources to other sectors that the Republican leader deems more important. According to Hartman, immigration will be at the top of the agenda.

Hartman commented that his ‘crypto’ team is already too small to effectively combat crime in the sector: “I hope they don’t trim it more.”

It’s not just SDNY that will lay off digital assets. The Commodity Futures Trading Commission (CFTC) will likely take a similar route, revealed Ian McGinley at the same event. McGinley is the head of enforcement at the CFTC, an agency that, in recent years, has been competing with the Securities and Exchange Commission (SEC) to become the supreme digital asset tsar.

McGinley said the agency only brought its first case against a digital asset firm in 2015. Since then, it has become more active, and by last year, ‘crypto’ lawsuits accounted for nearly half its enforcement actions.

“I don’t know if that trend will necessarily continue,” McGinley admitted.

Beyond reallocating resources away from the sector, Trump has previously revealed that he intends to change personnel. Notable departures will include SEC Chair Gary Gensler and Damian Williams, the U.S. Attorney for the SDNY. The latter will be replaced by Jay Clayton, Gensler’s predecessor at the SEC.

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