SEC bags $8.2B in fines in 2024, over half from Terraform

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The United States Securities and Exchange Commission (SEC) hit a new record for penalties and fines from its enforcement actions in the fiscal year 2024, largely thanks to a substantial settlement in its case against Terraform Labs.

In its November 22 annual report, the agency announced that it had obtained orders for $8.2 billion in financial remedies for the year ending September 30, “the highest amount in SEC history.”

The $8.2 billion consisted of $6.1 billion in disgorgement—the return of ill-gotten gains to those wronged—and prejudgment interest, also the highest amount on record, and $2.1 billion in civil penalties, the second-highest amount on record. 

Despite these impressive hauls, the SEC stated that the 583 enforcement actions represent a 26% decline in total enforcement actions compared to fiscal year 2023.

This makes sense when considering that a whopping 56% of the $8.2 billion financial remedies came from a single case, the SEC’s jury trial win against Terraform Labs and its former CEO Do Kwon.

In May 2022, the Terraform ecosystem collapsed when its UST algorithmic stablecoin lost its peg to the U.S. dollar. This led to the printing of more of the company’s native token, LUNA, to prop up UST. It eventually led to a crash in LUNA and an estimated $60 billion being wiped out of the digital asset space. 

In February 2023, the SEC charged Terraform and Kwon in the U.S. District Court for the Southern District of New York with securities fraud and for offering and selling securities in unregistered transactions. After a long drawn-out trial, in April this year, a jury unanimously found the company and its founder liable for securities fraud, with Terraform and Kwon subsequently agreeing to pay a $4.47 billion settlement.

“The Division of Enforcement is a steadfast cop on the beat, following the facts and the law wherever they lead to hold wrongdoers accountable,” said SEC Chair Gary Gensler. “As demonstrated by this year’s results, the Division helps promote the integrity of our capital markets to benefit investors and issuers alike.”

The record year will serve as a welcome going away present for Gensler, whose nearly four-year tenure will be coming to an end next year. 

The controversial and much maligned—arguably unfairly—chair of the SEC announced he would be stepping down on January 20, 2025, bringing to an end a stewardship marred by accusations of jurisdictional overreach and heavy-handedness; his chosen departure date is uncoincidentally the same day crypto-friendly President-elect Donald Trump will be sworn into office.

Gensler’s resignation immediately sparked rumors and debates about who would be his Trump-era replacement, with several pro-crypto candidates leading the betting.

Gensler’s replacement

One of the top candidates to step into Gensler’s substantial shoes is SEC Commissioner Hester Peirce, popularly known as “Crypto Mom.”

Peirce has often been regarded as a softer touch than Gensler, particularly when it comes to the digital asset space. During her time as Commissioner, she has been publicly critical of the agency’s refusal to engage with digital asset users and developers, as well as expressing her support for a spot bitcoin ETP and claiming that the regulator had a duty to give investors what they want.

It’s no surprise that certain industry figures see Peirce as the favorable choice. Brian Armstrong, CEO of digital asset exchange Coinbase (NASDAQ: COIN)—and longtime regulatory whinger-in-chief—posted his preference for Peirce on X, saying “she would be the best choice. Smart, fair, professional. Can work with both sides.”

Another candidate on which Trump may look favorably is Mark Uyeda, also a current SEC commissioner. Uyeda has been vocal about his pro-crypto stance and has openly advocated for a defined and balanced approach to digital asset regulation and governance.

Looking beyond the current SEC roster, former SEC Commissioner Dan Gallagher has also been floated as a potential candidate for Chair. However, this is a somewhat left-field pick, as Gallagher is currently the Chief Legal Officer at trading platform Robinhood (NASDAQ: HOOD) and has stated that he is not interested in returning to the SEC.

“It is always an honor to have your name in the mix for an incredibly important job like SEC Chairman. However, I have made it clear that I do not wish to be considered for this position,” said Gallagher in a recent statement.

Whoever ends up stepping into the role of SEC chair, come January, will have a difficult balancing act to perform, keeping the pro-crypto President happy while maintaining the consumer protections and regulatory oversight that has become a hallmark of the agency under Gensler.

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