Author: CCN, Giuseppe Ciccomascolo
Translation: Felix, PANews
Key Points:
- The U.S. Securities and Exchange Commission (SEC) is increasing its enforcement efforts against participants in the crypto market, taking a record 46 actions in 2023.
- Fraud and unregistered securities issuance are the most common charges, especially against ICOs.
- The crypto community is awaiting the outcome of the lawsuit against Ripple.
Enforcement of cryptocurrency remains a top priority for the U.S. SEC. Under the leadership of Chairman Gary Gensler, the commission has intensified its enforcement efforts against cryptocurrency companies and individuals. Regulatory actions related to cryptocurrency in 2023 increased by 53% compared to 2022.
However, the attention of the crypto community is focused on the ongoing lawsuit between the U.S. SEC and Ripple, especially after the latest developments and two significant victories for Ripple in court.
SEC Enforcement Actions Against Participants in the Crypto Space
In 2023, the SEC initiated 46 enforcement actions related to cryptocurrency, a 53% increase from 2022. As of the end of 2023, the total fines imposed on participants in the crypto market amounted to approximately $2.89 billion, with $281 million coming from settlements reached that year.
Number of SEC cryptocurrency enforcement actions, trading suspensions, delinquent filings, and cease-and-desist orders from 2013 to 2023 l Source: SEC
The most common charges involve fraud and unregistered securities issuance. Of the 46 actions in 2023, 57% involved fraud, 61% involved unregistered securities issuance, and 37% involved both. Additionally, 37% of the actions were related to Initial Coin Offerings (ICOs). It is worth noting that in 2023, the SEC also took two enforcement actions related to NFTs.
In 2023, the proportion of enforcement actions targeting individuals rather than companies decreased from 50% in 2022 to 39%. Furthermore, in administrative litigation, 52% of respondents admitted to self-reporting, cooperating, or making remedial efforts, higher than the average of 44% from 2013 to 2022. In two administrative litigations, defendants' remedial efforts and cooperation with SEC staff did not result in fines.
Enforcement Actions Against Crypto Assets and Networks
Kraken
Date of Lawsuit: November 20, 2023
Case Description: Accused of operating the Kraken cryptocurrency trading platform as an unregistered securities exchange, broker, dealer, and clearing agency. Kraken agreed to cease offering or selling securities through its cryptocurrency collateral services or staking programs and to pay a civil penalty of $30 million.
Status: Resolved
Celsius Network
Date of Lawsuit: July 13, 2023
Case Description: Celsius and its former CEO Alex Mashinsky were accused of violating federal securities laws by 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 Lawsuit: June 6, 2023
Case Description: The platform was accused of operating its cryptocurrency asset trading platform as an unregistered national securities exchange, broker, and clearing agency, and failing to register the issuance and sale of its cryptocurrency collateral or staking service plan.
Status: Ongoing
Binance and CZ
Date of Lawsuit: June 5, 2023
Case Description: The U.S. SEC filed a lawsuit in a federal court in Washington, D.C., listing 13 charges against Binance and CZ. The charges included Binance artificially inflating its trading volume, transferring customer funds, failing to restrict U.S. customer access to its platform, and misleading investors in its market monitoring. The SEC also pointed out that CZ secretly controlled customer assets, commingled and transferred 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 4 months in prison.
Status: Resolved
Justin Sun and His Three Wholly-Owned Companies
Date of Lawsuit: March 22, 2023
Case Description: The SEC accused Justin Sun and his companies of offering and selling the Tronix (TRX) and BitTorrent (BTT) crypto asset securities without registration, with some celebrities also implicated. Only DeAndre Cortez Way and Austin Mahone paid fines to settle this case.
Status: Ongoing
Terraform Labs and Do Kwon
Date of Lawsuit: 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 Lawsuit: 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 pending trial.
Status: Ongoing
Nexo
Date of Lawsuit: 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 $22.5 million fine.
Status: Resolved
Caroline Ellison and Zixiao (Gary) Wang
Date of Lawsuit: 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 fraud scheme against FTX investors.
Status: Ongoing
Thor Technologies, Inc. and David Chin
Date of Lawsuit: 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 refund $744,555 and pay $158,638.06 in prejudgment interest, and ordered the company and David Chin to each pay a $150,000 fine.
Status: Resolved
SBF
Date of Lawsuit: December 13, 2022
Case Description: The regulatory agency accused Samuel Bankman-Fried (SBF) of devising a scheme to defraud FTX Trading Ltd. (FTX) equity investors. The case concluded with SBF being sentenced to 25 years in prison.
Status: Resolved
Kim Kardashian
Date of Lawsuit: October 3, 2022
Case Description: The social media influencer was accused of promoting crypto asset securities provided and sold by EthereumMax on social media without disclosing her compensation for the promotion. Kardashian agreed to settle, paying a $1.26 million fine.
Status: Resolved
Bloom Protocol
Date of Lawsuit: December 13, 2022
Block Bits
Date of Lawsuit: April 28, 2022
Case Description: The SEC accused Block Bits of raising nearly $1 million from over 20 investors based on false statements about an automated digital asset trading bot that had never been operational. The company paid a fine for this.
Status: Resolved
BlockFi
Date of Lawsuit: 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: Resolved
Poloniex
Date of Lawsuit: August 9, 2021
Case Description: Poloniex agreed to pay over $10 million to settle charges of operating an unregistered online digital asset exchange.
Status: Resolved
Gregory Keough, Derek Acree, and their company Blockchain Credit Partners
Date of Lawsuit: August 6, 2021
Case Description: They unlawfully issued and sold securities through the DeFi market from February 2020 to February 2021. The defendants agreed to a cease-and-desist order, including disgorgement of a total of $12,849,354 in illegal gains from Keough and Acree, and a fine of $125,000.
Status: Resolved
Loci Inc. and CEO John Wise
Date of Lawsuit: 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: Resolved
Tierion
Date of Lawsuit: December 23, 2020
Case Description: According to the U.S. Securities and Exchange Commission, Tierion raised approximately $25 million in July 2017 through the sale of "Tierion Network Tokens" (TNT). Tierion paid a fine of $250,000.
Status: Resolved
Virgil Capital
Date of Lawsuit: December 22, 2020
Case Description: The U.S. Securities and Exchange Commission froze assets of Stefan Qin for alleged securities fraud. Stefan Qin was accused of defrauding investors in the Virgil Sigma Fund LP since 2018, misrepresenting the fund's strategy, and using the 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 unregistered securities, raising over $1.3 billion. After years of litigation, the case entered the trial phase in April 2024.
Ripple's three partial victories in court last year brought optimism to the company. These victories also led to an increase in the price of XRP. If Ripple prevails, the value of the asset may be positively impacted.
Recently, after a relatively quiet period, the battle over data access rights has resumed. Ripple recently filed a motion to keep certain financial documents and sales data related to the SEC's allegations confidential. The SEC opposed the motion, stating that this information is crucial to the case.
However, Ripple argues that historical data is irrelevant due to changes in XRP sales. Now, the XRP community eagerly awaits Judge Torres's rulings on several motions, including the final judgment in the remedial phase. Despite the case lasting nearly four years, it is far from over.
Related Reading: FTX Settles with the IRS, Faces Opposition to Compensation Plan Restructuring
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