January 18, 2023
The Securities and Exchange Commission continues to make cryptocurrency-related enforcement a top priority under the leadership of Gary Gensler, bringing 30 enforcement actions against digital asset market participants in 2022, up 50% from the 20 actions taken in 2021 and the highest number since 2013, according to the report Cornerstone Research released today.
The report, SEC Cryptocurrency Enforcement: 2022 Update, found that the SEC brought 24 litigation actions in US federal courts and six administrative proceedings in 2022. The number of litigations mainly increased from 14 years before. According to the report, based on data from Cornerstone Research’s Cryptocurrency Enforcement Database, in 2022 the SEC also issued two pending filing orders, two follow-up actions, and one stop order under Section 8(d) of the Securities Act.
“Under Chairman Gensler, the SEC has sharpened its focus on cryptocurrency lending and trading platforms and decentralized finance platforms,” he said. Simone Mola, report author and principal at Cornerstone Research. “As Chairman Gensler has noted, ‘the runway is getting shorter’ for crypto intermediaries to register with the SEC. This could lead to more enforcement actions from the SEC’s Crypto Assets and Cyber Unit, which recently increased its workforce to investigate securities law violations in crypto market.
In 2022, the SEC charged a total of 79 defendants or respondents in cryptocurrency enforcement actions, of which 56 (71%) were individuals and 23 (29%) were companies. The proportion of enforcement actions charging only individuals has grown under the Gensler administration from almost 20%, on average, in the period 2013‒2020 to 35% in 2021 and 50% in 2022.
Out of a total of 30 enforcement actions in 2022, 14 involved initial coin offerings (ICOs), and more than half (57%) of those ICO-related actions involved allegations of fraud. In addition, the SEC brought the first charges in 2022 in the cryptocurrency space related to insider trading and market manipulation.
“Based on the implementation of the US Supreme Court’s Howey test, the SEC continues to pursue actions declaring that tokens issued in unregistered securities offerings related to ICOs are investment contracts subject to SEC regulations and enforcement.” said Abe CherninVice president of Cornerstone Research and cohead of his firm FinTech Practice. “We have observed an increase in assistance to the SEC from outside agencies and organizations during crypto-related investigations under the Gensler administration.”
From the first cryptocurrency-related enforcement action in 2013 to the end of 2022, the SEC has brought 127 enforcement actions, including 82 litigation actions and 45 administrative proceedings against digital asset market participants.
At the same time, the SEC has imposed about $2.61 billion in total monetary fines, of which $242 million is the settlement the agency is making in 2022.
Additional Report Highlights
- Of the 127 crypto enforcement actions from 2013 to 2022, 59% alleged fraud, 73% blamed unregistered securities, and 44% blamed both. Since 2013, 70 cryptocurrency-related enforcement actions (55%) have involved ICOs.
- Since 2013, the SEC has received assistance from outside agencies and organizations in 56 actions (44%). The SEC also acknowledged assistance from international authorities and organizations in 21 enforcement actions during the same period.
- About 43% of the 82 cryptocurrency enforcement actions tried in US courts since 2013 took place in New York, with 29 in the Southern District and six in the Eastern District. The SEC has, however, been increasingly litigating cryptocurrency enforcement actions in other federal courts.
- Since 2013, the SEC has issued 20 cryptocurrency-related trading suspension orders and 12 delinquent filing orders, along with several subpoenas and administrative follow-ups.
Cornerstone Research’s Cryptocurrency Enforcement Database contains cryptocurrency-related enforcement actions brought by the SEC between January 1, 2013 and December 31, 2022.
About Cornerstone Research
Cornerstone Research provides economic and financial consulting and expert testimony in all phases of litigation and regulatory matters. The company supports clients with rigorous objective analysis. Working with an extensive network of academics, former regulators, and industry specialists, Cornerstone Research identifies the most qualified experts for each case.
Founded in 1989, Cornerstone Research has always been guided by its core values: commitment to clients, experts, and staff, and providing services of consistent quality. The company has more than 700 staff and offices in Boston, Chicago, London, Los Angeles, New York, San Francisco, Silicon Valley, and Washington.
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