Crypto Assets and Cyber Enforcement Actions: Top 20 SEC Filed Charges Since Ripple Lawsuit
The SEC has intensified its focus on cryptocurrency enforcement under Chair Gary Gensler, with a record 46 actions in 2023. l Source: Tom Williams/CQ-Roll Call, Inc via Getty Images
Key Takeaways
- The US Securities and Exchange Commission (SEC) is ramping up enforcement against crypto players, with a record 46 actions taken in 2023.
- Fraud and unregistered securities offerings are the most common charges, with ICOs particularly targeted.
- The crypto community is awaiting the end of its ongoing case against Ripple.
- The most recent settlement was reached with Terraform Labs.
Cryptocurrency enforcement remains a top priority for the US Securities and Exchange Commission (SEC) which, under the leadership of Chair Gary Gensler, boosted its actions against crypto companies and individuals. The watchdog cryptocurrency-related enforcement actions in 2023 increased by 53% from 2022.
However, the crypto community’s is fixing its attention on the SEC’s ongoing case with Ripple. This follows the case’s latest developments and Ripple’s two significant victories in court.
SEC Enforcement Actions Against Crypto Players
Cryptocurrency enforcement remains a top priority for the US SEC. Under the leadership of Chair Gary Gensler, the SEC initiated 46 cryptocurrency-related enforcement actions in 2023, marking a 53% increase from 2022.
This surge in enforcement actions represents a new record since the first cryptocurrency-related action in July 2013. By the end of 2023, monetary penalties against digital-asset market participants totaled approximately $2.89 billion, with $281 million coming from settlements reached that year.
The most common allegations involved 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, 2023 also saw the SEC bring its first two enforcement actions related to non-fungible tokens (NFTs).
In 2023, the proportion of enforcement actions targeting individuals, rather than firms, dropped to 39%, down from 50% in 2022. Additionally, the SEC acknowledged self-reporting, cooperation, or remedial efforts from 52% of respondents in administrative proceedings. This represented an increase from the 44% average observed between 2013 and 2022. In two administrative proceedings, the respondents’ remedial efforts and cooperation with SEC staff resulted in no monetary penalties.
Crypto Assets And Cyber Enforcement Actions
| Company | Date of Filing | Case Description | Case Status |
|---|---|---|---|
| 1. Payward Inc. and Payward Ventures Inc. (Kraken) | November 20, 2023 | Charged for operating Kraken’s crypto trading platform as an unregistered securities exchange, broker, dealer, and clearing agency. Kraken agreed to cease offering or selling securities through crypto asset staking services or staking programs and pay a civil penalty of $30 million. | Settled |
| 2. Celsius Network Limited | July 13, 2023 | Celsius and its former CEO, Alex Mashinsky, for violating registration and anti-fraud provisions of the federal securities laws, including by failing to register the offers and sales of Celsius’s crypto lending product, the Earn Interest Program. Celsius is cooperating with the SEC and has consented to the relief requested in the complaint, which includes a permanent injunction against future securities law violations | Ongoing |
| 3. Coinbase, Inc. | June 6, 2023 | The platform was charged for operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency and for failing to register the offer and sale of its crypto asset staking-as-a-service program. | Ongoing |
| 4. Binance Holdings Ltd. and Changpeng Zhao | June 5, 2023 | The SEC charged Sun and his companies for the unregistered offer and sale of crypto asset securities Tronix (TRX) and BitTorrent (BTT). The case also involved some celebrities. However, only DeAndre Cortez Way and Austin Mahone paid a fine to settle the case. | Ongoing |
| 5. Justin Sun and three of his wholly-owned companies | March 22, 2023 | The SEC charged Sun and his companies for the unregistered offer and sale of crypto asset securities Tronix (TRX) and BitTorrent (BTT). The case also involved some celebrities. However, only DeAndre Cortez Way and Austin Mahone paid a fine to settle the case. | Ongoing |
| 6. Terraform Labs PTE Ltd and Do Hyeong Kwon | February 16, 2023 | Terraform Labs has been accused of orchestrating a multi-billion dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities. Terraform agreed to pay $4.47 billion. The sum includes a $80 million payment from Kwon. | Settled |
| 7. Avraham Eisenberg | January 20, 2023 | Eisenberg was accused of orchestrating an attack on a crypto asset trading platform, Mango Markets, by manipulating the MNGO token. | Ongoing |
| 8. Nexo Capital Inc. | January 19, 2023 | Nexo was charged with failing to register the offer and sale of its retail crypto asset lending product, the Earn Interest Product (EIP). To settle the SEC’s charges, Nexo agreed to pay a $22.5 million penalty. | Settled |
