Securities Enforcement Roundup – April 2025

In this issue of our monthly Securities Enforcement Roundup, we highlight top securities enforcement developments and cases from April 2025.

In April 2025:

• On the crypto front, the United States Securities and Exchange Commission (SEC) settled a suit against a crypto firm for misleading investors in connection with its sales of crypto mining devices (while also walking away from other charges); the SEC charged a crypto executive with conducting a fraudulent crypto scheme; and in his first public statement as SEC chair, Paul Atkins expressed his eagerness to establish a rational regulatory framework for crypto assets.
• The SEC announced a multi-million-dollar whistleblower award, signaling a continuing commitment to its whistleblower program under the new administration.
• The SEC’s Division of Corporation Finance announced its view that “stablecoins” with specified characteristics are not securities under the federal securities laws.
• Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 25-07 seeking input on modernizing FINRA rules to better align with the evolving nature of member workplaces.

Crypto Enforcement Activity and Developments

On April 23, 2025, Nova Labs Inc., a cryptocurrency firm, agreed to pay a civil penalty of $200,000 to resolve securities fraud charges by the SEC in a litigated action. [1] In its complaint filed in federal court in January 2025, the SEC alleged that Nova conducted unregistered offerings of crypto assets as securities and defrauded investors in connection with those offerings by allegedly making false and misleading statements to prospective equity investors about its relationships with several prominent companies that were not actually using Nova’s blockchain network. [2]

As part of the settlement, the SEC dismissed with prejudice its claims relating to conducting allegedly unregistered offerings, “rest[ing] on its judgment that the dismissal will facilitate the Commission’s ongoing efforts to reform and renew its regulatory approach to the crypto industry[.]” [3] Nova (and many in the crypto industry) construed the settlement as a victory, publicly claiming that the settlement established that crypto mining devices that mine tokens for network growth are not necessarily securities that need to be registered with the SEC. The settlement is consistent with the SEC’s changing approach to crypto regulation, where enforcement actions are being deprioritized in favor of regulatory reform.

On April 22, 2025, the SEC charged a crypto executive with fraudulently raising approximately $198 million under false pretenses and defalcating more than $57 million of those funds. [4] The executive’s scheme allegedly consisted of selling “membership packages” for his purported crypto asset and foreign exchange trading company, with the guarantee of high returns from his allegedly sophisticated trading strategies. [5] He also offered multi-level marketing-style referral incentives to members in order to attract additional investors. According to the SEC, the executive was using the funds to pay for personal expenses, including Lamborghinis and luxury retail items, as well as to pay other investors their supposed returns and referral rewards. In addition to the SEC’s charges, the executive also faces parallel criminal charges in the US District Court for the Eastern District of Virginia.

Lastly, on April 25, 2025, SEC Chairman Paul Atkins made his first public statement since being sworn in on April 21. He delivered his remarks at the SEC’s third Crypto Task Force Roundtable, which focused on discussing challenges registrants face when attempting to safely custody crypto assets. [6]

In his remarks, Chair Atkins expressed his eagerness to “tackle long festering issues, such as regulatory treatment of digital assets,” and praised SEC Commissioner Hester Peirce for her efforts in leading the Crypto Task Force toward developing a rational regulatory framework for crypto asset markets. He also recognized the “entrepreneurs across the United States [who] are harnessing blockchain technology to modernize aspects of our financial system,” which he expects to result in huge benefits. We expect this to be the first of many statements by Chair Atkins as the Commission works to install a “common-sense crypto policy within the United States.” [7]

SEC Awards $6 Million to Joint Whistleblowers

On April 21, 2025, the SEC announced an award of $6 million to joint whistleblowers who voluntarily provided new information to the Commission that first led to the opening of an SEC examination and, according to the SEC, provided a roadmap for the subsequent enforcement action. [8] In the press release, the acting chief of the SEC’s Office of the Whistleblower commented on how the SEC is able to “leverage whistleblower information in various ways, including by prompting an examination,” and “[i]f that examination ultimately results in an enforcement action, the whistleblower may be eligible for an award.” [9]

This whistleblower award, which is the first that the SEC has announced since the change in administration, demonstrates the SEC’s continued commitment to its whistleblower program.

SEC’s Division of Corporation Finance Issues Statement on Stablecoins

On April 4, 2025, the SEC’s Division of Corporation Finance (Corp Fin) published a statement regarding “stablecoins,” a type of crypto asset designed to maintain a stable value relative to a reference asset, such as the US dollar, a commodity like gold, or a pool or basket of assets. [10] Corp Fin explained that certain “Covered Stablecoins” are not securities under the federal securities laws and thus do not need to be registered or exempt from registration to be lawfully issued. Covered Stablecoins are those that are designed to maintain a stable value relative to the US dollar, redeemable for US dollars on a one-for-one basis, and backed by low-risk liquid assets that are equal to or greater than the value of the outstanding stablecoins.

This collateral is known as the “reserve,” which issuers may use to earn a profit but cannot sell unless they are redeeming stablecoins. The statement analyzed whether Covered Stablecoins are securities under the Reves analysis and the Howey test, and determined they are not. The stated impetus for Corp Fin’s statement was “an effort to provide greater clarity on the application of the federal securities laws to crypto assets.” [11]

SEC Commissioner Caroline Crenshaw criticized Corp Fin’s analysis of stablecoins, noting that the statement “painted a distorted picture of the USD-stablecoin market that drastically understates its risks.” [12] In particular, she argued that because more than 90% of stablecoins are distributed via designated intermediaries, stablecoin holders cannot redeem their stablecoins directly with the issuer. Thus, since stablecoin issuers generally have no obligation to redeem retail holders’ stablecoins, the reserve does not meaningfully reduce the risk that retail holders bear by owning stablecoins; when stablecoin holders redeem coins through an intermediary, the intermediary pays them the market price, and is not obligated to redeem the coins for US dollars on a one-for-one basis. [13]

She also questioned whether reserves effectively guarantee that issuers can satisfy unlimited redemption requests, positing that if there is a “run” on an issuer, the issuer may need to rapidly sell reserve assets at reduced prices, and may ultimately be unable to honor all redemption requests. [14]

These conflicting statements suggest the road to developing a comprehensive regulatory framework for crypto is likely to be a bumpy one.

FINRA Seeks Input on Modernizing Its Rules for Member Workplaces

As discussed in our recent LawFlash, FINRA announced Regulatory Notice 25-07 (the Notice) on April 14, 2025, which seeks input from members, investors, and other interested parties on how FINRA can modernize its rules to better align with the evolving nature of modern workplace practices (e.g., more remote and hybrid work arrangements in place of in-person, paper-based workplace arrangements). [15]

The Notice highlights several key areas for potential modernization, including (1) updates to Rule 3110, including reconceptualizing the use of specific types of offices and other locations in defining supervisory requirements; (2) registration processes for members, branches, and individuals; (3) the use of new technologies to support candidate assessment and FINRA’s Continuing Education Program; (4) electronic delivery of information to clients and the use of negative consent letters; (5) recordkeeping and digital communications; (6) compensation arrangements, including the use of personal services entities (PSEs) and continuing commission programs; and (7) fraud protection tools. [16]

FINRA is accepting comments on these topics until June 13, 2025.