Morgan Stanley Will Attract Government Scrutiny With Its Recent Embrace of Bitcoin (BTC), Says Former SEC Official

A former chief of the Office of Internet Enforcement at the U.S. Securities and Exchange Commission (SEC) says Morgan Stanley will attract government

Morgan Stanley recently permitted its wealth advisors to pitch Bitcoin exchange-traded fund (ETF) products to its high-net-worth clients. Now, a former chief of the Office of Internet Enforcement at the U.S. Securities and Exchange Commission (SEC) says the move will attract heavy scrutiny from regulators.

On the social media platform X, John Reed Stark says that by allowing its brokers to pitch BTC ETFs to clients, Morgan Stanley has now subjected itself to what he says will become “the largest SEC and FINRA examination sweep in history.”

According to the ex-SEC official, Morgan Stanley’s effort to push BTC ETFs to clients is tantamount to a “death wish,” as he believes most regulators see Bitcoin and other digital assets as a “novel way” to set investors’ money on fire.

“SEC and FINRA compliance staff and SEC and FINRA enforcement staff will have instantaneous access to every single record, document, email, text, voicemail, phone conversation, etc. pertaining to Morgan Stanley’s bitcoin sales to retail investors.

This resplendent, abundant and easily accessible treasure trove of evidence will be available to the SEC and FINRA not only with the click of a mouse in the form of a request for documents or testimony, but also upon demand during an on-site surprise ‘for-cause’ inspection.

In my honest opinion, identifying violations will be like shooting fish in a barrel. So whoever Morgan Stanley’s current compliance director is — well, good luck with that.”

The former SEC official adds that he believes regulators are particularly keen on examining the sales practices of brokers who pitch BTC ETFs to clients who are over 65 years of age.

“I’m sure the SEC and FINRA will be paying special attention to the sales of bitcoin ETFs by any broker to any customer over the age of 65. I’m also sure that any broker who sells a bitcoin ETF to a customer who is over 75 will get an extra helping of attention from the regulators.”

As of May 2024, Morgan Stanley reportedly held 4.27 million shares of the Grayscale Bitcoin Trust (GBTC) valued at $269.8 million.

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