Smashing all previous records, the U.S. Securities and Exchange Commission (SEC) collected $4.68 billion in crypto fines in 2024.
The fines collected in 2024 alone account for nearly 70% of the total crypto fines imposed by the SEC since 2013. While the number of lawsuits filed against crypto firms has dropped to 11, a significant decline from 30 in 2023, the total amount collected in fines is up by over 3,000%. In 2023, the SEC imposed $150.27 million in fines on crypto companies.
A single penalty against Terraform Labs, totalling $4.68 billion, accounts for 98% of the fines imposed by the SEC this year. In June 2024, a U.S. court ruled against Terraform Labs and its co-founder Do Kwon, following a lawsuit filed by the SEC.
The company faced charges for offering unregistered securities. The court also imposed a complete ban on Terraform Labs, barring them from dealing in any unregistered securities or crypto-related offerings.
Is The SEC More Vigilant In 2024?
Regarding whether the SEC is more actively going after cryptocurrency firms, the record fines collected in 2024 don’t provide a clear answer.
First, the number of lawsuits filed by the SEC has decreased in 2024. One isolated case with an unprecedented settlement does not indicate an overall stricter stance against crypto firms.
Excluding the Terraform Labs penalty, the total collected by the SEC in crypto fines this year is not greater than what was collected in 2023. Had the SEC been more vigilant, we would have seen more lawsuits against crypto firms in 2024. This comes at a time when losses from crypto scams grew by over 45% year-on-year (YoY) in 2023, with investors losing over $5.6 billion.
On the contrary, the regulatory environment for crypto firms in the U.S. has improved. For example, crypto ETFs received the green light from the SEC, helping the crypto markets recover from the longest bear run in crypto history.
What Does The SEC Do With the Fines It Collects?
When you see reports of the SEC collecting billions in fines, you might wonder what the SEC does with the money.
Fines collected by the SEC go to the U.S. Treasury. However, the financial regulator has other ways of using the funds it collects. After Sarbanes-Oxley Act of 2002, the SEC gained the authority to use fines to compensate victims. Before that, the funds were transferred directly to the U.S. Treasury.
That said, setting up a fair distribution mechanism can be challenging in most cases. Sometimes, the cost of distributing fines to victims exceeds the amount collected. In such cases, the money may sit for years before eventually being transferred to the government.
