Crypto enforcement by the SEC has significantly increased in recent years, with a 53% rise in cases from 2022 and more than double the cases from 2021. By the end of 2023, the SEC imposed a total of approximately US$2.89 billion in monetary penalties against participants in the US crypto sector, with US$281 million paid in settlement fees.
Chairman Gary Gensler has garnered attention for the SEC’s ‘regulation by enforcement’ approach to managing the crypto sector. Rather than creating specific laws for crypto companies, the SEC has opted to use enforcement through lawsuits to fit crypto broadly into existing legal frameworks, developing the law on a case-by-case basis. Gensler emphasized that the goal of enforcement is to bring market participants into compliance with laws and rules to protect US investors.
The most common enforcement cases have involved fraud and unregistered securities offerings, with 57% related to alleged fraud, 61% related to alleged unregistered securities, and 37% alleging both. Only two cases were specifically related to Non-fungible tokens (NFTs), while 37% were related to Initial Coin Offerings (ICOs).
In 2023, the SEC targeted major players in the crypto space, including Coinbase, Kraken, Terraform Labs, and Tron, reflecting a shift towards more prominent firms in the industry.
Furthermore, the US Treasury Department’s Office of Foreign Assets Control (OFAC) and the US government have become increasingly active in applying sanctions laws to cryptocurrency companies, a development noted by legal experts at the Paul, Weiss, Rifkind, Wharton & Garrison law firm. This application of sanctions to the crypto sector is still evolving, with the US government likely to set new precedents in the short term. These efforts have been shaped by President Biden’s crypto executive order, which directed government agencies to prepare reports and recommendations regarding the various aspects and risks posed by crypto.
