Top 5 SEC Enforcement Developments for February 2025

Each month, we publish a roundup of the most important SEC enforcement developments for busy in-house lawyers and compliance professionals. This month, we examine:

• A change in direction in the SEC’s enforcement strategy against major cryptocurrency platforms;
• The establishment of the Cyber and Emerging Technologies Unit;
• Breach of fiduciary duty charges against a capital management company and a former investment adviser;
• SEC and parallel criminal charges in connection with an alleged commercial real estate fraud; and
• The FCPA pause and how it affects SEC enforcement.

1. The SEC Drops Enforcement Actions and Investigations Against Major Cryptocurrency Platforms

In a significant shift, the SEC dismissed its lawsuit against leading cryptocurrency exchange Coinbase, Inc. (“Coinbase”) and its global parent company. On February 27, 2025, the SEC and Coinbase filed a joint stipulation to dismiss with prejudice the SEC’s enforcement action in light of the agency’s formation of “a crypto task force dedicated to helping the Commission develop the regulatory framework for crypto assets.”  As noted in our June 2023 client alert, the SEC sued Coinbase, alleging violations of the registration provisions of the securities laws and contending that Coinbase operates its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency and that it failed to register the offer and sale of its crypto asset staking-as-a-service program, which the SEC claims is a security. Also on February 27, 2025, Commissioner Hester Peirce issued a statement about the dismissal, criticizing what she called the SEC’s “larger strategy to use its enforcement tool to regulate the crypto industry.”  She called for the SEC’s policy divisions, as opposed to the Division of Enforcement, to develop regulations to address new industries.

The SEC also changed direction in other major digital asset enforcement actions.  On February 10, 2025, the SEC, three Binance-related entities, and Binance founder Changpeng Zhao filed a joint motion for a 60-day stay in light of the launch of the SEC’s crypto task force, which the parties stated “may impact and facilitate the potential resolution” of the litigation. As noted in our June 2023 client alert, the SEC sued the Binance defendants for non-scienter violations of the securities laws, including allegations of operating as an unregistered exchange, conducting unregistered offers and sales of crypto assets, and making misleading public statements.

In addition to the dropped lawsuits, on February 24, 2025, Robinhood Markets, Inc. (“Robinhood”) announced that the SEC closed its investigation into Robinhood Crypto, LLC, a wholly owned subsidiary of Robinhood. According to a Robinhood press release, the SEC advised Robinhood in a letter that it “had concluded its investigation and did not intend to move forward with an enforcement action,” despite issuing a Wells Notice to Robinhood Crypto in May 2024.

In addition to these enforcement developments, on February 4, 2025, Commissioner Peirce released a statement discussing the SEC’s new evolving approach to cryptocurrency regulations. Peirce stated that the Commission’s handling of crypto in the past decade has been marked with “legal imprecision and commercial impracticality.” Peirce stated that the Crypto Task Force is meant to provide a more structured and transparent regulatory framework for digital assets as opposed to an enforcement-based strategy. She outlined 10 non-exhaustive priorities for the Crypto Task Force, the first of which, not surprisingly, is to determine the status of crypto assets under the securities laws. The Crypto Task Force seeks written input and will host several upcoming meetings to discuss crypto asset regulation.

2. SEC Establishes the Cyber and Emerging Technologies Unit

On February 20, 2025, the SEC announced the creation of the Cyber and Emerging Technologies Unit (CETU). The roughly 30-member CETU replaces the former Crypto Assets and Cyber Unit. Unlike the Crypto Asset and Cyber Unit, which brought numerous non-fraud actions in the digital asset and cybersecurity spaces, the CETU will focus on “combatting cyber-related misconduct” and “protect[ing] retail investors from bad actors in the emerging technologies space.”  As stated in the SEC’s press release, the priority areas for the CETU include:

• Fraud committed using emerging technologies, such as artificial intelligence and machine learning;
• Use of social media, the dark web, or false websites to perpetrate fraud;
• Hacking to obtain material nonpublic information;
• Takeovers of retail brokerage accounts;
• Fraud involving blockchain technology and crypto assets;
• Regulated entities’ compliance with cybersecurity rules and regulations; and
• Public issuer fraudulent disclosure relating to cybersecurity.

