The SEC remains public enemy No. 1 for the US crypto industry, stepping up its enforcement efforts in 2024. The regulator has issued record fines to companies Cryptocurrency all year round.
With a possible change in the SEC’s regulatory stance expected under the incoming Donald Trump administration, let’s look back at how the agency has overseen cryptocurrency companies this year.
The record fines demonstrate the SEC’s stance on cryptocurrencies
The past year has marked a turning point for the regulator’s approach, with a reduction in enforcement measures but a significant increase in fines. In 2024, the SEC imposed $8.2 billion in fines for 583 crypto companies.
This figure is greater than the total fines imposed during the past 12 years. Most surprising, this significant increase came from just 11 cases, each involving serious financial misconduct.
One of the most important cases involved Terraform Labs. Its founder, Do Kwon, faces charges of orchestrating one of the largest securities frauds in American history. After a jury trial in Manhattan, Terraform Labs settled with the SEC for $4.5 billion.
“Terraform Labs PTE, Ltd. & Do Kwon agree to pay more than $4.5 billion after a unanimous jury verdict holding them responsible for a years-long fraud involving crypto asset securities that caused huge losses to investors when the scheme collapsed,” SEC posted in June.
Terraform, which filed for bankruptcy in January, will prioritize compensating cryptocurrency investors in the liquidation process before making a deal with the SEC.
The company estimates that eligible shareholders could recover between $184.5 million and $442.2 million, leaving the majority of the deal amount outstanding.
Fraud cases dominate SEC enforcement actions
The SEC has pursued several fraud cases, with Touzi Capital and its founder, Eng Taing, being among the most prominent. Touzi Capital has raised more than 100 million USD from investors, promising safe cryptocurrency mining projects with high profits and debt recovery services.
However, the SEC alleged that the funds were misused and diverted into unrelated businesses for personal gain.
According to the lawsuit, the company’s Bitcoin mining operations were plagued with fluctuating energy costs and equipment problems, contradicting marketing claims of reliability and profitability. Therefore, the SEC seeks permanent injunctions, civil penalties, and a ban on Taing from serving as a director or director in any company.
Another notable development involves BitClave, a blockchain startup accused of violating securities laws during its 2017 ICO. The SEC distributed $4.6 million to investors from the BitClave Equity Fund.
The fund compensated those affected by the collapse of the company’s Consumer Activity Token (CAT) offering.
Cryptocurrency Companies Oppose SEC Lawsuits
Several SEC lawsuits have helped fight scammers and fraudsters. However, leaders in the cryptocurrency industry do not like the lack of clarity and judicial approach to law enforcement. For example, the SEC has taken regulatory action against many cryptocurrency exchanges, classifying cryptocurrency transactions as securities.
Lawsuits and enforcement actions by the SEC have prompted significant resistance from major companies in the crypto industry. Crypto.com, after receiving the Wells notice in October, sued the agency first.
The company’s CEO, Kris Marszalek, criticized the regulator’s stance, claiming that it unfairly classified most cryptocurrency transactions as securities. This is a trend from the agency under the leadership of Gary Gensler.
However, Crypto.com withdrew this lawsuit in early December after Marszalek met with President-elect Donald Trump. It seems that the industry expects a change in the SEC’s stance on cryptocurrencies under the new leadership of Paul Atkins.
“Despite the ongoing change of administration, the SEC continues to send Wells notices. However, Crypto.com is so confident that they will withdraw from a lawsuit against the agency – the same day their CEO meets with Trump,” crypto researcher Molly White wrote. write on X (formerly Twitter).
Meanwhile, Binance and former CEO Changpeng Zhao also sought to challenge the SEC’s enforcement approach. Its legal team filed a motion to dismiss the amended complaint, arguing that the SEC does not provide clear criteria for determining when cryptocurrency transactions qualify as securities.
Defense attorneys cited disagreements with previous rulings, including the prominent case SEC vs. Ripple, concluded that XRP is not a security in all situations.
Similarly, Kraken refuted the SEC’s claims that some digital assets, such as ADA and SOL, meet the definition of securities. Citing the Howey standard, Kraken argued that the assets did not qualify as investment contracts and accused the SEC of regulatory overreach.
“Gensler’s policy is one extreme, but the question remains whether we will move to another extreme. I think there has been progress in taking a neutral stance and regulatory/acceptance from the SEC,” Sander Gortjes, co-founder of HELLO Labs told TinTucBitcoin.
Legal and financial consequences for DeFi protocols
The SEC also took aim at DeFi (DeFi) protocols, with Rari Capital facing accusations of misleading investors and operating unregistered investment products.
At its peak, Rari managed over $1 billion in crypto assets through its earn and fuse teams, which each promised automatic balancing for optimal returns.
However, the SEC said that these processes often required manual intervention, contradicting the company’s claims.
The SEC’s efforts also extended to individual promoters, including Vy Pham, accused of illegally selling unregistered securities through the promotion of the Saitama Inu Token. Pham is accused of misleading investors with inflated statements about Token value and profit potential for personal gain.
Besides enforcement actions, the SEC is also involved in legal battles brought by crypto companies. Bitnomial, a Chicago-based derivatives exchange, has filed a lawsuit against the SEC. The exchange argued that its XRP futures contract falls under the jurisdiction of the Commodity Futures Trading Commission (CFTC).
A historic win against Coinbase
Earlier this year, the SEC won a decision allowing its lawsuit against Coinbase to go to trial. The case focuses on allegations that the exchange engaged in the sale of unregistered securities.
U.S. District Judge Katherine Polk Failla, decision that the transactions involved fall within the framework that courts have used to define securities for decades, cementing the SEC’s power over cryptocurrency platforms.
The outcome of this trial could have far-reaching consequences for the industry as it tests the limits of the SEC’s regulatory power and the legal classification of digital assets.
The SEC’s actions in 2024 reflect an increased crackdown on the cryptocurrency industry. However, under a new pro-crypto administration, the industry and community expect the agency’s stance to change significantly.
“Gary Gensler is not the source of the crypto crackdown by the US SEC. However, he expanded enforcement compared to his predecessors. As pro-crypto SEC Chairman, Paul Atkins is expected to provide differentiated leadership, demonstrating collaboration with the broader crypto and financial ecosystem,” said Maksym Sakharov, co-founder WeFi said.
Major cryptocurrencies like XRP have seen price increases based on such optimism. However, the true scope of these changes will only be seen in the coming months.