The SEC's Record-Breaking Year: $8.2B in Remedies, 50% of Major Fraud Cases Crypto-Related

The Securities Exchange Commission (SEC) obtained orders for $8.2 billion in remedies for the 2024 fiscal year, a record high for the regulatory agency. This is a 67% increase from the $4.9 billion in financial penalties that it collected in 2023.

The Securities and Exchange Commission (SEC) announced record-breaking achievements in its 2024 fiscal year, obtaining orders for a staggering $8.2 billion in financial remedies to protect investors and ensure market integrity. This marks a substantial 67% increase from the $4.9 billion collected in 2023.

According to the SEC's official press release, the regulatory agency filed 583 total enforcement actions during the year, which saw a 23% decrease compared to the previous year. The majority of these actions (431) were stand-alone enforcement matters, while 93 were follow-on administrative proceedings based on civil injunctions, orders, and criminal prosecutions. Notably, 59 enforcement actions targeted issuers who failed to make their compulsory filings on time.

The massive increase in financial remedies, despite the decline in enforcement actions, can be largely attributed to the SEC's focus on pursuing крупные правонарушения, particularly those involving digital assets. In one significant case, Terraform Labs (TFL) and its co-founder Do Kwon settled charges with the SEC, with TFL agreeing to pay $4.5 billion and Kwon ordered to pay $200 million in penalties.

Speaking on the SEC's proactive efforts, Chair Gary Gensler highlighted the agency's role in holding wrongdoers accountable and protecting investors.

Gensler said:

“The Division of Enforcement is a steadfast cop on the beat, following the facts and the law wherever they lead to hold wrongdoers accountable. As demonstrated by this year’s results, the Division helps promote the integrity of our capital markets to benefit investors and issuers alike.”

Beyond the financial remedies, 2024 also saw record levels of complaints and reports, with the SEC receiving 45,130 tips, complaints, and referrals, marking the highest number ever. The regulator also obtained orders banning 124 individuals from serving as officers or directors of public companies, which is the second-highest number in a decade, and distributed $345 million to harmed investors.

In a testament to the growing prevalence of digital assets in the financial landscape, two of the four major fraud cases that the SEC charged in 2024 involved crypto assets.

One case centered on the Hyperfund crypto asset pyramid scheme, which allegedly raised over $1.7 billion from investors worldwide. The SEC charged two individuals, Xue Lee, aka Sam Lee, and Brenda Chunga, aka Bitcoin Beautee, for their involvement in the scam.

The other major fraud case involved NovaTech Ltd and its founders, Cynthia and Eddy Pention, who were charged by the SEC for a multilevel marketing and crypto scheme that raised over $650 million from more than 200,000 investors globally. Other promoters of the scheme were also charged alongside the two for their involvement.

Highlighting the emerging technologies that pose major risks for fraudulent activities, the agency noted how bad actors used everything from artificial intelligence to fake crypto platforms to defraud victims. The SEC specifically mentioned Silvergate Bank and Barnbrige DAO, noting that it settled charges against the two.

While the SEC obtained a $4.5 billion judgment against Terraform Labs, the regulator is unlikely to get any of the funds. TFL is also bankrupt and has the court's go-ahead to wind down. There are no signs that the company, which is behind one of the biggest financial collapses ever, has the funds to pay off the losses to investors and penalties to regulators. The SEC also agreed to be paid only after the company satisfies all claims in its bankruptcy winddown.

Several of the Terra mainnet services have already been shut down, including the Shuttle Bridge interface, which the company closed in early November, burning all the tokens in the Shuttle Bridge wallets. The team also plans to shut down Enterprise DAO and Warp Protocol, two Cosmos-based DeFi protocols powered by Terra, by December 31, 2024.

Meanwhile, retail investors who lost billions to the UST and LUNA collapse continue to hope for a community-led revival. Terra Luna Classic (LUNC) ‘s community on Discord recently approved a proposal to transfer the CoinMarketCap dashboard account access for the token to Allnodes, the top validator of Terra Classic’s mainnet.

However, they voted overwhelmingly against a proposal by Cosmos-based developer team BLV Labs asking the community to approve $5,000 in LUNC for its work on the Terra Classic blockchain. The developer worked on the use Oracle module to calculate and update the minimum deposit required for creating a governance proposal. According to the community, the developer has not deployed the feature on the testnet and mainnet and must finish the work to get paid.