On November 14, the US Securities and Exchange Commission (SEC) issued a press release about its work for the 2023 fiscal year, with a special emphasis on crypto-related enforcement. Let’s recall the SEC's high-profile cases in crypto and why the community does not like the regulator.
The fiscal year in some countries does not coincide with the calendar year. In the US, for example, it runs from October 1 to September 30 for the federal government.
SEC’s productive 2023 fiscal year, or where are the remaining $4B
According to the press release, this fiscal year was "highly productive and impactful" for the regulator in matters of crypto assets. In total, the regulator filed 784 lawsuits, recovered $5 billion, and paid out $1 billion to harmed investors.
Notably, $600 million was disbursed to whistleblowers, with a substantial portion — $279 million — given to a single individual.
Apparently, the remaining $3.4 billion will go to employee salaries and other internal spending. However, there is no transparency on this issue in the report.
Recall that in July, the head of the SEC, Gary Gensler, addressed the US Senate Committee on Appropriations and called for more resources from the budget. According to the plan presented there, the regulator's budget in fiscal 2024 is about $5.1 billion.
Now, let’s talk about the cases mentioned by the SEC. The crypto section of the press release mentions four types of crimes that have attracted the regulator's attention, and each is accompanied by examples of proceedings that have taken place.
SEC’s progress in combating crypto fraud
The SEC outlined the cases against Sam Bankman-Fried and other FTX executives, Terraform Labs and its founder, Do Kwon, Alex Mashinsky, CEO of bankrupt cryptocurrency lending company, and many similar crimes.
SEC against unregistered offerings of cryptos and NFTs
Those cases are related to the sale and offering of securities under the guise of crypto assets.
The SEC also highlights cases against platforms, such as Gemini, Celsius, and Kraken. The latter one resulted in ceasing to offer crypto-staking services to customers and paying a $30 million fine.
The SEC had also addressed charges against Impact Theory LLC and Stoner Cats 2 LLC for offering unregistered securities in the form of NFTs. So, this year, the crypto community learned that NFTs can also be treated as securities by regulators.
Whether crypto is a security or not is not exactly clear in the US. There is a view that it is a commodity. The answer to this question is important for the regulation of the sphere. Read our article dedicated to this debate: Crypto: security or commodity?
SEC’s lawsuits against unregistered exchanges and other intermediaries
Here, the commission is talking about lawsuits against exchanges and other similar crypto companies: Bittrex, Binance, and Coinbase.
Typically, trading platforms are accused of operating as an "unregistered securities exchange, broker, and clearing agency" in the US.
Touting, or why the Securities and Exchanges commission sued Kim Kardashian
In the touting section, the SEC mentions lawsuits against influencers and celebrities, who illegally promoted cryptocurrencies and failed to disclose details of personal interest and bias to investors.
Among others mentioned are the $1.35 million fine paid by famous former NBA player Paul Pierce, and Kim Kardashian, who paid a $1.26 million fine for promoting the EthereumMax token.
Unfortunately, the total amount of fines for all crypto-related cases for the 2023 fiscal year is not listed separately. It is also curious that the SEC does not mention cases where its track record may be questioned, such as the ongoing ones against Ripple Labs or Grayscale.
Frustration against the SEC after Enforcement Results 2023 publishing and spot Bitcoin ETF anticipation
The press release has caused mixed reactions in the community. For example, in X (formerly Twitter), the WhaleWire news media pointed out that the report states that $1 billion has been returned to affected investors but $5 billion was recovered, and said that the SEC was "pocketing $4 billion".
In general, the crypto community has shown increased attention to the regulator's actions this year. This is largely due to expectations around spot Bitcoin ETFs.
If you missed this topic, read our article: What is a spot bitcoin ETF, and why does everyone talk about it?
Often, the SEC's denials and postponements on these issues are attributed personally to Gary Gensler. For instance, in an interview with CNBC on November 14, Cathie Wood, the head of investment firm ARK Invest, said that she thought Gensler's arguments about Bitcoin manipulation as a basis for refusing to approve a spot bitcoin ETF seemed odd, provided he is very knowledgeable about cryptocurrencies. In this context, she mentions a course about cryptocurrencies that Gensler gave at MIT in 2018.
Wood’s guess is that Gensler wants to become US Treasury Secretary. From this perspective, it is more important for him to focus on the dollar, and because of the approval of such a financial instrument, there could be a conflict of interest.
The opinion that under Gensler's spot Bitcoin ETFs will not be approved has also been expressed by former SEC official John Reed Stark. However, in his opinion, this is due to the political situation in the country, and the situation may change if the president of the Republican Party wins the election in 2024.
On the other hand, Bloomberg analysts believe that, with a 90% probability, at least one spot Bitcoin ETF will be approved before January 10, 2024.
The approval of spot Bitcoin ETFs will have a strong impact on the market, but it is unknown whether it will make the price of the first cryptocurrency fly to the moon or, as was the case with the launch of Bitcoin futures in 2017, go down. Read more about it in our article: What's happening with Bitcoin ETFs and will BTC reach the moon.
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How a spot Bitcoin ETF splits the market into optimists and pessimists
