Several crypto industry stakeholders have pending lawsuits in the U.S. and other jurisdictions following a busy year for government prosecutors and digital asset attorneys.
2023 featured crypto’s largest court case to date coupled with a multi-billion dollar settlement between the industry’s largest exchange and several U.S. regulatory bodies. However, 2024 promises another series of court battles and crypto defendants arguing against illegal doings.
The U.S. Securities and Exchange Commission (SEC) sued multiple crypto businesses in what some proponents termed a “regulation by enforcement” campaign against blockchain assets.
Found a typo in the SEC’s brief. They refer to their “active regulatory and enforcement agenda” in crypto — think they actually mean “active regulation by enforcement agenda.” Don’t think any of us recall seeing the SEC’s crypto regulatory agenda… https://t.co/D2tuG3cSuW
— Stuart Alderoty (@s_alderoty) May 16, 2023
According to SEC Chair Gary Gensler, the majority of these crypto assets qualify as securities and fall under the purview of existing financial policies. He views the ecosystem as rife with fraud and non-compliance.
The Commodity Futures Trading Commission (CFTC) kept apace with Gensler’s SEC, fielding 47 lawsuits involving digital asset operators accused of fraud and running Ponzi schemes. Indeed, the CFTC recorded its largest-ever win after fining Cornelius Johannes Steynberg of Stellenbosch $3.4 billion.
New cases are likely to emerge amid unresolved litigation and rolling enforcement action. These are the seven crypto cases to watch at press time.
Binance
Crypto’s largest exchange, Binance, reached a record-breaking $4.3 billion settlement with the CFTC, the U.S. Department of Justice, and the Treasury Department. Former CEO Changpeng Zhao also stepped down and pleaded guilty to at least one felony charge.
However, the SEC is still suing Binance and was notably absent from the multi-agency resolution announced in November. The SEC said Binance broke securities laws by operating an unregistered exchange and offering illegal securities like the BUSD stablecoin, a joint venture with Paxos.
Richard Teng, the new Binance CEO, would lead the company through an SEC lawsuit and adjust to the monitorship agreed upon with authorities.
You might also like: US court approves settlement between Binance and CFTC
Celsius
The bankrupt crypto lender is accused of defrauding thousands of investors under the leadership of ex-CEO Alex Mashinsky. Mashinsky denied wrongdoing after his arrest in July and indictment on seven criminal charges.
His trial will begin in September while Celsius faces suits from the CFTC and the SEC. A third lawsuit filed by the Federal Trade Commission was settled.
You might also like: Mashinsky’s trial date in Celsius fraud case set for September 2024
Coinbase
Like Binance, the SEC sued Coinbase in June. Coinbase allegedly failed to register its exchange and illegally provided staking-as-a-service to U.S. investors. Coinbase will square off with the securities watchdog in a Southern District Court of New York after denying the allegations.
The crypto exchange also saw its rule-making petition denied, although CEO Brian Armstrong said Coinbase would not give up.
Nice small win. We went to court to challenge the SEC’s refusal to create clear rules for the industry – and it worked (a court compelled them to respond).
Now that they’ve formally responded (with a no!) we can challenge their response in court, which helps us get one step… https://t.co/3RcTk1OVcp
— Brian Armstrong 🛡️ (@brian_armstrong) December 16, 2023
FTX
While FTX founder Sam Bankman-Fried was convicted on all seven charges, including fraud at his exchange and crypto trading firm Alameda Research, a second trial to address severed counts may be held.
Federal prosecutors could sue Bankman-Fried for unlawful political donations and bribing foreign government officials. A New York court is scheduled to sentence the fallen crypto mogul in March. This is the same time a second FTX trial may be pursued. Bankman-Fried’s bid for a delayed sentencing was already refused.
You might also like: Sam Bankman-Fried denied delayed sentencing over FTX fraud
Kraken
Kraken pulled out of New York, but the SEC still has a case against the Jesse Powell-founded crypto exchange. The SEC accused Kraken of commingling customer funds and operating an unregistered securities exchange. Kraken promised to respond.
David Ripley, Kraken CEO, said the company does not list securities, and the SEC does not have a regulatory structure to register compliant crypto firms.
We strongly disagree with the SEC claims, stand firm in our view that we do not list securities, and plan to vigorously defend our position.
As we have seen before, the SEC argues that @krakenfx should “come in and register” with the agency, when there is no clear path to…
— Dave Ripley (@DavidLRipley) November 21, 2023
Ripple
Ripple partial victory in a multi-year legal tussle with the SEC over XRP sales was considered a turning point by many in crypto. The SEC said Ripple’s XRP sales to institutional and retail investors broke securities laws.
Judge Analisa Torres ruled that XRP sales on exchanges were not unregistered securities, while institutional offerings were. Either side may appeal outcomes as negotiations are expected to decide possible penalties for Ripple based on sales to sophisticated investors.
You might also like: Ripple vs. SEC: timeline
Tornado Cash
The U.S. Treasury sanctioned Tornado Cash in August 2022 for allegedly enabling money laundering and other criminal activity. Co-founders of the Ethereum-based mixing service also face legal action.
Tornado Cash developers Roman Storm and Roman Semenov stand accused of sanctions evasion and aiding money laundering. Both defendants deny the charges, and Storm was arraigned in Manhattan court.
Another developer, Alexey Pertsev, spent nearly nine months in jail before his release in the Netherlands pending a trial in March.
Read more: Tornado Cash case: crypto anonymity vs regulation
