Will Binance settle with the SEC? Take a look at the history of high-profile SEC penalties
This morning, Stablecoin issuer Paxos is facing a lawsuit from the U.S. Securities and Exchange Commission over BUSD-related issues. The SEC said Paxos' offering and listing of BUSDs is an "unregistered security" and plans to Sue Paxos for violating investor protection laws and may take enforcement action.
In the past, encryption projects have been subject to SEC investigations that have resulted in "money for life." How severe will Binance and Paxos face in this case? BlockBeats sorted out the previous investigated projects and the amount of fines as follows:
Bloom Protocol -- $30.9 million
Cause of action: The SEC accused it of conducting IC0 for "unregistered security" tokens
Fined: $30.9 million
On August 10, 2022, the SEC had ordered cryptographic startup Bloom Protocol to register its Token or face a $31 million fine. The SEC has issued a cease and desist order against Bloom Protocol, accusing it of making an unregistered crypto asset security IC0. Bloom promised to register the tokens and compensate harmed investors, or pay a fine of up to $30.9 million.
Kraken -- $30 million
Cause of action: Suspected of offering unregistered securities to U.S. investors.
Fined: $30 million
On February 9, 2023, Kraken, a crypto trading platform, was being investigated by the SEC to determine whether it violated certain rules regarding the offering of unregistered securities to U.S. investors. The investigation is at an advanced stage and it is not clear which tokens or products are under scrutiny.
On Feb. 10, Kraken reached a settlement with the SEC and paid the SEC a $30 million fine, and Kraken will immediately terminate its encrypted pledge service for U.S. customers.
Block.One (EOS) -- $24 million
Cause of indictment: Allegations of raising billions of dollars over nearly a year with unregistered, first-issue digital currencies
Settlement: $24 million
In September 2019, the SEC filed a complaint against Block.One, alleging that Block.One provided investors with false and misleading information about EOS, an unregistered security offered by Block.one. In the case, the SEC settled on the condition that Block.one pay a $24 million penalty. Block.one readily agrees that the fine is small beer for Block.one -- just six-thousandths of the $4 billion it has raised.
As the largest financing in the history of the coin circle, the penalty result of EOS had an important impact on the subsequent Crypto practitioners' way of looking at regulation. At that time, the community once had a similar joke saying, "4 billion only fined 24 million, this is not punishment, this is encouragement".
EOS jumped 10 per cent after the settlement announcement.
Tezos -- $25 million
Cause of lawsuit: The conflict between the founder and the foundation led to the delay of the launch of Tezos main network and the delay in investors receiving XTZ
Fined: $25 million
In July 2017, Tezos launched an ICO to raise $232 million, but while the foundation was raking in cash, Tezos co-founders Arthur and Kathleen accused Johann Gevers, chairman of the Tezos Foundation, of issuing $1.5 million worth of XTZ in October 2017, It also filed a lawsuit against its owner, Dynamic Ledger Solutions, seeking $25 million in settlement damages.
Infighting between the founders and the foundation led to delays in the launch of Tezos's main website, and law firm Block & Leviton, who has been investigating Tezos since October 2017, formally filed a class-action lawsuit against the company in mid-December on behalf of nearly 30,000 investors.
In the end, after nearly three years of back-and-forth in the Tezos class action lawsuit, the Tezos Foundation announced in March 2020 that it was seeking a settlement and paying a $25 million fine to the SEC.
LBRY -- $20 million
Cause of action: LBRY violated securities laws by selling its native LBC tokens without registering with the SEC.
Fined: $20 million
2022 年 11 月 8 日，加密公司及区块链内容分发平台 LBRY 被指控在未向 SEC 注册的情况下销售其原生 LBC Token，违反了证券法。12 月 1 日，LBRY 宣布败诉，并表示其「已经被美国法律和债务扼杀，虽然 LBRY 协议和区块链将继续存在，但 LBRY Inc. 公司必须死（must die）」。 LBRY Inc. 公司首席执行官杰里米·考夫曼 (Jeremy Kauffman) 表示，目前还没有收到美国证券交易委员会具体的罚款金额，但估计将会有 2000 万美元。
Nvidia -- $5.5 million
Cause of action: Failure to disclose the impact of crypto mining on the company's business
Fined: $5.5 million
On May 6, 2022, the SEC disclosed a settlement of charges against technology company NVIDIA Corporation (NASDAQ: NVDA) for failing to adequately disclose the impact of cryptocurrency mining on the company's gaming business. It is understood that NVIDIA has declined to respond to the SEC's findings, but has agreed to pay a $5.5m fine.
