Crypto Trader Sentenced in $47M Fraud Case—SEC’s Controversial Surveillance Tool Strikes Again

Another scalp for the SEC’s much-debated Market Abuse Unit—this time nabbing a trader who allegedly siphoned $47 million from investors. The case spotlights the agency’s aggressive (some say overzealous) use of data analytics to police crypto markets.

While regulators cheer the conviction as a win for ’market integrity,’ critics whisper about false positives and the irony of trusting centralized surveillance to police decentralized finance. Just another day in the Wild West of digital assets—where the sheriff’s algorithms are as opaque as the transactions they monitor.

SEC’s trade tracking tool faces resistance

Citadel Securities LLC and the American Securities Association sued the SEC in 2023, contending the regulator lacked congressional approval to run the database. 

Republican lawmakers echoed those concerns, warning that CAT might expose investors’ personal or political information. Donald Trump’s return to the White House and the publication of the conservative “Project 2025” policy blueprint have pushed the debate inside the commission. 

Paul Atkins, sworn in as SEC chair last week, told senators during his confirmation hearing that CAT’s costs had “ballooned” and that its scope “has kind of veered off.” He has ordered a review of the project.

Financial-industry lobbying began even before Atkins took office. The SEC has already removed direct personal identifiers such as names and birth years from CAT data. In February, the Securities Industry and Financial Markets Association urged the commission to halt fee collections tied to the system while its future is decided.

CAT has recently triggered two more enforcement actions

Alongside the Nuveen matter, the SEC credits CAT with triggering two other recent enforcement actions. In November, a Federal Reserve Bank examiner pleaded guilty to trading on secrets about firms he supervised. 

The following month, a Florida day trader settled claims that he used thousands of fake “spoof” orders to nudge thinly traded stocks.

Standing before Judge Gardephe on Monday, Williams, who has advanced Parkinson’s disease, apologized “to the court, my family, and Nuveen’s employees and clients,” adding, “I’m embarrassed and ashamed.” 

Federal guidelines called for 57 to 71 months. The maximum possible term was 75 years, though such penalties are rare in white-collar cases. Prosecutors said the pair used prepaid “burner” phones to avoid detection. On one August 2022 morning, they made more than $55,000 by shorting Match Group Inc. shares just before Nuveen unloaded a large block.

Williams had asked the judge to spare him prison, calling himself “an uncommonly decent and giving man.” Gardephe rejected that plea, citing the “blatant nature” of the wrongdoing and the sheer volume of illegal trades.

Under a forfeiture order filed later Monday, Williams agreed to give up more than $35 million held in Charles Schwab Corp. and JPMorgan Chase & Co. accounts, along with a six-bedroom, six-bathroom home in West Linn, Oregon.

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