Regulatory Forum

Q4 was an eventful period for the SEC, marked by a prolonged government shutdown during which routine matters, including examinations, non-emergency enforcement actions, and regulatory guidance, paused. The shutdown was followed by a swift post-reopening surge in examinations and regulatory activity, and significant leadership changes. The Exam Division promptly issued its 2026 Examination Priorities thereafter, and SEC staff issued other notable guidance during the quarter. New regulatory guidance, as well as relevant enforcement developments, are summarized in the Regulatory Forum. While new rulemaking ground to a halt in 2025, as 2026 begins, Chairman Paul Atkins has signaled a renewed focus on regulatory reform to enhance market competitiveness and capital formation. The Standish Compliance team continues to track and analyze regulatory developments and their impact on our private fund and other clients. Let us know if you have questions regarding any regulatory developments or their application to your firm.

During Q4, final judgments were entered in District Courts in New York and Texas against individuals who were previously charged in insider trading cases brought by the SEC's Market Abuse Unit. Bryan Scott McMillan of Texas obtained information from a domestic partner who worked at Apollo that the firm would be acquired by another company. He was ordered to pay disgorgement with interest totalling $99,660 plus a civil penalty of $122,100 and is further subject to an officer and director bar. In addition, Anthony Viggiano of New York, a former financial industry analyst, learned about impending M&A transactions and strategic partnerships while working at two financial institutions and tipped two of his close friends about the upcoming deals, who subsequently traded in advance of the transactions, resulting in illegal gains. We expect insider trading investigations and enforcement actions to continue in the coming year, both against those who themselves misuse material nonpublic information for illegal trading as well as those who tip such information to others. See https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26417 and https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26454.

The SEC continues efforts on multiple fronts to modernize the regulatory framework for digital assets with several new forms of guidance issued in Q4, as discussed in other posts. Notwithstanding those efforts, the SEC does continue to bring enforcement actions related to fraudulent activities involving crypto assets, as discussed below, in another separate crypto asset venture fund post (see Shima Capital Management), and with respect to a broader fraud scheme including crypto assets (see Nathan Gauvin).

In December, the SEC filed charges against three purported crypto asset trading platforms (Morocoin Tech Corp., Berge Blockchain Technology Co. Ltd., and Cirkor Inc.) and four investment clubs (AI Wealth Inc., Lane Wealth Inc., AI Investment Education Foundation Ltd., and Zenith Asset Tech Foundation) alleging that they defrauded retail investors out of more than $14 million in an elaborate scam. According to the Chief of the SEC's Cyber and Emerging Technologies Unit, the complaint "alleges a multi-step fraud that attracted victims with ads on social media, built victims’ trust in group chats where fraudsters posed as financial professionals and promised profits from AI-generated investment tips, then convinced victims to put their money into fake crypto asset trading platforms where it was misappropriated." She reiterated "fraud is fraud, and we will vigorously pursue securities fraud that harms retail investors.” See https://www.sec.gov/newsroom/press-releases/2025-144-sec-charges-three-purported-crypto-asset-trading-platforms-four-investment-clubs-scheme-targeted.

In another December enforcement action, the SEC charged Danh C. Vo, founder and CEO of VBit Technologies Corp., with fraudulently raising over $95.6 million from approximately 6,400 investors and misappropriating $48.5 million of investor funds in connection with his bitcoin mining business called “VBit.” The SEC alleged that Vo solicited investors and lied to them about VBit's business. According to the complaint, Vo offered and sold “Hosting Agreements” that purported to provide investors with a passive income stream through bitcoin mining—the process of using high-speed computers (known as “mining rigs”) to solve complex algorithms to validate and secure transactions on the blockchain and earn bitcoin. However, such agreements were apparently sold for many more mining rigs than VBit was actually operating. Vo was further charged with misappropriating millions for gambling debts and personal gifts before fleeing the U.S. The case is being litigated with other U.S-based family members named as relief defendants who have consented to disgorgement of ill-gotten gains. See https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26448.

In an ongoing high-profile case, the SEC proposed final consent judgments against two former FTX executives and a former executive of Alameda Research, a crypto asset hedge fund owned by the two executives and Samuel Bankman-Fried that was entangled in the FTX scandal. The three individuals consented to permanent injunctions from similar violations, as well as 5-year conduct-based injunctions and 8 or 10-year officer-and-director bars. See https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26450.

The Commodity Futures Trading Commission (CFTC)'s Market Participants Division issued no-action relief to private fund managers that would be required to register as a commodity pool operator (CPO) and/or commodity trading advisor (CTA), but where the funds are limited to qualified eligible persons (QEPs). QEPs include both "qualified purchasers" and "knowledgeable employees" as defined in the Investment Company Act, as well as certain other categories of investors. In 2012, the CFTC rescinded prior Rule 4.13(a)(4) (the "QEP Exemption"), which provided an exemption from registration as a CPO with respect to privately offered commodity pools whose investors were limited to QEPs. However, the CFTC is considering reinstating the QEP Exemption in some form. Accordingly, the no-action letter provides temporary relief while the CFTC contemplates new rules to reinstate the QEP Exemption or publicly determines not to do so. The relief is available to investment advisers registered with the SEC that either (i) are registered or would be required to register with the CFTC as a CPO or (ii) rely on an existing exemption from CPO registration pursuant to CFTC Rule 4.13, with respect to funds: (1) that are exempt from registration under the Securities Act of 1933 and sold without marketing to the public in the U.S. (provided that the prohibition on public marketing does not apply to a Rule 506(c) offering under Reg D); (2) whose investors the CPO reasonably believes are limited to QEPs; and (3) with respect to which the CPO files a Form PF. Private fund managers that meet these conditions can withdraw their CPO or CTA registration or stop filing and affirming exemptions under Rule 4.13, but must file a notice to the CFTC via email informing them that they are relying on the relief. Separately, the no‑action Letter confirms that a CPO relying on the letter would not be required to comply with CFTC Regulation 4.13(e)(2) and offer to participants the right to redeem the participant’s interest in the pool solely with respect to pools for which it is relying on this no‑action position. See CFTC Letter 25-50 below.

