Good evening and thank you for that generous introduction.

Before I begin, let me give the required disclaimer that the views I express today are my own and do not necessarily reflect the views of the Commission or its staff.[1]

It's a privilege to be here this evening as the UJA honors Barry Berke. I've had the privilege of knowing Barry for many years, as an adversary, as a colleague, and, most importantly, as a friend. Barry is well known to many as one of the most sought after and talented trial lawyers in the country. Beyond that, he is a peerless example of integrity, skill, and devotion to his clients. But most of all – and this label is particularly appropriate in this setting – he's a real mensch. So for all of these reasons, he is a fitting honoree for tonight's event.

It's also an honor to have the podium for a few minutes at one of our country's truly great philanthropic organizations. The UJA does admirable work in many arenas, including fighting poverty and caring for the elderly and those with disabilities and, most recently, assisting with the response to the hurricanes that struck the U.S. last year.

UJA's philanthropic work is guided by a single, overarching question: "What are today's most urgent challenges?" From there, the UJA draws on its expertise to deliver resources where they will have the greatest impact. That is truly the hallmark of a great organization.

While our mission is obviously far different, in the Enforcement Division of the SEC, we strive to emulate this approach.

With the encouragement of the SEC's Chairman, we have spent the last year focusing on two "big-picture" questions:

What are the most urgent challenges and risks facing investors and markets today, and how can we best use our limited resources to address them in the most thoughtful and effective way?

My Co-Director, Stephanie Avakian, previewed our thinking on both of these questions in a speech she gave last fall at a securities industry event.[2] I would like to pick up where she left off and give you an update on our efforts and progress roughly six months later.

At a high level, the problems we are confronting today are the same as they've always been, from outright fraud and manipulation to less obvious forms of misconduct that undermine confidence in the markets and tip the scales in a way that harms investors, particularly retail investors.

But on the ground, the contours of the risks to the markets and investors are always changing and evolving – partly due to the seeming unending creativity and ingenuity of bad actors, and partly due to technological change.

As a result, the Division of Enforcement has to adapt to these changes to continue its mission of protecting investors and maintaining confidence in our markets.

And we must do this while recognizing that our resources are limited and need to be thoughtfully deployed.

As Stephanie mentioned in October, we remain focused on protecting retail investors, who are among the most vulnerable participants in our markets. And one of the most urgent issues that we have identified – for both retail investors and in the market more broadly – concerns the potential for investor harm flowing from the rapid pace of technological change and the increased complexity in the financial markets.

I want to spend some time this evening talking about how we are responding to these issues, and how we are evaluating our impact on the market and to the Commission's mission. We think hard about the messages we want to send and the types of cases we want to bring, and we focus our resources accordingly. This is, perhaps, best illustrated by our efforts in cyber-related matters, including initial coin offerings – also known as ICOs – and through our continuing focus on holding individuals accountable for misconduct.

Cybersecurity, Cryptocurrencies and ICOs

Let me start with the Division's approach to cyber-related misconduct.

We have identified four broad subject areas that pose significant risks to market integrity and to investors, and we've shifted significant resources to address them. Those areas are:

• Illegal trading and manipulation resulting from hacking incidents;
• Failures by registrants to safeguard information or ensure system integrity;
• Cyber-related disclosures by public companies, which you saw illustrated in our recent matter involving the company formerly known as Yahoo!;[3] and
• ICOs, cryptocurrencies, and blockchain-related issues.

I want to focus in more detail on this last category, in part because there has been a lot of public attention on our recent Enforcement activities in this space. As many of you know, in just a few years, cryptocurrency and ICO markets have grown from a mere concept into a phenomenon.

ICOs have raised more than $6 billion so far in 2018, which compares to roughly $4 billion raised by ICOs in all of 2017, and less than $100 million in 2016.[4] The offerings are happening in dozens of market segments, from finance, trading, and e-commerce to gaming, advertising, transport, and social networking. And the money is being invested by a broad base of investors.

