The US Securities and Exchange Commission (SEC) has tightened the blockade against cryptocurrency companies in 2022. In the past year alone, the US regulator has filed 30 enforcement actions against companies and individuals in this sector. That is, two and a half operations per month. Specifically, the SEC has filed lawsuits against 79 defendants, of which 56 (71%) are individuals and 23 (29%) are companies.
According to a recent report by consulting firm Cornerstone Research, the SEC had a record high in actions against crypto companies in 2022, outperforming 2021 by 50%. In 2020, there were 29 procedures, which is an equally high number.
“The number of enforcement actions filed in 2022 represents nearly a quarter of the total 127 cryptocurrency-related enforcement actions taken since July 2013, when the SEC issued the first such action,” Cornerstone Research said.
The SEC is cracking down on cryptocurrency companies
As the research firm points out, most of the SEC’s actions involve fraud and the offering of unregistered securities. Of the 30 enforcement actions filed in 2022, 70% alleged fraud, 73% alleged violation of an offering of unregistered securities, and 50% alleged both. Also according to the report, nearly half of the 30 implementations were related to Initial Coin Offerings (ICOs).
In terms of financial penalties such as fines, for example, they totaled about US$2.61 billion (R$13.57 billion). Of that amount, US$242 million (R$1.25 billion) was in agreements signed by the Securities and Exchange Commission.
As noted by Cornerstone Research, under Gensler’s chairmanship, the SEC has focused on digital asset lending, trading platforms, and decentralized finance (DeFi) platforms.
BlockFi and FTX cases
One of the cases highlighted in the report was cryptocurrency lending firm BlockFi. On February 14, 2022, BlockFi was indicted by the Securities and Exchange Commission (SEC) for allegedly failing to record offers and sales on its crypto lending product. In addition, it alleged that the company was operating as an unregistered investment firm, among other allegations.
At the time, BlockFi agreed to pay the SEC a $50 million fine, plus an additional $50 million in fines to settle similar charges with the states. This was the largest financial penalty imposed by the SEC in 2022. Furthermore, it was one of the largest settlements the SEC has imposed in cryptocurrency-related enforcement actions.
Another case is related to the destruction of FTX. Shortly after the cryptocurrency trading exchange crashed, on December 13, 2022, the CEO and co-founder of FTX was charged by the SEC with allegedly defrauding investors. As early as December 21, 2022, the Securities and Exchange Commission (SEC) indicted the former CEO of Alameda Research, FTX’s sister company, and former CTO and co-founder of FTX, who pleaded guilty to fraud charges.
to Simona Mola, Director of Cornerstone Research and author of the report, The SEC will continue to monitor the cryptocurrency market. “It looks like crypto assets will likely continue to be a priority under Gensler’s administration,” she said.