U.S. Securities Exchange Commission (SEC) reports over $4.8 billion were paid in disgorgement and penalties – a record figure – across 2020. Cryptocurrency firms and unauthorized ICOs contributed a quarter of the figure as the securities authority halted Telegram’s $1.26 billion “Grams” token sale earlier in the year.

Despite the challenges brought about by the global COVID-19 pandemic, the SEC enforcement program had its best year yet in stopping fraud and illegal securities offerings. In the past year, the Commission has brought to book several international companies due to securities misconduct, including Wells Fargo, BMW VG, SCANA Corp, JP Morgan, and Telegram, to name a few.

In total, the Commission brought about 715 enforcement actions – 405 being standalone actions – and a further 72% of the standalone actions included one or more individuals. These included top management personnel in several companies, including CEOs and CFOs, accountants, auditors, and other company gatekeepers.

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The majority of the SEC’s 405 standalone cases in the Fiscal Year 2020 concerning securities offerings (32%), investment advisory and investment company issues (21%), and issuer reporting/accounting and auditing (15%) matters.

Crypto contributes to 26.6% of the total fines.

While a bulk of the penalties and fines were taken from traditional companies, crypto-related firms contributed to over 25% of the total fines. The annual report provides a list of crypto firms that raised unregistered ICOs, offering a clear description of the fines paid and the amount distributed to owners.

Top of the list is Telegram’s ICO sale, which contributed a quarter of the total amount nabbed by the SEC in 2020. TON raised over $1.7 billion in its public sale of ‘Grams’ tokens, but the Commission halted the tokens’ distribution after obtaining a temporary restraining order on TON Issuer Inc. The Commission alleges Telegram’s ‘Grams’ token offering pertains to operating an unregistered offering of digital tokens in federal law violations.

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Telegram agreed to settle the lawsuit and stop further development of the project paying $18.5 million in fines to SEC and refunding $1.2 billion to investors.

Other cryptocurrency companies included in the report are Kik, who are ordered to pay a fine of $5 million for offering an unregistered ICO; and Bitclave, Shopin, NAC Foundation, Unikrn, Boon Tech, and Bitcoiin2Gen, who reaped a combined $40 million in fines.

A strategic view from the SEC

The SEC also reformed some of its sectors to enhance the protection of investors in the market. Whistleblowing is one key area that the Commission is working on – as they disbursed record amounts in 2020 to incentivize whistleblowing. At the end of the 2020 fiscal year, the SEC offered $175 million to 39 whistleblowers, representing a 200% increase over the next highest year since 2011. Notwithstanding, the Whistleblower Program distributed its largest amount yet to an individual – $114 million – late last month.

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Of the $4.68 billion collected by the Commission in disgorgements, $600 million was returned to individual investors. The average amount of time taken on investigations over the past year has reduced from 37 months to 34 months.




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Crypto-Related Fines Contribute 25% Of the $4.8 Billion Collected By The SEC In 2020

by Anthony Beattie
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