The US Securities and Exchange Commission (SEC) is sending a clear message to the cryptocurrency industry: compliance with regulations is paramount. In 2024, the SEC has levied record-breaking fines on cryptocurrency entities, highlighting the growing financial risk for companies that fail to meet regulatory standards.
According to a study by cryptocurrency analytics firm Social Capital Markets, the SEC has issued over $7.42 billion in fines since 2013. However, a staggering $4.68 billion, or 63%, of those fines were issued in 2024 alone. This represents a massive 3,018% increase compared to the $150 million in fines issued in 2023.
The dramatic spike in fines is largely attributed to a historic $4.47 billion penalty levied against bankrupt company Terraform Labs. The company was found guilty of defrauding investors during the disastrous collapse of the Terra LUNA/USD cryptocurrency in 2022, an event that triggered a cryptocurrency bear market. This unprecedented fine served as a stark warning to the industry, establishing a new standard for regulatory oversight.
The SEC carried out approximately 11 enforcement actions in 2024, with an average fine of $426 million. This is a significant jump from the previous year, where the average fine was just $5 million across 30 enforcement actions.
The SEC’s approach reflects a strategic shift toward targeting larger companies and high-profile cases. In recent years, the agency, under the leadership of Gary Gensler, has been increasingly aggressive in pursuing top cryptocurrency companies. In June 2023, the SEC filed lawsuits against both Binance and its founder, Changpeng Zhao, alleging deceptive tactics, conflicts of interest, and evasion of the law. Around the same time, the agency sued Coinbase, claiming that the exchange was illegally operating as a national securities exchange.
While Ripple Labs was fined $125 million last month for violating federal securities laws through its sale of XRP to institutional clients, this penalty was significantly lower than the SEC’s initial request of nearly $2 billion.
The SEC’s assertive stance underlines the increasing importance of regulatory compliance in the cryptocurrency space. As the industry continues to evolve, companies will need to prioritize adherence to regulations to avoid hefty fines and protect themselves from future legal action.
