SEC Achieves Record $8.2 Billion in Penalties During Crypto Crackdown

Historic Milestone for the SEC in 2024

The United States Securities and Exchange Commission (SEC) achieved a historic milestone in penalties and fines during the fiscal year 2024, primarily due to a landmark settlement with the cryptocurrency firm Terraform Labs. The SEC reported an unprecedented total of $8.2 billion in financial remedies for the year ending September 30, marking the highest amount in its history.

Understanding the Factors Behind the Record Fines

Despite a substantial 26% decline in the number of enforcement cases, down to 583 from the previous year, the total monetary penalties surged significantly. A substantial portion of this total relates to the SEC's legal victory against Terraform Labs and its former CEO, Do Kwon. The firm consented to a staggering $4.47 billion settlement following findings of liability for fraud associated with the collapse of its blockchain ecosystem in 2022, which led to massive financial losses for investors.

The Significance of the Terraform Labs Settlement

• The Terraform settlement accounted for a significant portion of the SEC's overall collections. Without it, the agency would have had $3.72 billion in penalties, marking its lowest total since 2013.
• In comparison, the SEC collected $3.4 billion in fines and penalties in 2013.

Record Collections and Enforcement Actions

In fiscal year 2024, the SEC's total fines and penalties surged by 65.5% compared to the previous year. The agency collected:

• $2.1 billion in penalties
• A record $6.1 billion in disgorgement—this process involves returning illicit profits to affected investors.

Remarks by SEC Chair Gary Gensler

Outgoing SEC Chair Gary Gensler emphasized the agency's commitment to accountability, stating:

"The Division of Enforcement is a steadfast cop on the beat, following the facts and the law wherever they lead to hold wrongdoers accountable."

The Future of SEC Enforcement Under New Leadership

This record-setting year marks the end of Gensler's nearly four-year tenure as SEC Chair, with his resignation set for January 20, 2025, aligning with the inauguration of President-elect Donald Trump. Under Gensler’s leadership, the SEC has maintained a stringent approach to cryptocurrency firms, with crypto-related enforcement actions peaking at 46 last year. However, it is noteworthy that the number of crypto enforcement cases fell to 11 in 2024, while fines related to these actions skyrocketed by over 3,000% largely due to the settlement with Terraform Labs.

Final Thoughts

The SEC’s actions in 2024 highlight its commitment to regulating the rapidly evolving cryptocurrency market and ensuring accountability for fraudulent activities. As new leadership approaches, it remains to be seen how the agency will continue to adapt its strategies in the ongoing battle against financial misconduct.