SEC Forms Force to Crack Down on Pump-and-Dump Schemes

TLDR

Table of Contents

SEC launches new task force to target offshore crypto fraud and cross-border pump-and-dump schemes.
The task force will investigate foreign companies manipulating U.S. markets through low-liquidity crypto tokens.
SEC warns gatekeepers and underwriters enabling fraud will face full enforcement action.
Recent crypto scams drained over $140M, prompting stricter SEC oversight across borders.

A new international task force has been created by the U.S. Securities and Exchange Commission (SEC) to target growing financial fraud, with a strong focus on crypto-related pump-and-dump schemes. The move comes amid a rise in market manipulation linked to offshore actors and low-liquidity digital tokens. The SEC aims to improve investor protections and close enforcement gaps that bad actors have used to avoid accountability.

SEC Launches Cross-Border Task Force

The SEC has officially announced the formation of a Cross-Border Task Force to strengthen enforcement against financial fraud carried out across international borders. The group will focus on cases involving foreign-based companies, especially those using offshore entities to avoid U.S. securities laws.

SEC Chairman Paul S. Atkins said in a press release, “We welcome companies from around the world seeking access to the U.S. capital markets. But we will not tolerate bad actors – whether companies, intermediaries, gatekeepers or exploitative traders – that attempt to use international borders to frustrate and avoid U.S. investor protections.”

The task force will be made up of staff from the Division of Enforcement and will use the SEC’s full legal resources to carry out investigations. These efforts will focus on areas where enforcement has been limited due to jurisdictional challenges, such as China and other regions with limited cooperation on securities enforcement.

Margaret A. Ryan, Director of the Division of Enforcement, stated, “This initiative strengthens our ability to enforce securities laws and protect American investors from schemes designed to exploit global financial systems.” The task force will also review the role of auditors, underwriters, and market gatekeepers who help foreign firms access U.S. markets.

Focus on Crypto Pump-and-Dump Schemes

One of the task force’s early priorities is to investigate crypto-related pump-and-dump schemes that are increasingly targeting U.S. investors. These schemes often involve low-value digital tokens that are promoted through misleading marketing or social media hype. Prices rise quickly, and early holders sell at a profit, leaving others with steep losses.

The SEC’s move comes after several recent cases showed the growing scale of the problem. A token labeled “CR7,” issued on the Solana blockchain, quickly jumped to a market cap above $5 million before dropping to zero. A fake version of the token had earlier caused losses of over $140 million.

Another example includes a meme coin linked to rapper Kanye West, which saw a rapid rise and fall in August. The project briefly surged, then collapsed, leaving many investors with losses. Similar coins, often linked to celebrities or online influencers, have followed the same pattern.

Larger projects have also been investigated. The LIBRA token project collapsed after $87 million was pulled from liquidity pools by insiders. A trader then exited with $107 million, which caused the token’s price to drop by nearly 94%. These cases have increased the need for coordinated oversight between countries.

Greater Scrutiny on Market Gatekeepers

Alongside targeting fraud schemes, the Cross-Border Task Force will review the roles played by financial intermediaries. These include auditors, underwriters, and legal firms that help bring foreign companies to U.S. markets. Many of these entities are key parts of transactions that later raise concerns about fraud or misconduct.

By reviewing their actions, the SEC aims to hold accountable those who facilitate access to American investors. The agency has said that gatekeepers must meet the same standards as U.S.-based firms, regardless of where they are based.

The task force plans to use existing international agreements and partnerships to carry out investigations and share information. These partnerships may include regulators in Europe and Asia to improve case coordination and enforcement. The SEC continues to push for broader cooperation to address financial crimes that cross borders and affect U.S. investors.

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