Unregistered ICOs Paid SEC $1.2 Billion in Fines in 2020

The United States Securities and Exchange Commission (SEC) has applied a hardline approach to cryptocurrency regulation for quite a while. This approach has led to a record-breaking year for the agency as it took billions in fines.

Big Gains for the Regulator 

The SEC’s Enforcement Division recently published its annual report for the 2020 fiscal year, confirming that it had collected a record-breaking $4.68 billion in fines from companies this year. Of the total fines, $1.26 billion came from companies with unregistered Initial Coin Offerings (IOCs). The remainder was paid by firms in other markets. 

The agency engaged in 715 cases. Out of those cases, 405 were independent actions concerning crimes such as insider trading, securities offerings, market manipulation, and the Foreign Corrupt Practices Act. Of all these independent actions, crypto-related cases took the lead with 130 cases, marking 30.2 percent of the grand total.

The SEC also confirmed that it returned $600 million of the fines to the victims of these fraudulent organizations and schemes.  

Telegram: The Biggest Culprit 

The SEC’s biggest crypto haul came from Telegram after shutting down the company’s aspiration of a digital asset and blockchain network. Telegram had raised $1.8 billion in two ICOs for its Telegram Open Network (TON) blockchain and GRAM tokens in 2018. As the firm prepared for an October 2019 launch, the SEC swooped in and slammed it with a securities violation lawsuit. 

Thus began a months-long legal tussle between both parties. The conflict ended in June. Telegram agreed to shut both projects down and pay the SEC $18.5 million in fines and return $1.2 billion to investors, per an SEC press release. 

While the SEC took the Telegram victory as a sign of improvement, it was met with widespread criticism. The agency’s pro-crypto Commissioner, Hester Pierce, said at a speech that neither side came out of the case with a win, and that the result was even worse for the crypto industry and its hopes for improved innovation. In part, she said:

“Who did we protect by bringing this action? The initial purchasers, who were accredited investors? The members of the public…? Would-be innovators, who will now take additional steps to avoid the United States?”

Despite the criticism, the SEC has remained resolute in its regulatory approach towards crypto ICOs and its issuers. 

Along with Telegram, the agency’s report showed that it also got fines from Shopin, Bitclave, NAC Foundation, Bitcoiin2Gen, and Boon Tech. The six cases netted the agency about $40 million, although the SEC and NAC Foundation are still settling their conflict at the San Francisco Superior Court.