DOJ Announces Establishment of Task Force on Market Integrity and Consumer Fraud; SEC Chairman Highlights Actions Involving ICOs

Earlier today, Deputy Attorney General Rod J. Rosenstein announced that the President issued an executive order establishing a new Task Force on Market Integrity and Consumer Fraud, comprised of a number of divisions of the Department of Justice (DOJ), including the FBI and various United States Attorney’s Offices as designated by the Attorney General.  The focus of the Task Force is to investigate and prosecute consumer and corporate fraud that targets the public and the government, with a particular emphasis on the elderly, service members and veterans.

The Deputy Attorney General was joined by Securities and Exchange Commission (SEC) Chairman Jay Clayton, Acting Director Mick Mulvaney of the Consumer Financial Protection Bureau (CFPB), and Chairman Joe Simons of the Federal Trade Commission (FTC) in making the announcement.  The executive order directs the DOJ to invite the participation of multiple agencies across the executive branch, including the SEC, CFPB and FTC, as well as the Departments of Defense and Health and Human Services, the Commodity Futures Trading Commission, and many others.  Deputy Attorney General Rosenstein stated that the Task Force will draw on “pooled resources, including subject-matter expertise, data repositories, and analysts and investigators” to “identify and stop fraud on a wider scale than any one agency acting alone.”

In his remarks, Chairman Clayton highlighted the SEC’s actions involving allegedly fraudulent Initial Coin Offerings (ICOs), noting that the SEC has frozen tens of millions of dollars in assets raised in certain ICOs, while working in parallel with federal criminal authorities.  Clayton also noted that the SEC is working with other regulators to “provide clarity on the application of our laws and regulations to new and emerging products” such as digital currency.  “[C]yber-enabled crime is an area of focus that the SEC shares with many others” on the new Task Force, he said.

In previous blog posts, Goodwin has reviewed and analyzed the SEC’s coordination with the DOJ, and other federal and state regulators, as well its guidance regarding certain permissible token sales.

Today’s announcement by high-ranking government officials of a multi-agency Task Force with a broad mandate is significant as it demonstrates the administration’s commitment to initiating criminal and regulatory investigations against perceived bad actors in various marketplaces, including a focus on emerging digital products.  In addition to stressing the Task Force’s pooled resources, Deputy Attorney General Rosenstein emphasized that the creation of the Task Force is consistent with the DOJ’s recently announced policy to encourage cooperation among federal, state, local and foreign regulators to prevent “piling on” (i.e., multiple actions by regulators and penalties for the same conduct) and instead achieve “joint” results that metes out appropriate punishment.  The Deputy Attorney General also noted that companies that choose to voluntarily report misconduct, cooperate with Task Force investigations and remediate harm will potentially benefit by being exposed to less severe punishment.