Feel the SEC's enforcement of the crypto industry

The U.S. SEC announced the enforcement results for fiscal year 2023 on November 14, Eastern Time. The report shows that the SEC filed a total of 784 enforcement actions, an increase of 3% from 2022. The enforcement actions generated a total of $4.949 billion in fines, second only to $6.4 billion in 2022, the second highest in history. The SEC said that fiscal year 2023 was a fruitful year for enforcement work. The cases it focused on investigated involved areas such as cryptocurrency, cybersecurity, false statements by listed companies, and market manipulation.

The SEC report also helps us classify the illegal behaviors in detail. The following is the original translation of the encryption-related content:

FY 2023 was another productive and impactful year for the SEC’s crypto-asset securities enforcement efforts. In FY 2023, the Division proposed enforcement actions addressing a range of alleged misconduct in the crypto-asset securities space, including multi-billion-dollar crypto fraud schemes, unregistered crypto-asset offerings, platforms and intermediaries, and illegal celebrity touting.

Fraud

In fiscal year 2023, the department’s investigations resulted in lawsuits alleging a wide range of crypto fraud, including against Terraform Labs and its founder Do Kwon; Richard Heart and three entities he controlled: Hex, PulseChain, and PulseX; and FTX CEO Samuel Bankman-Fried and other FTX executives.

Author's random comment: All the scammers have been caught, so a bull market is coming? (Do they have to make such a fuss to get caught?)

Unregistered Offering

Failure to comply with the registration provisions of the federal securities laws deprives investors of the disclosures necessary to make informed investment decisions.

The department’s investigation has resulted in a number of companies being accused of offering unregistered services through crypto asset lending and/or custody programs.

The lawsuit involved a group of securities exchanges, including Genesis/Gemini, Celsius, Kraken and Nexo. Kraken and Nexo agreed to cease their unregistered products. Kraken also agreed to pay a $30 million civil penalty, disgorgement and prejudgment interest, and Nexo agreed to pay a $22.5 million civil penalty.

Additionally, the SEC filed its first action against an issuer of non-fungible tokens (NFTs) in fiscal year 2023. Based on the department’s investigation and recommendations, the SEC charged Impact Theory LLC and Stoner Cats 2 LLC with illegally issuing unregistered crypto asset securities in the form of so-called NFTs.

The author's random comment: If reporting could earn you money, the crypto industry might be doomed.

Unregistered exchanges and other intermediaries

Crypto intermediaries—whether they call themselves centralized or decentralized—typically provide a suite of services that are typically separate from one another in other securities markets: exchange functions, broker-dealer functions, custody and clearing functions. The commingling of various functions within crypto intermediaries creates inherent conflicts of interest and risks for investors.

The SEC brought a series of enforcement actions in fiscal year 2023 in response to what it called rampant violations in the crypto asset intermediary sector, including actions against Beaxy, Bitcoin, Biance, and UnitedBey.

Author's random comment: Hong Kong can copy homework, otherwise licensed institutions will suffer too much loss

Selling

The SEC has taken action in several cases where “influencers” allegedly illegally peddled crypto-asset securities without disclosing that they were compensated, depriving investors of the ability to understand the celebrities’ views on those securities.

The SEC also charged celebrities Lindsay Lohan, Jake Paul, Michelle Mason (Kendra Lust), Miles Parks McCollum (Lil Yachty), Shaffer Smith (Ne-Yo), Ariane Thiam (Akon), DeAndre Cortes (Soulja Boy), and Austin Mahone with illegally promoting crypto-asset securities without disclosing compensation for doing so. All but Cortes Lust and Mahone settled the charges.