More than 50% increase in SEC cryptocurrency-related enforcement actions in 2023 over 2022.
WASHINGTON, Jan. 24, 2024 /PRNewswire-PRWeb/ -- The Securities and Exchange Commission (SEC) continues to view cryptocurrency-related enforcement as a top priority, bringing 46 enforcement actions against various digital-asset market participants in 2023, according to a Cornerstone Research report released today. This number is the highest since 2013 and a 53% increase from 2022. In the first quarter of 2023 alone, the SEC brought 20 actions, the highest number in a single quarter.
The report, SEC Cryptocurrency Enforcement: 2023 Update, found that, of the 46 enforcement actions, the SEC brought 26 litigations in U.S. federal courts and 20 administrative proceedings in 2023. There were more than triple the administrative proceedings from last year, and the number of litigations increased slightly. The SEC imposed $281 million in monetary penalties for settlements reached in 2023.
"Chair Gensler has noted that 'enforcement is a tool, not the destination,' and the number of SEC enforcement actions brought in the crypto space has ramped up over the last two years," said Simona Mola, the report's author and a principal at Cornerstone Research. "We will be watching to see what 2024 brings, particularly in light of the SEC's recent approval of the first Bitcoin ETFs."
Approximately 37% of all the enforcement actions the SEC brought in 2023 were related to initial coin offerings (ICOs), down from 47% in 2022. Of the 17 ICO-related actions, 82% included allegations of fraud. Additionally, for the first time, the SEC brought two administrative proceedings related to non-fungible tokens (NFTs), with allegations of conducting unregistered securities offerings of crypto asset securities in the form of NFTs. The agency cited the U.S. Supreme Court's Howey test in bringing these NFT-related actions.
"The SEC has continued in 2023 to focus on its implementation of the Howey test," said Abe Chernin, a Cornerstone Research vice president and cohead of the firm's FinTech practice. "The SEC has increasingly concentrated on trading platforms for their crypto lending and staking programs or for allegedly failing to register as an exchange, a broker-dealer, and a clearing agency."
According to the report, the SEC charged 124 defendants or respondents in cryptocurrency enforcement actions in 2023. Of those 124, 54% were individuals and 46% were firms. The proportion of enforcement actions charging only individuals decreased to 39%, down from 50% last year.
Additional Highlights
- Of the 46 enforcement actions brought in 2023, 26 (57%) alleged fraud, 28 (61%) alleged an unregistered securities offering violation, and 17 (37%) alleged both.
- Relative to the 2013–2022 period, in 2023 the SEC increasingly recognized self-reporting, cooperation, or remedial efforts undertaken by 14 (52%) of the 27 respondents charged in administrative proceedings. In two proceedings, the SEC imposed no monetary penalties because of cooperation.
- In 2023, outside organizations, especially state agencies, continued to assist the SEC in bringing cryptocurrency enforcement actions.
- The most frequent allegations in cryptocurrency-related enforcement actions continued to be fraud and unregistered securities offerings.
- Since 2013, when the SEC brought its first cryptocurrency-related enforcement action, through 2023, the agency has brought 173 enforcement actions, including 108 litigations and 65 administrative proceedings. Of the 173 enforcement actions, 58% alleged fraud, 70% alleged an unregistered securities offering violation, and 42% alleged both.
- As of the end of 2023, the SEC has imposed approximately $2.89 billion in total monetary penalties against digital-asset market participants.
Cornerstone Research's Cryptocurrency Enforcement Database contains cryptocurrency-related enforcement actions brought by the SEC between January 1, 2013, and December 31, 2023.
About Cornerstone Research
Cornerstone Research provides economic and financial consulting and expert testimony in all phases of complex disputes and regulatory investigations. The firm works with an extensive network of prominent academics and industry practitioners to identify the best-qualified expert for each assignment. Cornerstone Research has earned a reputation for consistently high quality and effectiveness by delivering rigorous, state-of-the-art analysis since 1989. The firm has over 900 staff in nine offices across the United States and Europe.
Media Contact
Elisabeth Gaubinger, Cornerstone Research, 202.912.8909, [email protected], https://www.cornerstone.com/
SOURCE Cornerstone Research
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