SEC's Cryptocurrency Enforcement Actions: An Overview of 20 Major Charges Initiated by the SEC
In 2023, the SEC initiated 46 enforcement actions against cryptocurrencies, an increase of 53% compared to 2022.Author: CCN, Giuseppe Ciccomascolo
Compiled by: Felix, PANews
Key Points:
- The U.S. Securities and Exchange Commission (SEC) is intensifying its enforcement actions against participants in the crypto market, with a record 46 actions taken in 2023.
- Fraud and unregistered securities offerings are the most common charges, particularly against ICOs.
- The crypto community is awaiting the outcome of the Ripple lawsuit.
Enforcement of cryptocurrency regulations remains a top priority for the SEC under Chairman Gary Gensler, with the agency increasing its enforcement actions against cryptocurrency companies and individuals. In 2023, the number of enforcement actions related to cryptocurrency rose by 53% compared to 2022.
However, the crypto community's attention is focused on the ongoing lawsuit between the SEC and Ripple, especially following the latest developments and Ripple's two significant victories in court.
SEC Enforcement Actions Against Crypto Participants
In 2023, the SEC initiated 46 enforcement actions related to cryptocurrency, a 53% increase from 2022. By the end of 2023, the total fines against crypto market participants amounted to approximately $2.89 billion, with $281 million coming from settlements reached that year.
Number of U.S. SEC Cryptocurrency Enforcement Actions, Trading Halts, Late Filings, and Cease and Desist Orders from 2013-2023 l Source: SEC
The most common charges involve fraud and unregistered securities offerings. Of the 46 actions in 2023, 57% involved fraud, 61% involved unregistered securities offerings, and 37% involved both. Additionally, 37% of the actions were related to initial coin offerings (ICOs). Notably, the SEC also took two enforcement actions related to NFTs in 2023.
In 2023, the proportion of enforcement actions targeting individuals rather than companies decreased from 50% in 2022 to 39%. Furthermore, in administrative proceedings, 52% of respondents acknowledged self-reporting, cooperation, or remedial efforts, up from an average of 44% from 2013 to 2022. In two administrative proceedings, the defendants' remedial efforts and cooperation with SEC staff did not result in fines.
Enforcement Actions on Crypto Assets and Networks
Kraken
Date of Action: November 20, 2023
Case Description: Accused of operating the Kraken crypto trading platform as an unregistered exchange, broker, dealer, and clearing agency. Kraken agreed to cease offering or selling securities through its crypto asset staking services or staking programs and to pay a civil penalty of $30 million.
Status: Closed
Celsius Network
Date of Action: July 13, 2023
Case Description: Celsius and its former CEO Alex Mashinsky were accused of violating federal securities laws' registration and anti-fraud provisions, including failing to register the issuance and sale of Celsius's crypto lending product, the Earn Interest Program. Celsius is cooperating with the SEC and has agreed to the relief measures requested in the lawsuit.
Status: Ongoing
Coinbase
Date of Action: June 6, 2023
Case Description: The platform was accused of operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency, and failing to register the issuance and sale of its crypto asset staking-as-a-service program.
Status: Ongoing
Binance and CZ
Date of Action: June 5, 2023
Case Description: The SEC filed a lawsuit in a federal court in Washington, D.C., listing 13 charges against Binance and CZ. The charges allege that Binance artificially inflated its trading volume, misappropriated customer funds, failed to restrict U.S. customers from accessing its platform, and misled investors regarding its market surveillance. The SEC also noted that CZ secretly controlled customer assets, mixing and transferring investor funds. Binance agreed to forfeit $2.5 billion and pay a criminal fine of $1.8 billion, totaling $4.3 billion in fines. CZ was sentenced to four months in prison.
Status: Closed
Justin Sun and His Three Wholly Owned Companies
Date of Action: March 22, 2023
Case Description: The SEC accused Justin Sun and his companies of offering and selling unregistered securities, Tronix (TRX) and BitTorrent (BTT), with some celebrities also implicated. Only DeAndre Cortez Way and Austin Mahone paid fines to settle the case.
Status: Ongoing
Terraform Labs and Do Kwon
Date of Action: February 16, 2023
Case Description: They were accused of orchestrating a multi-billion dollar fraud involving algorithmic stablecoins and other crypto asset securities.
Status: Ongoing
Avraham Eisenberg
Date of Action: January 19, 2023
Case Description: Avraham Eisenberg was accused of attacking the crypto asset trading platform Mango Markets by manipulating the MNGO token. Avraham Eisenberg is currently detained awaiting trial.
