SEC Crypto Crackdown – Terraform Labs Settlement Pushes SEC to New Record in Penalties
SEC Crypto Crackdown – The U.S. Securities and Exchange Commission (SEC) reached a historic milestone in fiscal year 2024, securing a total of $8.2 billion in penalties and financial remedies—its highest amount ever. This record-setting figure, disclosed in the SEC’s annual report on November 22, was largely fueled by a massive $4.47 billion settlement with Terraform Labs and its former CEO, Do Kwon, following the collapse of its blockchain ecosystem in 2022.
Record Penalties for SEC in FY 2024
Despite the number of enforcement cases dropping by 26% to 583 compared to the previous year, the SEC’s financial haul skyrocketed due to the Terraform Labs case. The settlement, which addressed charges of fraud related to the collapse of the TerraUSD (UST) stablecoin and the broader LUNA ecosystem, accounted for over half of the total financial remedies collected by the agency.
Had Terraform Labs not been involved, the SEC’s total financial penalties would have been only $3.72 billion, marking its weakest year since 2013, when the agency collected $3.4 billion in fines. For the year ending Sept. 30, 2024, the SEC collected $2.1 billion in penalties and $6.1 billion in disgorgement—the process of returning illicit profits to harmed investors.
Gensler’s Legacy and Crypto Enforcement Actions
Outgoing SEC Chair Gary Gensler celebrated the results, emphasizing that the SEC remains committed to holding wrongdoers accountable. “The Division of Enforcement is a steadfast cop on the beat, following the facts and the law wherever they lead,” he stated. Gensler, who will step down on January 20, 2025, the same day Donald Trump is inaugurated as President, leaves behind a controversial legacy, particularly in his handling of the crypto industry.
Under Gensler’s leadership, the SEC ramped up its scrutiny of cryptocurrency companies, with 46 crypto-related enforcement actions in 2023. However, in 2024, the SEC’s crypto-related cases sharply declined to 11. Despite this, the fines and penalties related to crypto skyrocketed by over 3,000%, primarily due to the Terraform settlement.
Potential Shift in Crypto Regulation Under Trump
Looking ahead, the U.S. crypto industry hopes the SEC’s aggressive regulatory stance will soften under the incoming Trump administration. Trump has promised to ease regulatory enforcement, and many expect the SEC’s crypto lawsuits to “quietly go away” once he begins his second term. Katrina Paglia, Chief Legal Officer at Pantera, shared her expectation that the SEC’s multiple lawsuits against crypto firms will subside under Trump’s leadership.
As the SEC’s focus on the crypto industry wanes, it remains to be seen whether the record penalties of 2024 will mark the peak of the agency’s crypto enforcement efforts, or if it will continue to pursue aggressive actions well into the next administration.
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