Ex-SEC Official Warns of ‘Death Wish’ as Morgan Stanley Introduces Bitcoin ETF to Clients

A former high-ranking official at the U.S. Securities and Exchange Commission (SEC) has raised concerns over Morgan Stanley’s decision to offer Bitcoin exchange-traded funds (ETFs) to its affluent clients, calling it a risky move.

Morgan Stanley recently authorized its wealth advisors to promote Bitcoin ETF products to their high-net-worth clients, a move that has drawn criticism from the former chief of the Office of Internet Enforcement at the SEC.

On social media, John Reed Stark expressed his apprehension, suggesting that Morgan Stanley’s decision could trigger intense scrutiny from regulatory bodies. He warned that this move could lead to what he believes will be the “largest SEC and FINRA examination sweep in history.”

Stark emphasized that by allowing its brokers to push Bitcoin ETFs to clients, Morgan Stanley has essentially invited trouble, describing it as a “death wish.” He pointed out that most regulators view Bitcoin and other digital assets as a risky investment that could potentially lead investors to financial loss.

The ex-SEC official highlighted the extensive access that compliance and enforcement staff would have to all records related to Morgan Stanley’s Bitcoin sales to retail investors. He predicted that identifying violations in this scenario would be relatively easy for regulatory bodies.

As of May 2024, reports indicated that Morgan Stanley held a substantial stake in the Grayscale Bitcoin Trust (GBTC), with 4.27 million shares valued at $269.8 million.

In conclusion, the decision by Morgan Stanley to offer Bitcoin ETFs to its clients has raised red flags within regulatory circles, with concerns being voiced about the potential risks associated with such investments. The move has sparked debate and could potentially lead to increased oversight and scrutiny from regulatory authorities in the future.