Various Divisions and Offices of the SEC issued new guidance and engaged in dialogue with the industry related to crypto assets, including the following:

The Division of Corporation Finance recently issued two no-action letters to the DoubleZero Foundation and Fuse Crypto Limited, stating that it would not recommend enforcement action if their tokens (2Z and FUSE) are offered and sold as described in the respective no-action requests without registering them as securities. These no-action letters are a significant development for the crypto industry and the Decentralized Physical Infrastructure Network (DePIN) sector, providing clarity as to the regulatory implications of utility-focused tokens. The DoubleZero token rewards users for contributing resources (underutilized private fiber lines) into a shared high-speed network. The Fuse token rewards customers for participating in green energy initiatives and optimizing energy delivery. The no-action requests focus on whether each token is an “investment contract” under the Howey test (and thus a security). The SEC’s responding no-action letters conclude that the value of each token is derived from participants’ own technical and operational efforts, rather than an expectation of profit from the efforts of others or from speculative investment or secondary market trading. Therefore, SEC staff agreed not to treat them as securities. See https://www.sec.gov/rules-regulations/no-action-interpretive-exemptive-letters/division-corporation-finance-no-action/doublezero-092925 and https://www.sec.gov/rules-regulations/no-action-interpretive-exemptive-letters/division-corporation-finance-no-action/fuse-crypto-limited-112425.

In December 2025, the Office of Investor Education and Assistance issued an Investor Bulletin to help educate retail investors about the ways investors can hold crypto assets. The bulletin provided an overview of types of crypto asset custody and provided tips to help investors decide how best to hold such assets. See https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins.

Also in December 2025, the Division of Trading and Markets issued several new pieces of guidance to provide greater clarity on the application of the federal securities laws to crypto asset securities. The Division issued a statement expressing its views on how a broker-dealer can maintain physical possession of a crypto asset security it carries for the account of a customer for purposes of complying with Securities Exchange Act Rule 15c3-3 (the Customer Protection Rule). That same day, Division staff supplemented its Frequently Asked Questions (FAQs) to provide guidance for national securities exchanges (NSEs) and alternative trading systems (ATSs) on trading and settlement issues, particularly with respect to "pairs trading" where one of the crypto assets is a security and the other a crypto asset that is not a security. This new guidance supplements previous SEC staff guidance; however, additional questions remain and have been posed by Commissioner Hester Peirce to solicit feedback from the Crypto Task Force and other market participants. Both the SEC and FINRA continue to consider additional regulatory guidance and rulemaking updates. This expanded guidance, along with the DTC no-action letter described in a separate post, will allow financial intermediaries to support multiple asset types and opens the door for further development or a robust tokenized securities market, moving ever closer to Chairman Atkins stated vision of a “SuperApp Exchange” capable of seamlessly accommodating diverse financial instruments within a single platform. See https://www.sec.gov/newsroom/speeches-statements/trading-markets-121725-statement-custody-crypto-asset-securities-broker-dealers and https://www.sec.gov/rules-regulations/staff-guidance/trading-markets-frequently-asked-questions/frequently-asked-questions-relating-crypto-asset-activities-distributed-ledger-technology.

Finally, the SEC’s Crypto Task Force, led by Commissioner Peirce, hosted a roundtable event in December 2025 to facilitate an in-depth discussion on policy matters related to financial surveillance and privacy. In his opening statement, Chairman Atkins opened the event, noting that the participants were set to “wrestle with a question that, at its core, is profoundly American: whether people can participate in modern finance without surrendering their privacy.” He went on to discuss the tension between the federal government’s obligation to protect Americans from national security interests and threats, and what he described as regulators’ “voracious appetite for data,” and the freedom to conduct one’s affairs, including financial affairs, free from government and other surveillance. We expect more to come from these discussions. See https://www.sec.gov/newsroom/meetings-events/crypto-task-force-roundtable-financial-surveillance-privacy.

The SEC's Market Abuse Unit filed settled charges against a medical doctor, Artur Khachatryan, for conducting a manipulative "spoofing" trading scheme over a two-year period. According to the SEC's complaint, the scheme involved rapidly placing a series of orders for thinly traded stock that the trader did not intend to execute - known as "spoof orders," which moved the stock pricing up or down based on whether he was buying or selling. He would then execute bona fide orders on the opposite side of the market at prices that benefitted from the artificial price movement he had created with the spoof orders and cancel the non-bona fide spoof orders. Khachatryan allegedly opened multiple brokerage accounts and also used accounts in the names of friends and family members to conduct the scheme. He was not an investment adviser or fund manager and apparently engaged in the manipulative trading scheme for his own personal benefit. While initially trading during regular market hours, he later began trading after market hours, realizing that such trading was more profitable. Khachatryan provided false information to brokers regarding his trading activities and was reportedly warned by brokers regarding potential manipulative trading, and had brokerage accounts restricted and ultimately shut down by brokers for such activities. Khachatryan agreed to pay disgorgement plus prejudgment interest of nearly $400,000 plus a civil penalty of $112,165 and is prohibited from directly or indirectly opening, maintaining, or trading in any brokerage accounts in his own name, or the name of others for four years.