SEC Cryptocurrency Enforcement: Q3 2021 Update

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Under the Biden administration, the SEC continues to be active in policing the cryptocurrency space with 19 enforcement actions related to cryptocurrency brought in the first nine months of 2021.

Executive Summary

  • On April 17, 2021, Gary Gensler was sworn in as the chair of the SEC.1 Chair Gensler included crypto assets as one of the main areas to which he will direct SEC resources.2
  • In the first nine months of 2021, the SEC brought 19 enforcement actions related to cryptocurrency. Twelve were litigated in U.S. district courts (“litigations”), and seven were resolved within the SEC as administrative proceedings (“administrative proceedings”).
  • Cryptocurrency enforcement activity in Q1 2021 was largely in line with the activity in Q1 2020. In Q2 2021, enforcement activity slowed down as senior positions were filled under Chair Gensler.3 It bounced back in Q3 2021, with nine cryptocurrency enforcement actions
  • Since the first action in July 2013, the SEC has brought a total of 94 cryptocurrency enforcement actions as of September 30, 2021:
    • 55 litigations
    • 39 administrative proceedings

List of all SEC cryptocurrency enforcement actions, trading suspensions, press releases, statements, and investor bulletins and alerts

Number of SEC Cryptocurrency Enforcement Action by Calendar Quarter Q3 2012-Q3 2021

Number of Cryptocurrency Enforcement Actions by SEC Fiscal Year

While the overall number of cryptocurrency-related litigations and administrative proceedings brought by the SEC in FY 2021 slightly trailed those in FY 2020, enforcement activity picked up in the months after Chair Gensler began his tenure at the SEC and appointed his team.

Cumulative number of SEC cryptocurrency litigations by SEC Fiscal Year FY 2020-FY 2021

Cumulative number of SEC cryptocurrency administrative proceedings by SEC fiscal year FY 2020-FY 2021

Types of Cryptocurrency Enforcement Actions

In the first nine months of 2021, the SEC brought 12 litigations and seven administrative proceedings in the cryptocurrency space.

Number of SEC cryptocurrency enforcement actions and trading suspensions by calendar quarter Q3 2013-Q3 2021

Allegations in Cryptocurrency Enforcement Actions

From Q1 2021 to Q3 2021, the most frequent allegations in SEC cryptocurrency enforcement actions continued to be fraud and unregistered securities offerings.

Allegations in SEC cryptocurrency enforcement actions by calendar quarter Q3 2013-Q3 2021

Allegations in Cryptocurrency Litigations versus Administrative Proceedings

From Q1 2021 to Q3 2021, 11 of the 19 cryptocurrency enforcement actions alleged fraud, while 14 involved alleged an unregistered securities offering violation.

allegations of fraud in the offer or sale of securities in SEC cryptocurrency enforcement actions by calendar quarter Q3 2013-Q3 2021

Allegations of unregistered securities offerings in SEC cryptocurrency enforcement actions by calendar quarter Q3 2013-Q3 2021

ICOs as Unregistered Securities Offering Allegations

From Q1 2021 to Q3 2021, the SEC continued to focus on initial coin offerings (ICOs). All but one of the 14 enforcement actions alleging an unregistered securities offering violation under Sections 5(a) and 5(c) of the Securities Act were related to ICOs. More than 60% of these ICO-related enforcement actions alleged fraudulent behavior.

ICOS as unregistered securities offering allegations in SEC cryptocurrency enforcement actions by calendar quarter Q3 2013-Q3 2021

[1] SEC, “Gary Gensler Sworn in as Member of the SEC,” Press Release, April 17, 2021, https://www.sec.gov/news/press-release/2021-65.

[2] SEC Chair Gary Gensler, “Testimony before the Subcommittee on Financial Services and General Government, U.S. House Appropriations Committee,” May 26, 2021, https://www.sec.gov/news/testimony/gensler-2021-05-26.

[3] See, e.g., SEC, “SEC Appoints New Jersey Attorney General Gurbir S. Grewal as Director of Enforcement,” Press Release, June 29, 2021, https://www.sec.gov/news/press-release/2021-114.


The views expressed herein are solely those of the author, who is responsible for the content, and do not necessarily reflect the views of Cornerstone Research.

Methodology

The SEC enforcement website was used to identify actions relevant to financial technologies, referred to herein as “cryptocurrency enforcement actions.” See “Enforcement,” https://www.sec.gov/page/litigation.

Cornerstone Research Data Analytics identified relevant enforcement actions brought by the SEC between January 1, 2013, and September 30, 2021, by using a series of financial technology relevant phrases.

Allegations in the cryptocurrency enforcement actions were generally taken from the “Violations” section in the SEC orders and the “Claims for Relief” sections in the litigation complaints.

The SEC fiscal year begins on October 1 and ends on September 30 of the following year.

See the Appendices for all SEC cryptocurrency enforcement actions, trading suspensions, press releases, statements, and investor bulletins and alerts.

Author

  • Washington

Simona Mola

Principal