A report released by litigation consulting firm Cornerstone Research found that the USA’s top securities watchdog, the Securities and Exchange Commission (SEC) brought a total of 46 cryptocurrency-related enforcement cases in 2023.
Crypto-targeted enforcement by the SEC is up 53% from 2022 and is more than double the cases from 2021. By year-end 2023, the monetary penalties against participants in the US crypto sector totaled a staggering ~US$2.89 billion, out of which US$281 million was paid in settlement fees.
The SEC under chairman Gary Gensler has been controversial for its ‘regulation by enforcement’ approach to managing the crypto sector. The SEC, it appears, has decided that instead of passing laws that specifically create bounds for crypto companies to operate within, they will bring enforcement by lawsuits that fit crypto broadly into existing legal frameworks to develop the law case-by-case. In March 2023 Gensler explained “Enforcement is a tool, not the destination. The goal is to get market participants into compliance with laws and rules to protect our ‘clients’: US investors.”
The most frequent examples of enforcement were fraud and unregistered securities offerings. Of the 46 enforcement actions, 57% were for alleged fraud, 61% were for alleged unregistered securities and 37% alleged both. Just two of the cases were related to Non-fungible tokens (NFTs) and 37% were related to Initial Coin Offerings (ICOs).
In 2023, the SEC notably went after much larger fish within the crypto space issuing cases against major crypto firms including Coinbase, Kraken, Terraform Labs and Tron.
In 2023, writing for Global Legal Insights, authors from the Paul, Weiss, Rifkind, Wharton & Garrison law firm explain that particularly in the last two years, the US Treasury Department’s Office of Foreign Assets Control (OFAC), and the US government more generally, have become more active in applying US sanctions laws to cryptocurrency companies.
They write that the US government’s application of sanctions to the crypto sector is ‘nascent and still evolving’ and it is likely that it will continue to set new precedents in the short term. These efforts were shaped by President Biden’s crypto executive order, which asked government agencies to prepare reports and recommendations about different aspects and risks posed by crypto.
