Feel the SEC’s enforcement strength in the crypto circle.

Experience the SEC's Strong Enforcement Power in the World of Cryptocurrency.

The US Securities and Exchange Commission (SEC) announced its enforcement results for the 2023 fiscal year on November 14th, Eastern Time. The report shows that the SEC initiated a total of 784 enforcement actions, a 3% increase compared to 2022. These actions resulted in fines totaling $4.949 billion, the second-highest in history, just behind the $6.4 billion in fines from 2022. The SEC stated that the 2023 fiscal year was a successful year for enforcement work. The cases investigated by the SEC focused on areas such as cryptocurrency, cybersecurity, false statements by listed companies, and market manipulation.

The SEC’s report also provides a detailed breakdown of the types of violations. Here is the translation of the original text related to cryptocurrency:

The 2023 fiscal year was another efficient and impactful year for the SEC’s enforcement work related to cryptocurrency asset securities. During the 2023 fiscal year, the agency recommended enforcement actions to address a range of alleged wrongdoing in the cryptocurrency asset securities arena, including multi-billion-dollar cryptocurrency fraud schemes, unregistered cryptocurrency offerings, platforms, and intermediaries, as well as illegal celebrity endorsements.

Fraud

In the 2023 fiscal year, the agency’s investigations led to litigation charging a significant amount of cryptocurrency fraud, including against Terraform Labs and its founder, Do Kwon; Richard Heart and three entities under his control: Hex, PulseChain, and PulseX; FTX CEO Sam Bankman-Fried and other FTX executives.

• Vitalik’s latest long article Exit Game Validity Verification for EVM – The Return of Plasma
• Interpreting Vitalik’s new work ZK+Plasma Changing the Layer 2 Landscape?
• Is the cryptocurrency industry similar to the early days of the internet?

Author’s comment: All the scammers have been caught, so does that mean the bull market is coming? (Do you have to cause such a commotion to get caught?)

Unregistered Offerings

Failure to comply with federal securities laws registration requirements deprives investors of the necessary disclosure rights to make informed investment decisions.

The agency’s investigations resulted in many companies being charged with offering unregistered securities through cryptocurrency loan and/or custodial projects, including Genesis/Gemini, Celsius, Kraken, and Nexo. Kraken and Nexo agreed to cease their unregistered offerings. Kraken also agreed to pay a $30 million civil fine, disgorgement, and prejudgment interest, while Nexo agreed to pay a $22.5 million civil fine.

In addition, during the 2023 fiscal year, the SEC filed its first-ever lawsuit against issuers of Non-Fungible Tokens (NFTs). Based on the agency’s investigation and recommendation, the SEC charged ImLianGuaict Theory LLC and Stoner Cats 2 LLC with illegally offering unregistered cryptocurrency asset securities in the form of NFTs.

Author’s comment: If whistleblowing came with rewards, the cryptocurrency industry would be in trouble.

Unregistered Exchanges and Other Intermediaries

Cryptocurrency intermediaries, whether they claim to be centralized or decentralized, often provide a range of services that in other securities markets are typically separate: exchange functionalities, broker-dealer functionalities, custodial and clearing functionalities. The mixing of various functionalities within cryptocurrency intermediaries brings inherent conflicts of interest and risks to investors.

The U.S. Securities and Exchange Commission (SEC) has taken a series of enforcement actions in the 2023 fiscal year to address rampant violations in the cryptocurrency intermediary sector, including actions against Beaxy, Bitcoin, Binance, and UniSwap.

Author’s witty remark: Hong Kong can copy the homework now, otherwise licensed institutions will suffer.

Sales Pitch

The SEC has taken action in several cases against “influencers” allegedly illegally selling cryptocurrency securities without disclosing their compensation, depriving investors of necessary information to assess potential biases in celebrity endorsements of these securities. For example, NBA Hall of Famer Paul Pierce and media personality Kim Kardashian have agreed to pay a total of $1.35 million and $1.26 million in civil fines, disgorgement, and prejudgment interest to settle charges of selling cryptocurrency securities without disclosing promotional compensation. The SEC has also charged celebrities Lindsay Lohan, Jake Paul, Kendra Lust, Lil Yachty, Ne-Yo, Akon, Soulja Boy, and Austin Mahone with illegally selling cryptocurrency securities without disclosing compensation. All except Mahone and Kolterous have resolved these charges.

Author’s witty remark: Resolving celebrity endorsements is just like resolving P2P lending in mainland China, be careful!

We will continue to update Blocking; if you have any questions or suggestions, please contact us!