Cryptocurrency enforcement increased more than 50 percent in 2023, SEC says

According to the Security and Exchange Commission, cryptocurrency-related enforcements rose by more than half in 2023.

Of the 46 enforcement actions brought against digital-asset market participants last year, nearly half (20) came in the first quarter, the highest number in a single quarter, officials said. The number of enforcements was more than half as much (53 percent) as the previous year. A report by Cornerstone Research found that the SEC brought 26 litigations to federal courts and initiated 20 administrative actions, more triple the number of administrative actions in 2022. The enforcements brought in more than $281 million in monetary penalties, the report found.

“Chair Gensler has noted that ‘enforcement is a tool, not the destination,’ and the number of SEC enforcement actions brought in the crypto space has ramped up over the last two years,” Simona Mola, the report’s author and a principal at Cornerstone Research, said. “We will be watching to see what 2024 brings, particularly in light of the SEC’s recent approval of the first Bitcoin ETFs.”

The report found that more than a third of the enforcement actions (37 percent) were related to initial coin offerings (ICOs), down from 2022’s 47 percent. Nearly all of the 17 ICO-related actions (82 percent) involved allegations of fraud. Additionally, the SEC brought two administrative actions related to Non-fungible tokens (NFTs), with allegations of conducting unregistered securities offerings of crypto asset securities.

“The SEC has continued in 2023 to focus on its implementation of the Howey test,” said Abe Chernin, a Cornerstone Research vice president and cohead of the firm’s FinTech practice. “The SEC has increasingly concentrated on trading platforms for their crypto lending and staking programs or for allegedly failing to register as an exchange, a broker-dealer, and a clearing agency.”

Of the total enforcement actions, nearly half involved fraud, while 61 percent alleged an unregistered securities offering violation and 37 percent alleged both. Fraud and unregistered securities continue to be the most frequent allegations.