SEC’s Chief Enforcer Resigns: Is the Exit Crypto-Related?

• The SEC’s enforcement director, Gurbir S. Grewal, is stepping down.
• Grewal directly oversaw the countless enforcement actions that have pitted the SEC against the crypto industry.
• The timing and perceived rush of Grewal’s exit has sparked speculation.

Under the Gary Gensler -led administration, the SEC has launched a barrage of enforcement actions against the crypto industry, asserting, much to the chagrin of industry participants, that decades-old securities laws are sufficient to guide the industry. 

The industry, meanwhile, has not taken the continued affront lying down, brazenly taking the fight to the regulator where possible in court and Washington, D.C. Following a recent organizational shake-up at the SEC, some suggest that the agency might begin feeling the heat.

SEC’s Chief Enforcer Hangs It Up

The SEC’s enforcement director, Gurbir S. Grewal, is stepping down after a three-year stint at the agency. The SEC revealed Grewal’s departure in a statement on Wednesday, October 2, noting that his exit will be effective from October 11.

While the SEC’s perceived anti-crypto stance is often attributed to Gensler alone, Grewal, as director of the division of enforcement, directly oversaw the recommendation of these enforcement actions, over 100 in total, for the commission’s consideration. These enforcement actions include the SEC’s cases against Kraken , Binance , Coinbase , and ConsenSys .

The announcement of Grewal’s exit has unsurprisingly sparked a flurry of responses from the crypto community, who have welcomed the development. Moreover, several influential community members have raised eyebrows at the timing of Grewal’s exit and the short notice given, insinuating that it could be a fallout of the recent tongue-lashing the agency has received at Capitol Hill for its crypto approach.

During a congressional hearing at the end of September 2024, Gensler was grilled about the SEC’s crypto approach, with Minnesota Representative Congressman Tom Emmer particularly calling into question the agency’s controversial handling of its case against DEBT Box and recent u-turn on the definition of crypto asset securities in its case against Binance.

Bashing Gensler for the agency’s approach to crypto regulation, Emmer asserted:

“Your inconsistencies on [crypto], sir, have set this country back. We could not have had a more historically destructive, or lawless, chairman of the SEC.”

Alluding to this hearing, prominent crypto lawyer Gabriel Shapiro suggested that Grewal was taking the fall.

“I'd guess he has to take the fall after Gensler was grilled about who was responsible for the Debt Box fiasco and whether that person has resigned,” Shapiro wrote.

Meanwhile, others like Bitwise Chief Investment Officer Matt Hougan marked Grewal’s resignation up as another sign of Washington’s desire for a more balanced approach to crypto regulation.

However, these suggestions that Grewal’s resignation has something to do with crypto have faced resistance from experts like ConsenSys Senior Counsel Bill Hughes and Stanford Law Lecturer Marc Fagel. Both of them boast experience in the government, Hughes as a former Associate Deputy Attorney General and Fagel as a former SEC regional director.

“Wild Conspiracy Theories?”

Hughes suggested that the timing of Grewal’s move allowed the current SEC chair, Gensler, to decide the next enforcement division leader, dismissing speculation that Grewal’s resignation was somehow linked with crypto as “wild conspiracy theories.”

“oh god here come the wild conspiracy theories.  My frens, the end of the fiscal year was two days ago and he's served for a couple of YEARS now in a demanding job. Sometimes you know when you are going to exit so you can take some time off before starting your big fancy new private sector job come 2025. but most importantly, no it probably has precisely nothing to do with crypto,” he wrote.

Hughes’ view received support from Fagel, who contended that contrary to the overarching speculation, the timing of Grewal’s exit was not unprecedented.

“This is the typical trend in recent administrations. The division director often leaves at this time so that their replacement can be named by the current Chair rather than by an acting Chair amidst a possible change in SEC leadership,” the former SEC regional director wrote.

Following Grewal’s departure, the SEC enforcement division’s deputy director, Sanjay Wadhwa, will act as acting director. Wadhwa has been with the SEC since 2003, serving in various investigative and enforcement capacities at the New York Regional Office, where he cut his teeth into several insider trading and abusive banking practices cases. Wadhwa left the New York Regional Office to work as deputy enforcement director under Grewal in 2021.

On the Flipside 

• The over 100 crypto enforcement actions recommended by Grewal’s unit represent a small percentage of the staggering over 2,400 cases recommended by the unit during his tenure.
• Despite the hopes of a more balanced SEC approach to crypto with Grewal out, it is likely safe to assume that the top enforcer’s replacement, Wadhwa, shares a similar stance on crypto as Grewal as he worked side by side with him over the past three years.

Why This Matters 

Grewal has played a key role in the SEC’s efforts to regulate crypto, efforts that several crypto industry participants have decried as unjust because of the perceived absence of clear rules.