The novelty of ICOs, coupled with excitement about the potential utility of the underlying blockchain or distributed ledger technology, makes these offerings particularly enticing for some investors.

But the growth in the ICO market can obscure the fact that these offerings are often high-risk investments. The issuers may lack established track records. They may not have viable products, business models, or the capacity for safeguarding digital currencies from theft by hackers. And some of the offerings are simply outright frauds.

Despite the risks, digital assets may hold promise as a new and efficient means for carrying out financial transactions, and ICOs – if done properly – could be an innovative way to raise funds and provide investors access to the capital markets. So both within the Division of Enforcement and across the agency as a whole, we have pursued a balanced approach – rooting out fraud and ensuring compliance with the law without discouraging lawful and socially beneficial capital formation and technological development.

We've tried to strike the balance by being proactive and working collaboratively with experts both within the agency and outside of it. What does that mean in practice?

First, the Commission and the staff of the Division of Enforcement have spoken clearly about ICOs and related issues as part of a concerted effort to provide meaningful information to market participants.

Last July, the Commission issued a public report that articulated how ICOs fit into the established legal and regulatory framework governing securities offerings.[5] Recognizing that every ICO is different, the report provides meaningful insight into a number of critical questions related to ICO offerings, including the question of whether and when an ICO constitutes an offering of securities.

In addition to speaking to the substantive legal issues, we've also coordinated within the agency to speak publicly on these topics about brass tacks issues relevant to investors. In November of last year, Enforcement issued a joint statement with the SEC's Office of Compliance Inspections and Exams warning investors about making investments in ICOs on the basis of celebrity endorsements.[6] Then, in March of this year, we issued a joint statement with the Division of Trading and Markets, alerting investors of risks associated with online trading platforms for trading digital assets.[7]

We've also worked to speak with one voice with our fellow regulators, and in January 2018, we issued a joint statement with the CFTC's enforcement director, warning of fraud in the ICO market.[8]

Cases brought by the Enforcement Division often receive a great deal of attention, but our hope is that speaking clearly about these issues to market participants may mean there are fewer cases that we have to bring.

Second, we have shifted and consolidated investigative resources to bring the full measure of our growing expertise to bear on this fast-developing market.

The Division formed the Cyber Unit last year, which comprises close to thirty investigative attorneys nationwide. The attorneys have investigative experience handling cyber-intrusions and the dark web, and some of them led our earliest enforcement efforts in the ICO space. So this is a formidable group, and they're all now working under the same umbrella.

In addition to the Unit, we're committing resources to, and are drawing on the talent and insights of, the entire Division. Some of the leading cases in this area were joint efforts by the Cyber Unit and staff from other parts of the Division, working in tandem with other experts throughout the agency.

Third, in a number of cases, the Commission has taken early action to stop or deter misconduct, protect investors, and preserve assets. One such matter involves charges against three co-founders of a purported financial services start-up who, we allege, orchestrated a fraudulent ICO that raised more than $32 million from thousands of investors last year.[9] We allege that the company's founders lured investors with misleading claims about their business partnerships, lies about their management team, and also paid celebrities to tout the ICO on social media.

In a number of our cases, there have been clear indicia of outright fraud, but the Commission has also brought cases to enforce the registration laws. Last December, we settled with a food-review startup after determining that the company's ICO was an unlawful, unregistered offering. The company refunded investor proceeds before any tokens were distributed after the Commission intervened.[10]

We have also suspended trading in the stock of numerous companies because of concerns about the accuracy and adequacy of information about the companies regarding, among other things, the adoption of blockchain technology.[11]

In addition to these filed actions, the Division has dozens of ongoing investigations involving ICOs.

Taken as a group, these matters and investigations highlight what we believe are some of the greatest risks to investors today. We could not have accomplished these things on such a short timeframe had the Division not shifted the necessary resources and worked collaboratively within the agency.

Given the potential of ICOs to fundamentally alter the process by which issuers raise money, they have a significance to our markets that far outweighs strict notional dollar amounts.