| 9. Caroline Ellison and Zixiao (Gary) Wang | December 21, 2022 | They’ve been charged for their roles in a multiyear scheme to defraud equity investors in FTX. | Ongoing |
| 10. Thor Technologies, Inc. and David Chin | December 21, 2022 | SEC accused the defendants of offering and selling crypto assets designated as “Thor Tokens” without any registration. They agreed to pay penalties as a result. | Settled |
| 11. Samuel Bankman-Fried | December 13, 2022 | The regulator charged Samuel Bankman-Fried with orchestrating a scheme to defraud equity investors in FTX Trading Ltd. (FTX). The case ended with a 25-year sentence to Bankman-Fried. | Closed |
| 12. Kim Kardashian | October 3, 2022 | The influencer was accused of touting on social media a crypto asset security offered and sold by EthereumMax without disclosing the payment she received for the promotion. Kardashian agreed to settle the charges, pay $1.26 million in penalties. | Settled |
| 13. Bloom Protocol, LLC | December 13, 2022 | The watchdog accused it of conducting an unregistered initial coin offering of crypto asset securities. Bloom agreed to pay a $300,000 penalty. The SEC’s order includes a provision for an additional springing penalty, up to the value of the offering proceeds. The means there is a total possible penalty of $30.9 million. | Settled |
| 14. Block Bits Capital, LLC | April 28, 2022 | The SEC alleges Block Bits raised almost $1 million from over 20 investors based on misrepresentations about an automated digital asset trading bot that was never functional. It paid a penalty. | Settled |
| 15. BlockFi Lending LLC | February 14, 2022 | BlockFi was accused of failing to register the offers and sales of its retail crypto lending product. BlockFi agreed to cease offering or selling BIAs in the United States. | Settled |
| 16.Poloniex LLC | August 9, 2021 | Poloniex agreed to pay more than $10 million to settle charges for operating an unregistered online digital asset exchange in connection with its operation of a trading platform that facilitated buying and selling of digital asset securities. | Settled |
| 17. Gregory Keough, Derek Acree, and their company Blockchain Credit Partners | August 6, 2021 | They offered and sold securities in unregistered offerings through DeFi Money Market from February 2020 to February 2021. Respondents consented to a cease-and-desist order that includes disgorgement totaling $12,849,354 and penalties of $125,000 each for Keough and Acree. | Settled |
| 18. Loci Inc. and its CEO John Wise | June 22, 2021 | From August 2017 through January 2018, Loci and Wise raised $7.6 million from investors by offering and selling digital tokens called “LOCIcoin.” They paid a a $7.6 million civil penalty. | Settled |
| 19. Tierion, Inc. | December 23, 2020 | According to the SEC, Tierion raised approximately $25 million through the sale of “Tierion Network Tokens” (TNT) in July of 2017. Tierion paid a $250,000 penalty. | Settled |
| 20. Virgil Capital LLC | December 22, 2020 | The SEC obtained an asset freeze due to alleged securities fraud by Stefan Qin, accused of defrauding investors in the Virgil Sigma Fund LP since 2018 by misrepresenting the fund’s strategy and using proceeds for personal and undisclosed high-risk investments. | Ongoing |
Table made by CCN using SEC data
SEC vs. Ripple Case
The legal battle 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 back-and-forth legal maneuvers, the case entered its trial phase in April 2024.
Ripple’s three partial victories in court last year have fueled optimism for the company. These wins also led to XRP price rallies, showing a potential positive impact on the asset’s value if Ripple prevails.
Recently, after a period of relative calm, the battle lines have been redrawn over access to data. Ripple filed a motion to keep certain financial documents and sales data related to the SEC’s claims confidential. Meanwhile, the SEC opposed this move, arguing the information is crucial for the case.
However, Ripple contends the historical data is irrelevant due to changes in their XRP sales practices. Now, the XRP community eagerly awaits Judge Torres ‘ rulings on several motions, including the final judgment in the remedies phase. Despite going on for almost four years, the case is far from over.
The most recent update regards Ripple contesting the SEC’s proposed $2 billion fine for selling XRP to institutional investors. The company argued it was unfair compared to other cases. The company pointed to Terraform Labs‘ recent $4.47 billion settlement. Ripple pointed out that the SEC usually seeks penalties between 0.6% and 1.8% of revenue. Ripple noted that, unlike Terraform, there were no fraud allegations in their case, nor did institutional buyers suffer significant losses. It requested the court reject the excessive fine and set a more reasonable penalty of $10 million.
Initially, Ripple argued that the company’s financial health was irrelevant to the case. However, the court disagreed, stating this information could be crucial during the remedy phase of the lawsuit.