Status: Ongoing
Nexo
Date of Action: January 19, 2023
Case Description: Nexo was accused of failing to register the issuance and sale of its crypto asset lending product, the Earn Interest Product (EIP). To resolve the SEC's charges, Nexo agreed to pay a fine of $22.5 million.
Status: Closed
Caroline Ellison and Zixiao (Gary) Wang
Date of Action: December 21, 2022
Case Description: Alameda CEO Caroline Ellison and former FTX Trading CTO Zixiao Gary Wang were accused of participating in a years-long fraudulent scheme against FTX investors.
Status: Ongoing
Thor Technologies, Inc. and David Chin
Date of Action: December 21, 2022
Case Description: The SEC accused Thor Technologies and founder David Chin of offering and selling crypto assets designated as "Thor Tokens" without registration. The court ordered Thor Technologies to pay $744,555 in restitution and $158,638.06 in late interest, and both the company and David Chin to each pay a fine of $150,000.
Status: Closed
SBF
Date of Action: December 13, 2022
Case Description: Regulators accused Samuel Bankman-Fried (SBF) of orchestrating a scheme to defraud investors in FTX Trading Ltd. (FTX). The case concluded with SBF being sentenced to 25 years in prison.
Status: Closed
Kim Kardashian
Date of Action: October 3, 2022
Case Description: The influencer was accused of promoting crypto asset securities offered and sold by EthereumMax on social media without disclosing the compensation she received for the promotion. Kardashian agreed to settle by paying a fine of $1.26 million.
Status: Closed
Bloom Protocol
Date of Action: December 13, 2022
Case Description: Regulators accused the company of conducting an initial coin offering of crypto asset securities without registration. Bloom agreed to pay a fine of $300,000.
Status: Closed
Block Bits
Date of Action: April 28, 2022
Case Description: The SEC accused Block Bits of raising nearly $1 million from over 20 investors based on false statements about a digital asset trading robot that never operated. The company paid a fine for this.
Status: Closed
BlockFi
Date of Action: February 14, 2022
Case Description: BlockFi was accused of failing to register the issuance and sale of its crypto lending products. BlockFi agreed to cease offering or selling BIAs in the U.S.
Status: Closed
Poloniex
Date of Action: August 9, 2021
Case Description: Poloniex agreed to pay over $10 million to settle charges of operating an unregistered online digital asset exchange.
Status: Closed
Gregory Keough, Derek Acree, and Their Company Blockchain Credit Partners
Date of Action: August 6, 2021
Case Description: They issued and sold securities in an unregistered manner through the DeFi market from February 2020 to February 2021. The defendants agreed to a cease-and-desist order, including the forfeiture of a total of $12,849,354 in illegal proceeds and a fine of $125,000 each.
Status: Closed
Loci Inc. and CEO John Wise
Date of Action: June 22, 2021
Case Description: From August 2017 to January 2018, Loci and Wise raised $7.6 million from investors by offering and selling a digital token called "LOCIcoin." They paid a civil penalty of $7.6 million.
Status: Closed
Tierion
Date of Action: December 23, 2020
Case Description: According to the SEC, Tierion raised approximately $25 million by selling "Tierion Network Tokens" (TNT) in July 2017. Tierion paid a fine of $250,000.
Status: Closed
Virgil Capital
Date of Action: December 22, 2020
Case Description: The SEC froze assets due to securities fraud allegations against Stefan Qin. Stefan Qin was accused of deceiving investors in Virgil Sigma Fund LP since 2018, misrepresenting the fund's strategy and using proceeds for personal and undisclosed high-risk investments.
Status: Ongoing
Ripple
The legal dispute between Ripple and the SEC began in December 2020. The SEC accused Ripple of selling XRP as an unregistered security, raising over $1.3 billion. After years of litigation, the case is set to go to trial in April 2024.
Ripple's three partial victories in court last year have brought optimism to the company. These victories also led to an increase in the price of XRP. If Ripple prevails, the asset's value could be positively impacted.
Recently, after a relatively calm period, the lines surrounding data access have been redrawn. Ripple recently filed a motion to keep certain financial documents and sales data related to the SEC's allegations confidential. The SEC opposed this motion, stating that this information is crucial to the case.
However, Ripple argues that historical data is irrelevant due to changes in XRP sales. The XRP community is eagerly awaiting Judge Torres's rulings on several motions, including the final judgment in the relief phase. Despite the case having lasted nearly four years, it is far from over.
