Contrary to popular belief that the crypto asset industry is not regulated, U.S. regulators are increasingly imposing significant financial penalties on crypto businesses -the names of penalties include fraud, violation of anti-money laundering regulations, provision of unregistered securities, and violation of sanctions Regulations.
In the United States or to any US citizen services and the headquarters of financial as business services, encryption-owned industrial business also have to comply with many of the same laws and regulations. These are some of the most stringent rules governing the provision of financial services in the world, and crypto businesses have invested huge resources in compliance with anti-money laundering and sanctions obligations.
Just as traditional companies and financial institutions are punished by regulatory agencies for violating these rules, crypto companies also need to face all this. Blockchain analysis company Elliptic ‘s analysis of U.S. regulatory enforcement actions since the birth of Bitcoin in 2009 shows that the fines imposed on companies and individuals engaged in crypto transactions have reached 2.5 billion U.S. dollars.
This includes the US Securities and Exchange Commission ( SEC ) fined US$1.69 billion, the US Commodity Futures Trading Commission (CFTC) fined US$624 million, the US Treasury Department’s Financial Crime Enforcement Network (FinCEN) fined US$183 million, and the Office of Foreign Assets Control of the US Department of OFCA) fined $606,000. Most of these penalties involve unregistered securities issuance (US$1.38 billion), fraud (US$928 million) and anti-money laundering violations (US$183 million). Penalties can be divided into civil penalties (US$722 million), seizure (US$1.62 billion) and restitution (US$161 million).
The first major enforcement action takes place in 2014 , the US SEC ordered Trendon T. Shavers and Bitcoin Savings and Trust for operating a Ponzi scheme to pay 4000 fine multi-million dollar , the scam to defraud the investment were 70 more than ten thousand Bitcoin. Whether it is US dollars, Bitcoin or Magic Beans, the SEC has proved that no matter what assets or technology is used, a Ponzi scheme is a form of fraud that can be traced under the same old law.
In 2013, FinCEN clearly stipulated that “virtual currency ” exchangers must comply with the Bank Secrecy Act, just like any other currency service business. This requires them to detect and prevent money laundering through records, customer identification and other measures. The Russian-based crypto asset exchange BTC- e failed to do this, and it was heavily used by criminals to launder criminal proceeds in cryptocurrencies. Although BTC-e is not based in the United States, it does provide services to American customers, so FinCEN imposed a fine of $122 million on the company and its operator Alexander Vinnik in 2017 .
In 2017 , there was also the rise of ” IC 0 “. Start-ups and projects raised billions of dollars in the form of cryptocurrencies such as Bitcoin or Ethereum through crowdfunding. In return, “investors” received tokens based on various blockchains, which represented a certain interest in these projects or businesses. However, many of these IC0s violated securities laws or were outright frauds themselves. The SEC has been tracking down those who manage and promote these IC0s .
The largest such action to date occurred in 2020 , when Telegram Group Inc. and its wholly-owned subsidiary TON Issuer Inc. accused the U.S. SEC of Telegram’s unregistered issuance of Crypto tokens called ” Grams ” in violation of federal securities laws. Reach a settlement . The defendant agreed to return more than 1.2 billion U.S. dollars to investors and pay a civil fine of 18.5 million U.S. dollars.
Recently, the U.S. CFTC has become the main source of enforcement actions against encryption businesses that involve fraud, reporting failures, and false sales and other violations. In March 2021 , British national Benjamin Reynolds was ordered to pay nearly US$ 143 million in compensation for defrauding customers and was fined US$ 429 million in civil fines. Previously, the CFTC accused Reynolds and the so-called crypto investment program Control-Finance of fraud and embezzlement of funds.
The US OFAC is the latest agency to take enforcement actions against encryption businesses. OFAC is responsible for imposing economic and trade sanctions on foreign countries, organizations, and individuals deemed to threaten the national security of the United States . Such sanctions also apply to cryptocurrencies and any other assets. OFAC has imposed penalties for violations of sanctions on two crypto-asset businesses in the past year .
Our analysis of law enforcement actions related to crypto assets in the United States shows that the crypto industry is far from the “Wild West” of the financial industry. Regulators have successfully used existing laws to stop and punish illegal activities that use crypto assets — from Ponzi schemes to money laundering — and hold companies accountable for compliance failures.
Enforcement of regulations ensures that bad actors cannot be rampant, and brings certain clarity to how regulations made decades ago apply to new technologies. In this way, such actions actually help crypto assets gain greater acceptance and legitimacy.