Dive Brief:
- The Securities and Exchange Commission pursued 583 enforcement actions in its 2024 fiscal year, a 26% decrease from the prior year, while also obtaining a record $8.2 billion in financial remedies. More than half of that total, announced Friday, was from the SEC’s fraud complaint against cryptocurrency startup Terraform Labs and its founder Do Kwon.
- The commission is widely expected to alter its enforcement priorities in 2025 as President-elect Donald Trump announces new agency leadership and a more welcoming stance toward digital currencies. SEC Chairman Gary Gensler and Commissioner Jaime Lizárraga announced last week that they’ll leave the agency in January, the week of Trump’s inauguration.
- Trump is still assessing candidates for SEC roles. Dan Gallagher, the chief legal officer of financial services firm Robinhood and a former SEC commissioner, told cable network CNBC Friday that he’s not interested in leading the SEC. Gallagher had been widely cited as a potential candidate for the commission under Trump.
Dive Insight:
The agency’s case against Terraform Labs and Kwon resulted in $4.5 billion in disgorgement, civil penalties and interest following a civil jury trial in New York.
In May 2022, Terraform and its Luna stablecoins depegged from the U.S. dollar, leading to a crash in which investors lost about $60 billion. The agency sued Terraform and Kwon in February 2023, accusing them of defrauding investors and selling unregistered securities; the company filed for bankruptcy 11 months later.
Under Gensler, the SEC and other Biden administration appointees aggressively policed the cryptocurrency industry, which responded with millions in donations to Trump and other Republican candidates in the last election.
Gensler’s five-year term was set to run to 2026, although Trump had threatened to fire him on the first day of his new presidential term. Trump has pledged to promote the industry, leading to speculation that he’d turn to a crypto executive as SEC chair.
In other notable enforcement actions over the fiscal year, the SEC settled cases with:
- Morgan Stanley, which agreed to pay $249 million in disgorgement, interest and civil penalty to settle fraud charges related to the disclosure of confidential information on its block trades.
- FirstEnergy, an Ohio-based utility, agreed in September to pay a $100 million civil penalty over a political corruption scheme in which it had paid former Ohio state legislators to help its interests.
- German software company SAP agreed in January to pay $98 million in disgorgement and interest for paying bribes in seven countries, including South Africa and Indonesia from 2014 to 2022.
Sanjay Wadhwa, acting director of the SEC’s enforcement division, said the enforcement numbers don’t reflect “countless investigations that may not have resulted in an enforcement action for evidentiary or other reasons, or where we declined to pursue an enforcement action, but that shined a spotlight on potentially problematic conduct and caused responsible market participants to cease engaging in it.”
The SEC’s fiscal year ends Sept. 30.
