SDNY to Reduce Focus on Digital Asset Crime as Trump Takes Power

In recent years, the United States Attorney's Office for the Southern District of New York (SDNY) has been one of the toughest in the country on digital asset crime.

The United States Attorney’s Office for the Southern District of New York (SDNY) has been a leading prosecutor of digital asset crime in recent years. However, as Donald Trump prepares to take office following his election victory, the office will shift its focus away from the sector to prioritize other areas, according to a senior prosecutor.

During a presentation at the Practicing Law Institute’s 56th Annual Institute on Securities Regulation, Scott Hartman, co-chair of SDNY’s Securities and Commodities Fraud Task Force, acknowledged that the office will reduce its attention to "crypto" crime after five years of heightened crackdowns.

"We brought a lot of big cases in the wake of the crypto winter — there were a lot of important fraud cases to bring there. But we know our regulatory partners are very active in this space, and we don’t have a lot of people," Hartman said.

One of the SDNY’s most high-profile actions was its case against Sam Bankman-Fried, the founder of the collapsed FTX exchange. The legal battle between SBF’s attorneys and the SDNY prosecutors spanned over a year, ultimately concluding with a 25-year prison sentence for the California native.

The office also has several outstanding cases against "crypto" executives, including Celsius founder Alex Mashinsky, the fate of which now hangs in the balance. It is likely that the prosecutors will conclude the ongoing cases but will be highly selective in deciding who to pursue moving forward.

Once Trump takes office in January, the SDNY will begin reallocating its resources to other sectors that the Republican leader has indicated are more important. According to Hartman, immigration will be at the top of the agenda.

Hartman noted that his "crypto" team is already too small to effectively combat crime in the sector. "I hope they don’t trim it more," he said.

The shift away from digital assets will not be limited to the SDNY. At the same event, Ian McGinley, head of enforcement at the Commodity Futures Trading Commission (CFTC), indicated that the agency will also likely scale back its focus.

The CFTC, which has been competing with the Securities and Exchange Commission (SEC) to become the primary digital asset regulator in recent years, brought its first case against a digital asset firm in 2015. Since then, it has ramped up its activity, with "crypto" lawsuits making up nearly half of its enforcement actions by last year.

"I don’t know if that trend will necessarily continue," McGinley said.

In addition to reallocating resources away from the sector, Trump has previously indicated that he intends to make changes in personnel. Notably, SEC Chair Gary Gensler and Damian Williams, the U.S. Attorney for the SDNY, are both expected to depart. The latter will be succeeded by Jay Clayton, Gensler’s predecessor at the SEC.