Cryptocurrency Fraud Penalties Push SEC’s 2024 Enforcement to $8.2 Billion
November 23, 2024
The SEC achieved $8.2 billion in financial compensation during fiscal year 2024, a significant achievement despite the lack of enforcement action.
The agency reported that it filed 583 cases this year, a 26% decrease compared to 2023. However, large financial penalties, especially from high-profile cases such as Terraform, have pushed compensation to record levels.
Terraform Labs Responsible for 56% of SEC Enforcement Penalties
The SEC’s enforcement report highlighted that TerraForm Labs’ $4.5 billion fine accounted for 56% of the total monetary award for the year. The case, related to the Terra/Luna collapse in 2022, resulted in the largest monetary award ever secured by the SEC following a trial.
Terraform Labs and its CEO Do Kwon were found liable for defrauding investors during the Terra/Luna collapse in 2022. The SEC described the incident as one of the most significant securities fraud cases in its history. The collapse, which destabilized the cryptocurrency market, resulted in significant losses for investors, prompting increased regulatory scrutiny.
In addition to Terraform, the agency reached a settlement with crypto-friendly bank Silvergate Capital over misleading disclosures about its compliance programs for crypto clients, including FTX. Barnbridge Dow also faced charges for failing to register its regulated crypto assets as securities.
In addition to enforcement, the Authority has highlighted its efforts to protect investors. It has distributed $345 million to affected investors this year, bringing its total to more than $2.7 billion since 2021.
The agency also processed 45,130 tips, complaints, and referrals in 2024, including 24,000 whistleblower submissions. Whistleblower awards reached $255 million, highlighting the agency’s reliance on public cooperation to identify and punish wrongdoing.
Outgoing SEC Chairman Gary Gensler said the measures underscore the agency's commitment to protecting investors.
“The Enforcement Division is a constant policeman in the field, following the facts and the law wherever they lead to hold violators accountable,” Gensler added.
Despite the authority’s achievements, critics have expressed concerns about its enforcement strategy. Miles Jennings, head of decentralization at a16z crypto, argued that large financial penalties may not address systemic issues in financial markets.
“SEC measures its success by the amount of fines collected from enforcement actions. While large fines can be a visible deterrent and provide a measurable benchmark for activity, they do not reflect whether SEC is achieving its core mission of preventing misconduct in financial markets,” he said.
