SEC Increased Crypto Litigations in 2022

It is no secret that the Securities and Exchange Commission has had a somewhat tumultuous relationship with the crypto industry over the last few years. From prosecuting crypto-related crimes to accepting or rejecting crypto regulation, the commission has certainly had its hands full. 

And according to a new report, 2022 was an especially busy year for the commission when it comes to crypto. The report in question was published on January 18, 2023, by Cornerstone Research. As per the report, the number of crypto-related litigations undertaken by the SEC rose by 50% from 2021 to 2022. 

A Year in Crypto 

The report notes that the SEC first brought forward crypto-related litigations in 2013 but that last year saw the highest number ever recorded. The 30 crypto enforcement actions which were taken against 79 defendants also represented a 50% increase from 2021. 

“The number of enforcement actions brought in 2022 represents nearly a quarter of the 127 total cryptocurrency-related enforcement actions brought since July 2013, when the SEC issued the first of such actions,” the report says. 

And these actions often led to the defendants having to pay fines to the SEC as the report notes  $2.61 billion in monetary penalties brought against defendants by the SEC, $242 million of which were settlements.

So, what offences were committed to warrant this many enforcement actions and this much in penalties? According to the report, most of these were fraud and unregistered securities offerings.  Out of the 30 enforcement actions brought in 2022, 70% were alleged fraud, 73% were allegedly unregistered securities offering violations, and 50% were allegedly both. Interestingly, half of the cases from 2022 had to do with Initial Coin Offerings (ICOs). 

Those in the industry might remember ICOs being all the rage in the mid to late 2010s, as well as the ‘Wild West’ period in which many of these ICOs were popping up without much regulation. And while the ICO craze seems to have died down, the SEC is still prosecuting unregistered or fraudulent ones. 

There also seem to be more cases of individuals being charged as opposed to companies. As the report explains, “Under the Gensler administration, the proportion of enforcement actions charging only individuals (rather than firms) has increased relative to prior years, from nearly 20% in the 2013‒2020 period to 35% in 2021 and 50% in 2022.”

Interestingly, a significant per cent (43%) of these incidents appear to be concentrated in New York and as of December 31, 2022, 42 of the 82 litigations had reached a resolution. 

What All This Means

Due to the nature of cryptocurrency, the industry will likely continue to see more interactions with the SEC. The increase in enforcement actions in 2022 could indicate that the industry is growing and as such, more interactions have organically occurred or could indicate an increase in crypto-related law violations or could indicate more attention being paid to the industry by the commission. 

Either way, we can expect more SEC-Crypto interactions in the years to come.