Kik Interactive (Kin) -- $5 million
Cause of action: Sold digital asset securities to U.S. investors without registering the offer and sale as required under U.S. securities laws
Fined: $5 million
On October 21, 2020, the United States Securities and Exchange Commission (SEC) announced that a Federal District Court has ruled that Canadian communications platform Kik Interactive Inc. The case resulted in a final ruling that Kik violated federal securities laws with $100 million in 2017.
On June 4, 2019, the SEC filed a complaint in the U.S. District Court for the Southern District of New York alleging that Kik sold digital asset securities to U.S. investors without registering the offer and sale as required under U.S. securities laws. The court granted the SEC's motion for summary judgment on September 30, 2020, ruling that Kik's "Kin" Token sale was a sale of an investment contract, which was a sale of securities, and therefore Kik violated federal securities laws when it conducted the transaction. Kik will also have to pay a $5 million fine.
Friedman LLP (former audit firm of Tether) -- $1 million
Cause of action: "Continuous violations of federal securities laws" and extensive "professional misconduct"
Fined: $1 million
2022 年 9 月 27 日，SEC 因 USDT 发行商 Tether 的前审计公司 Friedman LLP 公司「连续违反联邦证券法」并存在大量「不当职业行为」提起诉讼，并已与其达成和解。在与 SEC 达成的和解协议中，Friedman LLP 已同意对其员工进行适当的审计程序培训，并将支付 100 万美元的民事罚款和 564,138 美元的非法所得及利息。 Friedman LLP 公司于 2017 年 5 月至 2018 年 1 月期间为 Tether 提供审计服务。
EtherDelta -- $388,000
Cause of indictment: operating an unregistered digital currency trading platform
Fined: $388,000
The US Securities and Exchange Commission (SEC) sued Zachary Coburn, founder of digital currency trading platform EtherDelta, accusing him of operating an unregistered digital currency trading platform. Stephanie Avakian, co-director of the SEC's enforcement division, said EtherDelta, a digital currency exchange, was required to register with the SEC or qualify for an exemption.
On November 8, 2018, the SEC issued a notice announcing that Zachary Coburn had agreed to pay $300,000 in restitution, $13,000 in pretrial interest, and a $75,000 penalty to the SEC.
Telegram (TON) -- $18.5 million in restitution of $1.224 billion
On December 3, 2017, TON published a 132-page white paper. In order to raise funds, TON officially announced the news of ICO on January 12, 2018. TON had planned to raise a closed-end round in three stages, but the second stage raised $1.7 billion, twice as much as expected, and the third was canceled.
On October 12, 2019, just before the TON Mainnet was about to go live, the Securities and Exchange Commission (SEC) suddenly sent a lawsuit. In the letter, the SEC said it characterized GRAM's fundraising process as an "online illegal digital asset securities sale" and is preparing to file "emergency action and obtain temporary restraining orders" against two offshore entity investment companies involved in its Token GRAM private placement for violations of securities laws.
Above the courts, in an attempt to limit GRAM's sale, the United States courts made incomprehensible demands. The court ordered Telegram not only not to sell GRAM in the United States, but also globally. In desperation, Telegram had to announce that it was abandoning TON.
On May 12, 2020, founder Pavel Durov announced on Telegram public channel that Telegram Open Network project (TON) was terminated. Telegram will return $1.224 billion, or 70 percent, of the $1.7 billion it raised to investors, must pay a civil penalty of $18.5 million to the SEC, and must give the SEC 45 days' notice if it wants to try to sell the Token again.
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