Crypto Fraud Penalties Propel SEC’s 2024 Enforcement to $8.2 Billion

The US Securities and Exchange Commission (SEC) achieved $8.2 billion in financial remedies during its 2024 fiscal year, marking a significant milestone despite fewer enforcement actions.

The agency reported that it filed 583 cases this year, reflecting a 26% decrease compared to 2023. However, substantial financial penalties, particularly from high-profile cases like Terraform, drove remedies to record levels.

Terraform Labs Responsible for 56% of SEC’s Enforcement Penalties

The SEC’s enforcement report highlighted that the $4.5 billion penalty from Terraform Labs made up 56% of the year’s total financial remedies. This case, tied to the 2022 Terra/Luna collapse, resulted in the largest monetary judgment ever secured by the SEC after a trial.

Terraform Labs and its CEO, Do Kwon, were found liable for defrauding investors during the Terra/Luna collapse in 2022. The SEC described the incident as one of the most significant securities fraud cases in its history. The collapse, which destabilized the crypto market, resulted in significant losses for investors, prompting heightened regulatory scrutiny.

Beyond Terraform, the SEC settled with crypto-friendly bank Silvergate Capital for misleading disclosures about its compliance programs related to crypto clients, including FTX. BarnBridge DAO also faced charges for failing to register its structured crypto assets as securities.

In addition to enforcement, the SEC highlighted its investor protection efforts. It distributed $345 million to harmed investors this year, bringing its total to over $2.7 billion since 2021.

The agency also processed 45,130 tips, complaints, and referrals in 2024, including 24,000 whistleblower submissions. Whistleblower awards reached $255 million, underscoring the SEC’s reliance on public collaboration to identify and penalize wrongdoing.

The outgoing SEC Chair Gary Gensler emphasized that these actions emphasizes the agency’s commitment to protecting investors.

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

Despite the SEC’s achievements, critics have voiced concerns about its enforcement strategy. Miles Jennings, head of decentralization at a16z crypto, argued that large financial penalties might not address systemic issues in the financial markets.

“The SEC measures its success in the amount of fines collected from enforcement actions. While large fines can serve as a visible deterrent and provide a measurable benchmark for activity, they don’t reflect whether the SEC is achieving its core mission of preventing misconduct in financial markets,” he stated.