SEC builds accounting fraud unit as crypto oversight tilts toward rulemaking

The U.S. Securities and Exchange Commission (SEC) has set up a new department dedicated to examining violations in accounting practices and financial reporting, which shows that the agency has begun paying more attention to companies’ disclosures at a time when its approach toward crypto is quickly moving from litigation to rulemaking.

For the crypto industry and auditors who analyze their financial reports, this action delivers an unambiguous signal: even though the SEC is expanding its digital asset policy framework through the Crypto Task Force and regulations, it is actively improving its power of evaluating public firms’ disclosures to investors.

A team of accountants and lawyers, led by a Gibson Dunn alum

The new Financial Reporting and Accounting Unit will operate within the SEC’s Division of Enforcement, focusing on accounting fraud, financial reporting violations, and misconduct involving accountants and auditors.

The unit will be led by Timothy Zimmerman, who joined the SEC in May 2026 after spending 12 years at Gibson Dunn & Crutcher and serving as deputy general counsel at RSM US LLP, the fifth-largest U.S. accounting firm. Enforcement Director David Woodcock, who also joined the SEC in May, previously worked at Gibson Dunn.

The new unit combines two teams of lawyers and an accounting expert team using existing personnel and some new employees.

Why the SEC says it needs the capacity now

The SEC is trying to regain its expertise after a significant drop in accounting-related enforcement. According to Cornerstone Research, enforcement actions in the field of accounting and audits had dropped 68% in 2025 compared to the previous year.

Enforcement activity decreased overall. According to White & Case, the SEC had 313 prosecutions in fiscal 2025, a decline from the 431 in 2024 and the agency’s settlements were only $808 million, which is its lowest so far since 2012. The company believes that this decline is mainly caused by the lack of staff, the 43-day government shutdown, and a number of vacancies in the leadership.

Woodcock explained that the aim of the new unit is to retain specialized expertise.

“It’s about bringing that expertise together and allowing them to focus on those things that frankly are hard,” Woodcock stated, while adding that the ultimate goal is “making us better and smarter at them.”

Back to issuer disclosures, an old SEC beat

This unit is a manifestation of SEC Chair Paul Atkins’s overall “back to basics” approach, which is aimed at insider trading, market manipulation, breaches of fiduciary duty, and accounting fraud.

The trend began earlier in the year. At the 2026 SEC Speaks Conference, SEC Enforcement Chief Accountant Ryan Wolfe mentioned that accounting cases are “not dead,” and noted the SOX Group created for auditing and Sarbanes-Oxley violations. The Financial Reporting and Accounting Unit is a continuation of an initiative that was announced in March that targets misconduct within the audit profession.

Investigations in accounting represent one of the most technically challenging types of investigations carried out by SEC experts who deal with issues related to the valuation of assets and ascertaining impairment.

What auditors and the PCAOB should watch

The enlarged unit is likely to alter the manner in which the SEC collaborates with the Public Company Accounting Oversight Board (PCAOB), the body that has been responsible for many audit enforcement cases since 2018. Both bodies are collaborating so as to delineate their responsibilities better.

Recent incidents give a glimpse of the focus of the unit. This year, the SEC has settled an accounting fraud with Archer-Daniels-Midland worth $40 million and penalized the auditing firm EisnerAmper for improper asset valuation. Osman Nawaz, the principal deputy director of the Enforcement Division stated that Zimmerman‘s knowledge will be essential for specialized enforcement activities of the agency.

Even if the unit does not work specifically with cryptocurrency matters, its activities may still have a direct impact on crypto firms and issuers of tokens who adhere to U.S. securities law.

Companies are increasingly holding cryptocurrencies, as well as generating revenues from staking, custodial services, and stablecoins, leading to more complicated requirements for accounting and disclosures.

The SEC has been vocal about companies needing to provide disclosures to its investors that are relevant to any particular situation. Atkins has also joined the call for the SEC to issue “clear rules of the road” for crypto issuance, custody, and trading while protecting investors.

These efforts mean that the SEC is focusing on developing crypto policies separately from enforcement and increasing supervision over how all companies, both traditional and digital, report their finances.

Bottom line, the SEC is not retreating from oversight of crypto companies—it is shifting from questions about whether a token is a security toward whether crypto businesses are accurately reporting their financial condition.