SEC Enforcement Challenges: Crypto, Fintech, Musk, Theranos, Fyre Festival, and More

What are the SEC enforcement stories behind major cases of fraud such as the Fyre Festival and Elizabeth Holmes’s Theranos, or famous settlements such as with Elon Musk and Wells Fargo? Stephanie Avakian is the Co-Director of the SEC’s Division of Enforcement. She has worked on some of the most complex and intriguing investigations, settlements, and financial regulations in recent years.

In this interview, we discuss how the SEC and the greater financial regulatory community handle complex fraud cases while putting forth policy innovations for the fintech space.

We first touch on the technical aspects for judging when a virtual currency is a security and when it’s not. It has been a poignant point of debate whether the SEC should treat cryptocurrencies like Bitcoin as financial securities and thus directly regulate them. It has also become more and more difficult to regulate the cyber space at large, such as when celebrities from DJ Khalid to Floyd Mayweather touted cryptocurrencies on social media.

It’s been a long-time debate in the law community what the point of punishment is. When a financial institution commits fraud or crime, what level of punishment should the regulators seek? Do we want to hurt them, cripple them, or merely warn them? In the case of Wells Fargo’s settlement with the SEC, for example, the $500 million fine announced in Feb. 2020 was more about warning and deterring the company from further fraudulent practices than for the purpose of crippling it.

Bio: Stephanie Avakian was named Co-Director of the U.S. Securities and Exchange Commission’s Division of Enforcement in June 2017, after serving as Acting Director since December 2016. She was previously the Division of Enforcement’s Deputy Director, serving from June 2014 to December 2016. Before being named Deputy Director, Ms. Avakian was a partner at Wilmer Cutler Pickering Hale and Dorr LLP, where she served as a vice chair of the firm’s securities practice and focused on representing financial institutions, public companies, boards, and individuals in a broad range of investigations and other matters before the SEC and other agencies. Ms. Avakian previously worked in the Division of Enforcement as a branch chief in the SEC’s New York Regional Office, and later served as counsel to former SEC Commissioner Paul Carey. Ms. Avakian received her bachelors degree from the College of New Jersey and a law degree from Temple University’s Beasley School of Law, both with high honors.

Stephanie Avakian