SEC ramped up cryptocurrency enforcement in 2022, report shows

The Securities and Exchange Commission issued 30 cryptocurrency-related enforcement actions in 2022, a 50% increase from 2021 and the highest number since 2013, when the agency first issued such actions, according to a Cornerstone Research report released Wednesday.

The report, titled SEC Cryptocurrency Enforcement: 2022 Update, shows that the SEC brought 24 litigations and six administrative proceedings related to cryptocurrency in 2022. This is a 50% increase from 2021, when the agency brought 14 litigations and six administrative proceedings, or 20 crypto-related enforcement actions total.

Under Chairman Gary Gensler, “the SEC has sharpened its focus on cryptocurrency lending and trading platforms and decentralized finance platforms,” said Simona Mola, the report’s author and a principal at Cornerstone Research, in a news release Wednesday. “As Chair Gensler has noted, the ‘runway is getting shorter’ for crypto intermediaries to register with the SEC. This could lead to more enforcement actions coming from the SEC’s crypto assets and cyber unit, which recently expanded its workforce to investigate securities law violations in the crypto markets.”

The SEC issued its first crypto-related enforcement action in July 2013, according to the report, and has issued 127 actions since then. The 30 crypto-related enforcement actions issued in 2022 make up nearly a quarter of that total, and the 24 litigations last year represent the most crypto-related litigations brought by the SEC in one year.

Of the 30 crypto-related enforcement actions in 2022, 14 were related to initial coin offerings, or ICOs, and 57% of those ICO-related actions included a fraud allegation, the report said.

“Based on its implementation of the U.S. Supreme Court’s Howey test, the SEC continues to pursue actions alleging that tokens issued in ICO-related unregistered securities offerings were investment contracts subject to SEC regulation and enforcement.” said Abe Chernin, a Cornerstone vice president and co-head of the firm’s financial technology practice, in the news release.

According to the report, 73% of the agency’s crypto-related enforcement actions in 2022 alleged unregistered securities offerings, 70% alleged fraud and 50% alleged both.

Just last week, the SEC charged Genesis Global Capital and Gemini Trust Company with offering and selling unregistered securities through their crypto lending program, Gemini Earn.

“Crypto lending platforms and other intermediaries need to comply with our time-tested securities laws,” Mr. Gensler said in a news release announcing the charges. “Doing so best protects investors. It promotes trust in markets. It’s not optional. It’s the law.”