SEC's new toy "crypto money printing machine" fined $1.7 billion in 7 years

A new report shows that as of December 31, 2020, the U.S. Securities and Exchange Commission has launched a total of 75 enforcement actions related to the crypto market in the past seven years. The SEC's cryptocurrency enforcement actions have generated $1.77 billion in fines for the government over the past seven years.

According to a report published yesterday by Cornerstone Research, 70% of the SEC’s cryptocurrency enforcement actions have been concluded, resulting in $1.77 billion in fines. Simona Mola, the author of the report, wrote:

“Over the past seven years or so, the SEC has established itself as one of the leading regulators in the cryptocurrency space.”

She noted that between July 1, 2013 and December 31, 2020, the SEC initiated 75 enforcement actions, as well as a large number of court subpoenas and subsequent administrative orders, involving various types of cryptocurrencies and entities related to them. These entities include cryptocurrency issuers, brokers, exchanges, and other related service providers. The most common types of allegations were fraud (52%) and unregistered securities offerings (69%) (XRP's nightmare). Of these, 37% (28 lawsuits in total) involved both situations.

Perhaps one of the least surprising statistics is that the initial coin offering (ICO) boom peaked in the summer of 2017, a period of heightened SEC activity, as more than half of all cryptocurrency ICOs involved fraudulent and unregistered securities offerings.

It is worth noting that the majority of administrative lawsuits filed by the SEC in U.S. district courts (34 of 43) involved both companies and individuals. In this data, only 7 lawsuits involved only individuals and 2 lawsuits were only against companies. The report also shows that about half of the lawsuits were filed in New York State.

The SEC's most notable case is SEC v. Ripple, in which the SEC filed a $1.3 billion lawsuit against Ripple Labs and its executives Brad Garlinghouse and Chris Larsen. The regulator said in its filing that Ripple has raised a total of $1.3 billion since 2013 through unregistered securities offerings.

Ripple has made some breakthroughs in its recent battle with the SEC; it won a motion to keep the financial records of its two executives, Garlinghouse and Larsen, confidential, and even filed a motion to dismiss the lawsuit entirely. Meanwhile, dissatisfied XRP community members have filed their own motion to intervene in the case, arguing that the SEC does not represent their interests. Even the editorial board of the Wall Street Journal criticized the SEC’s particular approach to regulating the cryptocurrency market in an opinion piece published on April 18.

Abe Chernin, vice president of Cornerstone Research, wrote in the report that the SEC may shift its focus as cryptocurrency startups explore other potential sources of funding. "While the SEC will continue to focus on fraud, there are growing expectations that the new administration will develop a clearer regulatory approach and promote greater collaboration between agencies to promote innovation in the cryptocurrency market."

U.S. Securities and Exchange Commission Commissioner Hester Peirce (known as "Crypto Mom" ​​in the crypto circle) previously believed that regulators should take a more measured approach to crypto startups and proposed a "safe harbor" rule to provide them with breathing room and give them enough time to properly decentralize.

The SEC has also recently shifted its regulatory focus, and there have been major changes in its leadership. Gary Gensler took office as the new chairman of the SEC in April. Gensler previously taught a course on Bitcoin and blockchain technology at MIT. On CNBC's "Squawk Box" show last Friday, Gary Gensler, the new chairman of the U.S. Securities and Exchange Commission (SEC), said that many cryptocurrency tokens are securities and reiterated the SEC's regulatory authority: "To some extent, the SEC has a lot of authority over what is a security. In fact, many crypto tokens (I won't call them cryptocurrencies now) are indeed securities." When talking about Bitcoin, Gensler pointed out that it is not a security, saying: "It is a digital, scarce store of value, but highly unstable."