White-collar crime thrives in good economic times and in bad. In strong markets, fraudsters prey on optimism, luring investors with promises of easy gain. During financial downturns, they exploit fear by pitching supposedly safe investments to risk-averse victims.
Historically, federal authorities have played a critical role in investigating and prosecuting financial frauds. Prosecuting white-collar crime has traditionally been popular with both parties. Both Republican and Democratic administrations have recognized the clear public interest in stopping fraudsters.
Historically, federal authorities have played a critical role in investigating and prosecuting financial frauds.
The Trump administration, however, has signaled a clear shift in priorities at the agencies responsible for policing financial fraud. This laissez-faire attitude towards enforcement, combined with drastic budget cuts and a loss of experienced personnel, creates legitimate concerns about a wave of white-collar crime and tax fraud that leaves most Americans vulnerable to victimization.As The Wall Street Journal recently reported, the Trump administration is “retreating” from certain white-collar criminal prosecutions and “effectively redefining what business conduct constitutes a crime.” For example, Attorney General Pam Bondi in February issued a memo that, among other actions, redirected money laundering investigation and prosecutions toward cartels and transnational criminal organizations.
Trying to cripple the organizations responsible for fueling America’s drug problem is a worthy goal, but there is no need to simultaneously deprioritize prosecuting the criminals who steal directly from the American people. (The same memo disbanded the Justice Department task force responsible for targeting corrupt Russian oligarchs and other foreign kleptocrats.) Going after conmen or kingpins should not be a “Sophie’s choice”; we can do both, and indeed, it is the responsibility of the attorney general to do so.
The administration is also abandoning foreign bribery prosecutions. In February, President Donald Trump issued an executive order pausing all DOJ investigations and enforcement of violations of the Foreign Corrupt Practices Act (FCPA), a federal statute that prohibits American companies from bribing foreign officials to obtain business. The order suggested that FCPA enforcement unfairly punished American companies for conduct that is “routine” in other countries. This sends a dangerous message. Allowing U.S. companies to pay bribes, just because foreign companies do, only creates a race to the lowest-common denominator of global business integrity.
Major changes in the government’s approach to cryptocurrency are another cause for concern. On April 7, the DOJ issued a memo that said it would achieve Trump’s goal of ending “the regulatory weaponization against digital assets [cryptocurrency].” It’s unclear what that means. But the memo was clear that it was instructing the scaling back of prosecution of securities laws and violations of the Bank Secrecy Act (which requires financial institutions to help detect and prevent financial fraud and money laundering, in connection with cryptocurrency). DOJ also disbanded the National Cryptocurrency Enforcement Team that played a key role in investigating financial cybercrimes, and the SEC has reportedly dropped more than a dozen cryptocurrency cases.
In February, the SEC paused its suit against crypto entrepreneur Justin Sun for cryptocurrency manipulation. As The Wall Street Journal reported, Sun has invested $75 million in the crypto project World Liberty Financial that is backed by the Trump family. Then in March, Trump pardoned three founders of a cryptocurrency exchange who pleaded guilty in 2022 to violations of the Bank Secrecy Act.
As cryptocurrency markets evolve, clear and consistent regulation is necessary. But the Trump administration is going in the opposite direction — a disturbing trend that promises to risk the victimization of more Americans, as cryptocurrency fraud has skyrocketed to nearly $4 billion annually.
As cryptocurrency markets evolve, clear and consistent regulation is necessary.
One reason why white-collar crime may not be prosecuted as much is because mass federal firings by the Trump administration mean that there are far fewer officials left to prosecute it. There has also been an immeasurable loss of talent across agencies. The Wall Street Journal described efforts to “clean house at the Justice Department, swapping out and sidelining career supervisors who were responsible for charging crimes such as corruption, price fixing and securities fraud.” Reuters reported that high-level departures at the SEC could “significantly hamper the watchdog’s efforts to police markets and protect investors.” And DOJ asked U.S. attorney’s offices around the country to justify retention of any employee with less than two years of service who doesn’t work on administration priorities of immigration, national security or public safety.The most significant impact is likely to be at the IRS, which has lost approximately 13% of its workforce with even larger cuts being considered. Beyond the obvious concern that these massive cuts will lead to more tax avoidance and less tax revenue across the entire country, the IRS’s Criminal Investigation Division also works hand-in-hand with DOJ prosecutors on investigating and prosecuting financial crimes beyond tax evasion.
Although the Justice Department has not seen a significant reduction in personnel, the Consumer Financial Protection Bureau, which protects Americans against deceptive business practices by banks, credit card companies and other financial providers, has seen a 12% reduction in staff.
Fewer than 90 days into Trump’s term, his administration is dimming the lights on uncovering and prosecuting white-collar crime. Downgrading the importance of white-collar criminal prosecution and financial regulation weakens the enforcement landscape, emboldens criminals and ensures that more Americans will be victimized.
Unless the administration changes course, we could be looking at a particularly dangerous environment for American consumers and investors for years to come.
