The United States Securities and Exchange Commission (SEC) reached a significant milestone in fiscal year 2024, collecting a record $8.2 billion in fines and penalties. This is the highest in the agency’s history, as revealed in its annual report.
Despite handling fewer cases overall – a 26% drop from the previous year – the SEC’s financial haul underscores its focus on tackling large-scale violations, particularly in the cryptocurrency sector.
The landmark settlement with Terraform Labs was a major contributor to this historic total. It is a company once at the forefront of blockchain innovation but is now infamous for its role in one of history’s most dramatic crypto collapses.
Terraform Labs: The SEC’s Biggest Win in 2024
Terraform Labs, the creator of the Terra blockchain ecosystem, made headlines in 2022 when its algorithmic stablecoin TerraUSD (UST) and companion token LUNA crashed.
UST was designed to maintain its value at $1 through complex mechanisms tied to LUNA. However, in May 2022, this system failed catastrophically, leading to a collapse that erased approximately $60 billion in value from the crypto market. Investors were left devastated, and confidence in algorithmic stablecoins was severely shaken.
The crash began when UST lost its dollar peg, causing panic selling among investors. This led to a death spiral where both UST and LUNA plummeted in value. LUNA, once trading at over $100 per token, became virtually worthless. Critics accused Terraform Labs and its co-founder, Do Kwon, of misleading investors about the stability of their product.
SEC’s Enforcement and Record Settlement
In 2024, the SEC secured a massive $4.47 billion settlement from Terraform Labs and Do Kwon. This marked one of the largest penalties ever imposed in the agency’s history.
The SEC accused Terraform Labs of conducting a multi-billion-dollar fraud, deceiving investors, and failing to disclose critical risks associated with its blockchain ecosystem. This case alone accounted for more than half of the SEC’s total penalties for the year.
Do Kwon, who had evaded authorities for months, was arrested in Montenegro in 2023 while attempting to travel with a fake passport. His arrest marked a turning point in global efforts to hold crypto fraudsters accountable. Kwon now faces legal challenges in multiple countries, including the U.S. and South Korea.
More News: SEC Returns $4.6 Million to BitClave Investors After ICO Settlement
SEC’s Financial Remedies: How They Compare
The SEC collected $8.2 billion in total financial remedies in FY2024, which included $2.1 billion in penalties and a record $6.1 billion in disgorgement.
“Disgorgement refers to the return of illegal profits to harmed investors”.
This year’s figures represent a dramatic 65.5% increase from the $4.95 billion collected in FY2023. Interestingly, without the Terraform Labs case, the SEC’s collections would have totaled only $3.72 billion, its lowest since 2013, when it collected $3.4 billion. This underscores the outsized impact of the Terraform settlement on the agency’s overall performance.
| Year | Penalties (in millions) | Disgorgement (in millions) | Total (in millions) |
|---|---|---|---|
| FY 2024 | $2,102 | $6,092 | $8,194 |
| FY 2023 | $1,580 | $3,369 | $4,949 |
| FY 2022 | $4,194 | $2,245 | $6,439 |
| FY 2021 | $1,456 | $2,395 | $3,852 |
| FY 2020 | $1,091 | $3,588 | $4,680 |
| FY 2019 | $1,101 | $3,248 | $4,349 |
Enforcement Trends: Fewer Cases, Bigger Impact
In FY2024, the SEC pursued 583 enforcement actions, a 26% decrease from the previous year. However, the agency’s focus on high-impact cases like Terraform Labs led to a significant increase in financial penalties. This suggests a strategic shift toward targeting large-scale violations with the potential to set precedents.
The SEC’s enforcement activity in the crypto sector showed an interesting pattern. While the number of crypto-related cases dropped from 46 in FY2023 to just 11 in FY2024, the financial penalties tied to these cases soared by over 3,000%.
This increase was driven almost entirely by the Terraform settlement. The drop in case numbers may reflect the SEC’s prioritization of significant cases over smaller infractions.
Leadership and the Future of SEC Enforcement
FY2024 marked the final full year of Gary Gensler’s tenure as SEC Chair. Known for his strict approach to crypto regulation, Gensler has been a polarizing figure in the financial world. Under his leadership, the SEC ramped up its scrutiny of the crypto industry, culminating in high-profile cases like Terraform Labs and Ripple.
Gensler’s tenure will end in January 2025, coinciding with a new presidential administration. His departure raises questions about the future direction of the SEC, particularly as President-elect Donald Trump has expressed interest in easing regulatory pressures on the crypto industry.
With Trump set to take office, many in the crypto industry are hopeful for a more lenient regulatory environment. Legal experts predict that some ongoing SEC lawsuits against crypto firms may be scaled back or dismissed altogether.
Conclusion
The SEC’s $8.2 billion in penalties for FY2024 highlights its new focus on taking strong action in key cases to protect investors and rebuild trust in financial markets.
The Terraform Labs case shows the serious dangers of weak regulation in the crypto world. As the SEC prepares for new leadership, its next steps will be important in deciding how rules will shape both traditional finance and new technologies.