The same holds true in other cyber-related areas. Hacking and data intrusion undermine investor confidence in the fair and orderly operation of our markets, and the corresponding temptation to skirt disclosure of such events only compounds the problem.

So cyber-related matters reflect an unquestionably urgent group of challenges, warranting the allocation of significant agency resources. And so far, the work of the dedicated professionals on the staff to move so quickly into this space is paying dividends.

For example, according to recent news reports, more issuers are already seeking to register their ICOs with the SEC.[12]

The book has not yet been written on the Division's response to these emerging trends. But if recent experience is a guide, our commitment to meeting these emerging cyber-related issues head-on stands to greatly benefit investors both today and in the future.

Individual Liability

Shifting now to the subject of individual liability, as we've adapted to confront new challenges in our markets, the Division of Enforcement has continued to look for ways to maximize the effectiveness of its work. By being smart and resourceful in the Cyber arena, we hope to discourage misconduct before it takes root. And in a world of finite resources, it is imperative that enforcement actions advance goals of specific and general deterrence.

One of the primary ways we do that is with a focus on identifying and charging culpable individuals. Bad actors undermine the hard-earned trust essential to the health and stability of our capital markets. I view individual accountability as perhaps the most effective general deterrent tool in our arsenal, because it can have a broad effect on corporate culture in a way that immeasurably benefits individual investors, preventing misconduct before it starts.

Over the past year, the Commission has charged individuals in almost 80 percent of the Enforcement actions it has brought.

Late last year, we charged senior executives of the second-largest mining company in the world with fraud related to misrepresentations about the valuation of a multi-billion dollar asset.[13]

We also charged senior executives of a Canadian oil and gas company for their roles in an extensive, multi-year accounting fraud[14] and we charged the engagement partner at a Big Four accounting firm for audit failures.[15]

And recently, we charged the founder and senior executives of a high-profile pharmaceutical start-up. We obtained significant relief from the founder, who agreed to forfeit her control of the company, pay a large fine, and be subject to a ten-year officer and director bar.[16]

Of course, our emphasis on individual accountability has costs, because building and prosecuting cases against individuals is inherently resource-intensive. In many of our cases, it can be relatively straightforward to identify corporate misconduct. The harder part of the investigation is going the next step: identifying culpable individuals, testing the viability of their defenses, and creating a record that will stand up at trial.

Individuals are simply more likely to litigate charges than corporate issuers. So when the Division of Enforcement makes a decision to recommend charging an individual, we are by extension making a decision to commit our limited resources to a single matter, over a long period of time.

But we ultimately believe that the cost is worth it. As a practical matter, pursuing individuals likely has an impact on the total number of enforcement actions we can bring in any given period. But from our perspective, the deterrent effect of individual accountability has outsized effects on our markets.

Closing

In everything we do, we are working with an eye toward the two objectives I've described this evening: Protecting investors by timely targeting areas that are susceptible to abuse; and working to advance the goal of deterrence in order to maximize our effectiveness in a resource-constrained environment.

If we can do those things, then I think we can fairly say that we're making real progress in addressing the most pressing issues in the securities markets today.

We don't judge our effectiveness based on simplistic metrics – such as the raw number of enforcement actions filed or total fines and disgorgement. Those numbers are an easy way to compare activity in one period to another, but I think they ultimately measure the wrong kinds of outputs and drive the wrong kinds of incentives – encouraging us to divert resources away from challenging, high-impact cases and to seek penalties without regard for investors' best interests. In my view, neither of those things makes sense.

Rather, our success should be rightly measured by how much our work contributes to the overall degree of transparency and integrity within our markets, the extent to which investors are positioned to make sound and informed decisions, and the quality and efficiency of our efforts to address misconduct. Obviously, those qualitative results are much more difficult to measure. But I think a thoughtful approach to assessing our effectiveness is what makes sense.

I hope that my comments this evening have given you some insight into our work and to our goals and objective.

Shifting back to the focus of the evening, I look forward to witnessing the great work of the UJA in the coming months and years. And I extend my congratulations again to Barry for his well-deserved honor. Thank you again for your time this evening.