Crypto Fraud Penalties Propel SEC’s 2024 Enforcement to $8.2 Billion

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As a seasoned researcher with a keen interest in finance and regulatory affairs, I find the SEC’s performance in 2024 quite intriguing. The record-breaking $8.2 billion in financial remedies is undeniably impressive, particularly given the decrease in enforcement actions. However, it seems that the agency’s focus on high-profile cases like Terraform Labs has been instrumental in achieving this feat.

In the fiscal year 2024, the U.S. Securities and Exchange Commission (SEC) reached an impressive sum of $8.2 billion in financial penalties, a notable achievement even though there were fewer instances of enforcement action taken.

This year, the agency documented submitting 583 lawsuits, which represents a 26% reduction compared to the numbers seen in 2023. Despite the decrease in case filings, hefty fines, notably from high-profile cases such as Terraform, pushed remedies to unprecedented highs.

Terraform Labs Responsible for 56% of SEC’s Enforcement Penalties

In simpler terms, the report from the Securities and Exchange Commission (SEC) showed that the $4.5 billion fine imposed on Terraform Labs accounted for approximately 56% of all financial penalties given out in that year. This case, related to the 2022 crash of Terra/Luna, set a new record for the largest monetary judgment ever obtained by the SEC following a trial.

In simple terms, it was determined that Terraform Labs and its leader, Do Kwon, deceived investors during the fall of Terra/Luna in 2022. The Securities and Exchange Commission (SEC) labeled this event as one of their biggest securities fraud cases ever. This collapse, which caused instability in the crypto market, led to substantial losses for investors, triggering increased regulatory attention.

Moving on, it’s worth noting that Silvergate Capital, a bank known for its crypto-friendly approach, was fined by the SEC over deceptive disclosures concerning their compliance practices with crypto clients, including FTX. Similarly, BarnBridge DAO has been accused of not registering its structured cryptocurrencies as securities.

Besides enforcing regulations, the SEC emphasized its focus on safeguarding investors. This year alone, it returned approximately $345 million to affected investors, adding to a grand total of over $2.7 billion that has been distributed since 2021.

In the year 2024, the agency handled a total of 45,130 reports, which were either tips, complaints, or referrals. Among these, there were 24,000 reports submitted by whistleblowers. The value of whistleblower rewards reached an impressive $255 million, demonstrating the significant role that public collaboration plays in helping the SEC uncover and punish misconduct.

In his departure, Gary Gensler underscored that these actions clearly demonstrate the Securities and Exchange Commission’s dedication to safeguarding investors.

As a diligent cryptocurrency investor, I view the Division of Enforcement as my dedicated watchman, tirelessly pursuing the truth and upholding the law to bring those who act unscrupulously to justice.

Although the Securities and Exchange Commission (SEC) has made significant strides, there are voices raised in criticism, particularly about its enforcement tactics. Miles Jennings, who leads decentralization at a16z crypto, contends that hefty fines may not tackle the systemic problems prevalent within financial markets.

In evaluating its performance, the SEC focuses on the penalties it collects from enforcing rules. Although significant fines can act as a noticeable warning and offer a quantifiable yardstick for activity, they don’t necessarily show whether the SEC is effectively achieving its primary goal of curbing misbehavior in financial markets,” he pointed out.

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2024-11-23 18:00