Former SEC enforcement chief pans Bitcoin: “True market of BTC is zero”

Bitcoin and its altcoin brethren have supporters, and they have detractors. Former SEC enforcement chief, John Reed Stark, a cybersecurity expert and attorney who worked for 20 years at the SEC’s enforcement division, falls into the latter camp. He is no friend of Bitcoin or any other cryptos for that matter, publicly calling Bitcoin “a worthless sham that’s only useful for facilitating crime, and the public must be warned about the full spectrum of the crypto-sphere’s sleaziness”.

Stark recently delivered a blistering attack in a “Law 360” column, where he noted that the Securities and Exchange Commission would soon “crack down on initial exchange offerings (IEO)”, which he called an “unregulated crypto-casino fundraising mutation.” After years of tracking down the bad guys, Stark is adamant that Bitcoin and its other crypto spin-offs are nothing more than investment con games. His advice: Steer clear of these hucksters or risk losing your money to these “predators”, as he labels them.

Stark is no fan of the fundraising antics that are prevalent in the crypt-verse. He believes that ICOs and IEOs are nothing more than “an enticing medium for fraud, manipulation, insider trading, hacking, and a broad range of chicanery”. More specifically to the latest exchange related funding mechanism: “IEOs represent yet another blatant attempt to hijack a similar-sounding acronym — IPO — in an effort to lure investors seeking to get rich quick. However, just like ICOs, the IEO has not a single element in common with the IPO (other than the first and last letters of its acronym).”

Having dealt for 20 years in the slime world of money-laundering, terrorism financing, and ransomware extortion schemes, Stark is all too familiar with the dark side of crime. His personal appraisal of Bitcoin is direct: “Much of bitcoin’s value, outside of mere speculation, is derived solely from its ability to facilitate criminal activity. Need a fake I.D., bottle of opiates, a cache of credit card numbers, or a thousand Social Security numbers? Need a way to collect a ransomware payment? Need to fund terrorist-related activities? Need to hire a hitman? Cryptocurrencies like bitcoin have become the payment of choice for these, and a slew of other, criminal enterprises.”

Stark’s last position at the SEC was as chief of the SEC’s Office of Internet Enforcement for 11 years. He now heads his own consulting firm, which focuses on digital compliance issues and how firms deal with data-breach situations. He has a long history of dealing with ransomware attacks and revealed that an unfortunate “secret” on the commercial front is that most companies are willing to pay the ransom, typically demanded in Bitcoin. A recent study discovered that 98% of ransomware demands are paid via Bitcoin. Why Bitcoin? Per Stark: “It’s fast, reliable, verifiable, subject to little regulation, and virtually untraceable. Bitcoin is ideal for ransomware extortion schemes.”

We are but a decade into the cryptocurrency revolution, and its unregulated nature has definitely attracted, as John Stark notes, “a growing global cadre of dangerous criminals.” But, organized crime has infiltrated every financial service on the planet. Cryptos are no exception. Fraud will never be eliminated, but it can be managed to an acceptable level. The crypto world will have to adapt over time, or as Mr. Stark predicts, it will inevitably “collapse”.


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