SEC Crypto Fines hit $4.7B in 2024; Terraform Labs account for $4.4B

The U.S. Securities and Exchange Commission (SEC) has ramped up its enforcement actions against crypto firms in 2024, with fines totaling nearly $4.7 billion—a staggering 3,000% increase from the previous year. The SEC’s enforcement was significantly boosted by its $4.47 billion settlement with Terraform Labs and its former CEO Do Kwon in June, marking the largest action in the regulator’s history, according to a Sept. 9 report from Social Capital Markets.

Despite pursuing fewer cases this year, the SEC’s 11 enforcement actions led to a 3,018% jump in total fines compared to the $150.3 million collected in 2023. These fines include forfeiture, disgorgement, civil penalties, settlements, and prejudgment interest, reflecting a strategic shift towards more impactful enforcement actions.

• The $4.47 billion settlement with Terraform Labs set a new precedent for crypto enforcement.
• The SEC’s shift towards fewer, larger fines has resulted in a dramatic rise in overall penalties.

This strategy indicates the SEC is focusing on high-profile cases to set a precedent for the industry. In previous years, the largest action was against Telegram in 2019, where $1.24 billion in fines and penalties were imposed. While most fines since 2020 have been under $1 million, some, like the cases against GTV Media Group, Ripple Labs, and the Barksdales, exceeded $100 million.

Interestingly, while the average fine in 2024 surged to over $420 million due to the Terraform Labs case, fines in earlier years ranged between $5 million and $35.2 million. This rise in enforcement reflects the SEC’s commitment to targeting influential cases that will reverberate throughout the crypto industry.

The Terraform Labs Fine

In June 2024, the U.S. Securities and Exchange Commission (SEC) imposed a record-breaking $4.47 billion fine on Terraform Labs and its former CEO Do Kwon. This enforcement action became the largest ever undertaken by the SEC in the cryptocurrency sector. The massive fine was part of a settlement that addressed the collapse of Terra’s algorithmic stablecoin UST and its sister token LUNA, which resulted in catastrophic losses for investors in 2022.

The SEC alleged that Terraform Labs and Kwon had engaged in fraudulent practices, misleading investors about the stability and functionality of UST and LUNA. The collapse of these tokens triggered significant market-wide disruptions, leading to broader concerns about the risks posed by algorithmic stablecoins. Terraform Labs and Kwon were accused of violating federal securities laws by selling unregistered securities and engaging in deceptive practices.

The $4.47 billion settlement represents disgorgement, penalties, and other financial reparations. It reflects the SEC’s intensified focus on bringing crypto firms to task for regulatory non-compliance and its broader efforts to set a precedent for enforcement actions within the industry.

Source: https://socialcapitalmarkets.net/crypto-trading/crypto-sec-fines-penalties/