5 Biggest SEC Crypto Settlements

The Securities and Exchange Commission (SEC) is the apex body of the US government that regulates the cryptocurrency market. There have been many instances in the past where the SEC found out that certain cryptocurrency companies and enterprises had violated the rules and caused widespread loss to the investors. Such cases were contested in the court, and the SEC won the cases, which resulted in the accused being penalized with huge amounts of money. 

5 Major SEC Crypto Settlements That Shook the Market

Here are five major SEC Crypto settlements that gained significant attention from investors. 

1. Terraform Labs

Terraform Labs incurred an issue with the US regulatory agency in May 2022 when TerraUSD (UST) incurred an algorithm failure while handling a massive sell-off. UST lost its peg with USD, which caused a loss of currencies worth $40 billion from the crypto market. This caused widespread losses to several token holders. 

The allegations against Terraform Labs were that it misled the market regarding the capability of UST to boost the market. Unlike the previous notion, UST turned out to be an unreliable asset. In June 2024, Terraform Labs was charged a penalty of $4.05 billion.

2. Coinbase

Coinbase, a prominent crypto exchange, serves crypto investors all over the world. The company went public in 2021. Like other giants in this field, Coinbase has also come under the scanner of the US SEC. SEC found out that some of the services offered by Coinbase came under the category of unregistered securities. SEC alleged that Coinbase of functioning as an unregistered exchange, broker, and clearing agency, which was against US law. 

The US Federal court found Coinbase to be guilty of these charges and imposed a penalty of $350 million on this exchange. This was the biggest SEC-crypto settlement in history. 

3. Binance

Binance came under the SEC’s scrutiny in 2023 for allegations such as operating an unregistered exchange and offering unregistered securities. Binance had to pay $100 million to settle this allegation. 

Initially, the company gave the impression that Binance US was an independent entity, but later, it became clear that Binance had a significant say in this company. SEC found out that Binance had a stake in a company that was not registered as an exchange as per US law. Binance was also found to have violated the US securities law by operating unregistered exchanges, broker-dealers, and clearing agencies.

SEC filed over 13 different cases around these issues. After due litigation, Binance agreed to a settlement of $100 million. This was one of the major settlements orchestrated by the SEC on the largest cryptocurrency exchange. 

4. Ripple Labs

Ripple Labs fell under the SEC’s scanner in 2020 when it was alleged to have sold XRP as an unregistered security. Even though Ripple Labs was of the opinion that XRP did not qualify to be a security as it passed the Howey Test, the SEC did not agree with their arguments and filed a lawsuit against Ripple. 

Ripple had been promoting the trade of XRP as a currency in the past. So, it contested the case in the court and had a partial victory. In July 2023, the US court ruled that XRP did not fall into the category of securities when sold in secondary markets. However, XRP could be considered a security in the case of institutional sales. Ripple had to pay a partial penalty of $125 million in this case.

5. BlockFi

BlockFi is a crypto-lending platform that provides interest to investors. Like how a bank would function, investors can deposit their cryptocurrencies in BlockFi, earn interest, take loans with crypto as collateral, and the like. 

BlockFi came under the SEC’s surveillance regarding its product, named BlockFi Interest Account (BIA). Through this account, BlockFi lent the crypto deposited by investors to third-party institutions to generate revenue. SEC found out that these were unregistered securities. 

SEC filed a case in 2022, where BlockFi had to pay a penalty of $100 million penalty: $50 million to the SEC and $50 million to state regulators. BlockFi’s case is yet another crypto settlement that gained significant public interest. 

Final Thoughts

The legal tussles that these five cryptocurrency companies faced and the huge penalties imposed on them show that it is important for crypto investors and companies to comply with the laws. Regulatory agencies such as the SEC are strictly monitoring the market, and any unlawful activity will be penalized. 

Debates are going on regarding whether such centralized regulations are necessary in the world of decentralized finance. However, the SEC is taking these actions for the overall good of the market, so that more investors come to invest in crypto. 

With the US President Donald Trump’s crypto-friendly stance, organizations anticipate leniency in the laws and their enforcement. Such a change will revamp the market in a new direction.