3. SEC Files Settled Charges Against Investment Advisor for Conflicts of Interest and Breaches of Fiduciary Duty

 On February 14, 2025, the SEC brought a settled administrative proceeding against New York-based registered investment adviser One Oak Capital Management LLC (“One Oak”), and former One Oak investment adviser representative Michael DeRosa, for allegedly failing to adequately disclose advisory fees charged to certain clients converting brokerage accounts to advisory accounts and for failing to disclose conflicts of interest, among other charges.  The SEC alleged that around June 2020, after joining One Oak, DeRosa recommended that his customers convert more than 180 brokerage accounts to advisory accounts. According to the SEC, most of these customers were elderly and were brokerage customers charged on a commission basis.  The SEC alleged that the switch to One Oak resulted in the respondents charging advisory fees to these converted accounts, versus just brokerage commissions. The SEC claimed the accounts had very little trading activity so the shift to advisory fees resulted in significant cost increases and increased compensation for DeRosa, none of which was disclosed.

The SEC also alleged that One Oak did not consider whether it was suitable for the brokerage accounts to be converted to advisory accounts.

The SEC recognized remedial acts undertaken by One Oak and DeRosa.  The order found that One Oak and DeRosa violated the antifraud provisions of Section 206(2) of the Investment Advisers Act of 1940 and One Oak also violated Sections 204 and 206(4) of the Advisers Act and Rules 204-3 and 206(4)-7.  Without admitting or denying the order’s findings, One Oak consented to an order requiring it to pay a civil penalty of $150,000 and to certain undertakings, including retaining an independent compliance consultant to review certain policies related to retail business, while DeRosa agreed to a civil penalty of $75,000 and to a nine-month industry suspension.

4. SEC and DOJ Charges in Connection with a Commercia Real Estate Scheme

On February 12, 2025, the SEC filed an enforcement action in federal court against Elchonon Schwartz and his commercial real estate firm, Nightingale Properties, LLC.  According to the SEC, the defendants raised more than $60 million from at least 700 investors.  The SEC alleged that the defendants used a third-party’s internet platform to solicit the investments, which were packaged as commercial real estate private placements. The SEC claimed, however, that Schwartz misappropriated around $42 million and used the funds to prop up other failing commercial real estate projects and on luxury purchases.  The SEC brought charges under Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act.

Also on February 12, 2025, Schwartz pleaded guilty to one count of wire fraud in connection with the alleged investment scheme.  He is scheduled to be sentenced on May 19 and faces a maximum of 20 years in prison.

5. Executive Order Potentially Pauses FCPA Enforcement

On February 10, 2025, President Trump issued an Executive Order pausing enforcement of the Foreign Corrupt Practices Act (FCPA) for at least 180 days.  This pause aims to address concerns that current enforcement practices are too “expansive and unpredictable” and directs the attorney general to review guidelines and policies governing investigations and enforcement under the FCPA by the DOJ.  For a more detailed discussion, see our client alert on FCPA Enforcement. Based on statements by senior officials within the Division of Enforcement, the SEC, which has civil FCPA jurisdiction, is expected to follow the DOJ’s lead. As of the writing of this alert, however, the SEC’s FCPA website states that FCPA “continues to be a high priority area for the SEC.”

For businesses, this pause offers temporary relief from scrutiny, but long-term compliance with FCPA remains critical. Businesses should continue to maintain and enhance their internal compliance frameworks to mitigate corruption risks and prepare for any future regulatory changes. U.S. companies working in other jurisdictions remain subject to anti‑corruption laws in those jurisdictions.