June 27, 2022

Volume XII, Number 178

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June 24, 2022

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SEC Cryptocurrency Enforcement: Q3 2021 Update

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

See the Appendices >

Figure 1a: Number of SEC Cryptocurrency Enforcement Actions by Calendar Quarter

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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.

Figure 2a: Cumulative Number of SEC Cryptocurrency Litigations by SEC Fiscal Year

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Figure 2b: Cumulative Number of SEC Cryptocurrency Administration Proceedings by SEC Fiscal Year

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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.

Types of Cryptocurrency Enforcement Actions

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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.

Figure 4: Allegations in SEC Cryptocurrency Enforcement Actions by Calendar Quarter

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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.

Figure 5a: Allegations of Fraud in the Offer or Sale of Securities in SEC Cryptocurrency Enforcement Actions by Calendar Quarter

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Figure 5b: Allegations of Unregistered Securities Offerings in SEC Cryptocurrency Enforcement Actions by Calendar Quarter<br />Q3 2013–Q3 2021

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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.

Figure 6: ICOs as Unregistered Securities Offering Allegations in SEC Cryptocurrency Enforcement Actions by Calendar Quarter<br />Q3 2013–Q3 2021

(click chart to enlarge)

[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

Copyright ©2022 Cornerstone ResearchNational Law Review, Volume XI, Number 312
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About this Author

Simona Mola Senior Manager Cornerstone Research
Senior Manager

Simona Mola conducts financial and economic analyses in complex commercial litigation and regulatory proceedings. Dr. Mola manages teams to support expert witness testimony in all stages of litigation, including deposition and trial. Across a range of corporate finance and corporate governance matters, she addresses issues that include capital formation, disclosure requirements, financial reporting, and executive compensation. In addition, Dr. Mola has expertise with economic issues involving cryptocurrency, initial coin offerings (ICOs), blockchain use cases, and token...

202-912-8970
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