Half Of SEC Enforcement Actions Were Against ICOs In 2022

By Kevin • January 21, 2023 5:58 pm • Comments

The crypto community has been criticizing the SEC for a long time for its lack of effectiveness at regulating the industry and actually protecting investors.

After all, protecting the investors is what the agency was made to do, but it seems that the SEC has so far failed spectacularly in 2022 with events such as the FTX collapse.

Instead, if you look at the data, it seems that about half of the enforcement actions that has been done by the SEC has been targeting ICOs through litigation.

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This demonstrates that the SEC is primarily relying on litigation as its main method for regulation and this is certainly something that creates a lot of uncertainty for the industry.

After all, it is always unpredictable for investors when the SEC can sue a crypto project at any time based on its own interpretation of the law.

DeCrypto.co reports:

The report found that over the course of 2022, the SEC brought 30 total enforcement actions: 24 litigation actions in U.S. federal courts, and six administrative proceedings. The number of litigations rose from 14 cases registered the previous year.

Based in San Francisco, Cornerstone Research is a litigation consulting firm providing financial analysis and expert testimony to attorneys, corporations, and government agencies.

The firm’s database contains cryptocurrency-related enforcement actions brought by the SEC between January 1, 2013, and December 31, 2022.

Of the 30 enforcement actions, 14 involved initial coin offerings (ICOs), with 57% of these actions including a fraud allegation.

It is also interesting that the SEC is so focused on ICOs which means that the SEC is still very stubborn on its view that a lot of crypto tokens are considered securities.

Therefore, it is saying that all of these assets need to be registered with the SEC and follow strict securities guidelines.

The long drawn out lawsuit against Ripple is a classic example of this debate and the result of that will have significant impacts on the rest of the industry.

However, this is only the SEC’s claim and there are other entities like the CFTC that claim that some of these digital assets are commodoties.

It is clear that there must be definitive guidelines by lawmakers in order to prevent the SEC from making more allegations against crypto projects.

DeCrypt.co concludes:

Gensler has maintained that—from the agency’s standpoint—the majority of cryptocurrencies, especially the native assets of proof-of-stake (PoS) blockchains, which allow holders to passively earn returns through staking, are likely securities (and should be registered with the SEC).

Per the Cornerstone report, of the 127 crypto-related enforcement actions from 2013 through 2022, as much as 73% of cases alleged unregistered security offering violations, with 70 of them (55%) involving ICOs.

Over the same period, the SEC has imposed approximately $2.61 billion in total monetary penalties, of which $242 million were settlements the agency reached in 2022.

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