As a seasoned researcher who has witnessed the dynamic evolution of the financial landscape over the past decade, I am both alarmed and intrigued by the escalating trend of regulatory settlements with crypto companies. In my early career, these figures would have seemed unimaginable, but now they are becoming an alarming norm.
2024 has seen the U.S. authorities collect approximately two-thirds of all settlements to date – a total of over $19 billion – from cryptocurrency firms through lawsuits.
According to a report released on October 9th by CoinGecko, FTX, the troubled cryptocurrency exchange, along with its associated trading company Alameda, are reportedly responsible for a significant portion of the funds. A sum of $12.7 billion was paid to the Commodity and Futures Trading Commission (CFTC) as part of an August settlement.
In the year 2024, regulatory bodies collected approximately 8,327% more money in fines across eight different locations compared to 2022. This amounted to a massive increase from the $10.87 billion paid in settlements in 2023, representing a rise of around 78%.
The total settlement amounts included forfeiture, disgorgement, civil penalties, settlement and prejudgment interest, but not individual lawsuits against executives.
As reported by research analyst Lim Yu Qian at CoinGecko, the failures of Celsius and Terraform Labs around mid-2022 served as significant turning points that signaled the transition from a crypto bull market to a bear market. This downturn ultimately led to the downfall of FTX, which in turn sparked increased regulatory attention towards the cryptocurrency sector within the U.S.
The agreement between Terraform Labs and the Securities and Exchange Commission (SEC), totaling $4.47 billion, over the collapse of their algorithmic stablecoin TerraUSD (UST) in 2022 ranks as the second-largest settlement reached that year.
In August 2023, Genesis secured a place among the leading three entities for the year 2024, following a $2 billion settlement it reached with the Office of the Attorney General (OAG). Genesis had previously filed for Chapter 11 bankruptcy in January 2023.
Regulator activity ramps up in last two years
2024 might still have some settlements taking place, according to Qian’s perspective, considering the persistence of regulators. The year won’t officially end until the ball drops on New Year’s Eve.
Despite having several months remaining in the year, 2024 has already seen a significant rise of approximately 79% in total settlement value when compared to 2023, as mentioned by her.
With U.S. regulators continuing to closely examine the cryptocurrency sector, it’s possible that 2024 could see a higher number of legal settlements compared to the previous year.
2023 saw a unique scalp case, where only one company was still in operation at the time a settlement was finalized. (Qian’s original statement: “In 2023, one scalp that stood out was the only company that was still operational when a settlement was reached.”)
The significant fine imposed on Binance by U.S. regulators marks a notable achievement, as it’s currently the largest settlement ever given to a functioning cryptocurrency company. However, it ranks fourth in terms of monetary value among all settlements.
In November 2023, Binance and its previous CEO, Changpeng “CZ” Zhao, decided to admit guilt for several allegations, such as Anti-Money Laundering regulations, in order to settle lawsuits with various US regulatory bodies, including the Department of Justice (DOJ), Treasury Department, and Commodity Futures Trading Commission (CFTC).
Over the past few years, starting from 2019, U.S. regulatory bodies have amassed approximately $31.92 billion through settlements with cryptocurrency firms.
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2024-10-13 19:08