In the realm of cryptocurrency and digital assets, the Securities and Exchange Commission (SEC) has undergone a notable and, according to their recent report, highly impactful year in terms of enforcement actions. The report, which comes amidst speculation about the potential approval of a Bitcoin spot ETF, emphasizes the SEC’s commitment to investor protection and the cultivation of public trust in financial markets.
SEC director lauds the efforts of the agency
Gurbir S. Grewal, the director of the SEC enforcement division, underscores the urgency required in their efforts. He notes that safeguarding investor interests demands a sense of urgency and the utilization of all available tools. The Enforcement Division, according to Grewal, approached its responsibilities by leveraging risk-based initiatives, seeking robust remedies, rewarding cooperation, protecting whistleblowers, and returning nearly a billion dollars to investors who suffered harm.
Throughout the year 2023, the agency initiated over two dozen enforcement actions directly related to crypto assets and digital asset securities. This marked a significant increase compared to preceding years, signaling the agency’s heightened focus on policing the dynamic and rapidly evolving crypto industry. The agency Chair Gary Gensler characterizes the agency as a vigilant overseer, likening it to “a cop on the beat.” He emphasizes the agency’s commitment to following the facts and the law wherever they lead to hold wrongdoers accountable.
Gensler acknowledges the remarkable growth of crypto markets but also highlights the rampant misconduct within the space. The agency, under his leadership, vigorously pursued enforcement actions to root out wrongdoing and protect investors participating in the crypto space. Major players in the crypto industry faced charges from the SEC, including allegations of fraud and failure to register crypto asset offerings and exchanges. Landmark cases involved charges against FTX founder Samuel Bankman-Fried and Terraform Labs, with its founder Do Kwon, for allegedly defrauding investors of substantial amounts.
Landmark cases and celebrity scrutiny in the industry
The report also reveals charges against prominent crypto companies such as Celsius, Kraken, Genesis, and Gemini, as well as Nexo. Notably, Kraken and Nexo settled with civil penalties amounting to $30 million and $22.5 million, respectively. The NFT space, a subset of the crypto market, did not escape the SEC’s scrutiny in 2023. Impact Theory LLC and Stoner Cats 2 LLC faced charges for conducting illegal and unregistered offerings of crypto asset securities.
Celebrity endorsements of crypto projects also came under the SEC’s radar during the year. Reality TV star Kim Kardashian, among others, faced charges for promoting crypto assets on social media without disclosing the payments received. Kardashian agreed to pay $1.26 million to settle the charges. Further scrutiny extended to various other celebrities in the crypto space in 2023. Lindsay Lohan, NBA star Paul Pierce, YouTube personality Jake Paul, musician DeAndre Cortez Way (aka Soulja Boy), Michele Mason (aka Kendra Lust).
Others including Miles Parks McCollum (aka Lil Yachty), Shaffer Smith (Ne-Yo), Aliaune Thiam (Akon), and Austin Mahone were named for endorsing crypto asset securities. Except Cortez Way and Mahone, all others settled the charges. The SEC’s actions within the cryptocurrency landscape were part of a broader agency-wide overview for 2023. This comprehensive assessment involved 784 enforcement actions, resulting in $5 billion in financial remedies and the distribution of nearly $1 billion to investors who had suffered harm.
The SEC’s proactive stance and increased enforcement actions in 2023 underscored its dedication to navigating the challenges posed by the ever-evolving landscape of cryptocurrency and digital assets. The primary focus remained on investor protection and market integrity, reflecting the SEC’s commitment to upholding the public trust in financial markets.