Retail investors have lost more than $15 billion as a result of the SEC’s actions, according to Deaton.
The Securities and Exchange Commission (SEC) has been accused by prominent pro-crypto lawyer and U.S. Senate candidate John Deaton of seriously harming small investors’ finances by regulating cryptocurrencies.
In a recent post on X, Deaton said the SEC’s actions have led to losses exceeding $15 billion for retail investors.
According to Deaton, who has defended thousands of XRP holders in court, the SEC’s enforcement actions constituted “gross overreach” and had a negative effect on small investors.
“The SEC’s misconduct and gross overreach caused small investors over $15 billion. On behalf of those 75K small investors I represented, we do not accept the SEC’s apology,” Deaton wrote.
SEC Faces Scrutiny for its Aggressive Regulatory Stance
His critique coincides with growing public criticism of the SEC for its tough regulatory approach to the cryptocurrency sector.
Deaton is scheduled to face Democratic Senator Elizabeth Warren in the November election after securing the Republican nomination for the U.S. Senate in Massachusetts.
He made it clear that he planned to hold the SEC responsible, especially since he believed Senator Warren had been hesitant to do so.
On January 1, 2021, I filed a Writ of Mandamus against the @SECGov stating that the SEC had violated 75 years of legal precedent by claiming the token itself was a security.
— John E Deaton (@JohnEDeaton1) September 13, 2024
I pointed out that orange 🍊 groves, condos, chinchillas, digital assets, and even beavers 🦫, had been… https://t.co/N4EVLkNiaR
The SEC’s position on cryptocurrencies has unexpectedly changed in tandem with the agency’s criticism.
Paul Grewal, the Chief Legal Officer at Coinbase, shared a court document in which the SEC stated that it no longer considers cryptocurrencies to be securities.
Notably, the SEC’s amended complaint against Binance stated, “The SEC regrets any confusion it may have invited” by previously suggesting that tokens themselves were securities.
This is a change from the SEC’s previous stance, especially with reference to XRP, which was categorized as a security in previous court cases.
Deaton has long argued that the SEC’s regulation of cryptocurrencies needs to be made clearer because the agency has frequently acted inconsistently in this regard.
He cited the protracted legal dispute that resulted from the SEC’s failure to offer definitive guidance on XRP.
“All I asked was for the SEC to honor the law and make clear that the token itself (XRP) was NOT the security. The lawyers at the SEC not only refused to do so, but they attacked me personally,” Deaton remarked.
SEC Settles with eToro
Meanwhile, the regulator recently settled a case with trading platform eToro, forcing its U.S. operations to cease trading in nearly all crypto assets and imposing a $1.5 million fine.
This is just one example of the SEC’s ramped-up enforcement efforts in 2024.
According to a Sept. 9 report from Social Capital Markets, the SEC’s total monetary enforcement actions against crypto firms in 2024 had surged to $4.7 billion, a 3,000% increase from the previous year.
The largest move by the regulator occurred in June when it settled for $4.47 billion with Do Kwon, the former CEO of Terraform Labs, making it the SEC’s largest crypto enforcement action to date.
Seven states in the United States recently united to oppose the SEC’s regulation of cryptocurrencies.
The states, led by Attorney General Brenna Bird of Iowa, have filed an amicus brief in which they contend that the SEC’s attempt to regulate cryptocurrencies is an overreach of its authority and a “power grab” that would hinder innovation and the cryptocurrency industry.