By
Steve Muchoki
April 26th, 2024
Among the 46 legal actions initiated in 2023, 57% specifically targeted fraud, while 61% accused defendants of vending unauthorized products to US customers.
The United States Securities and Exchange Commission (SEC) continues to take enforcement seriously in the crypto industry, with the agency bringing 46 actions related to digital assets against 124 defendants in 2023.
According to a new study conducted by Cornerstone Research, 26 of the enforcement actions went through litigation in US district courts. The remaining 20 were resolved within the SEC through administrative proceedings under Section 8A of the Securities Act and Section 21C of the Exchange Act.
2023 Breaks New Record High for SEC Enforcement Actions
Cornerstone also found in its research that the agency, led by Gary Gensler, has brought 173 lawsuits against crypto firms since July 2013. However, the number peaked last year, representing a new record high in a single year, compared to the 30 actions issued in 2022.
Last year, approximately 39% of the enforcement actions targeted individuals alone, marking a 50% decline from the previous record in 2022.
Additionally, the study revealed that a predominant number of legal cases centered around accusations of fraud and conducting unregistered securities offerings. Among the 46 legal actions initiated in 2023, 57% specifically targeted fraud, while 61% accused defendants of vending unauthorized products to US customers.
Furthermore, 37% of the enforcement actions alleged both fraud and involvement in unregistered offerings.
SEC Issued $2.89 Billion in Penalties
Monetary penalties resulting from these legal actions reached approximately $2.89 billion by the end of December 31, 2023. According to Cornerstone, companies opting for settlement contributed $281 million to the total.
In August last year, crypto exchange Bittrex agreed to a $24 million settlement in response to SEC accusations of selling unregistered offerings.
The SEC filed a lawsuit against the exchange, its CEO William Shihara, and Bittrex Global, the company’s international trading platform. To resolve the legal dispute, the firm paid $14.4 million in disgorgement, $4 million in prejudgment interest, and $5.6 million in civil penalties to the federal regulator, making it a total of $24 million.
Another exchange Kraken paid $30 million to the market watchdog in February to settle its case. Part of the settlement included discontinuing its staking products, which the SEC claimed were illegal securities sales in the US market.
The SEC also settled with the now-defunct crypto hedge fund EmpiresX in May 2023 for $35 million.
$45 Million Settlement
Similarly, Nexo, a digital asset lending and borrowing company, paid $45 million in settlement with the SEC last year.
The regulator charged the crypto lender for offering an illegal securities product through its “Earn Interest Program” to American investors.
The SEC claimed the agency is not concerned about labels put on offerings but about their economic realities. Gensler said part of the reality is that crypto assets are not exempt from securities laws.
In another settlement agreement, the financial watchdog resolved a case with celebrity billionaire Kim Kardashian in October 2023, reaching a $1 million settlement. The renowned musician faced allegations of promoting a crypto project on her Instagram page without proper disclosure, thereby misleading investors.
