10 Crypto Projects Fined By SEC
Bloom Protocol
Reason for the lawsuit: SEC accuses it of conducting an unregistered securities ICO for its token.
Amount fined: $30.9 million
On August 10, 2022, the SEC ordered the cryptocurrency startup Bloom Protocol to register its token or face a $31 million fine. The US Securities and Exchange Commission issued a cease-and-desist order against Bloom, accusing it of conducting an unregistered ICO for its cryptocurrency asset security, ICO. Bloom has promised to register its token and compensate affected investors or face a fine of up to $30.9 million.
Kraken
Reason for the lawsuit: suspected of offering unregistered securities to US investors.
Amount fined: $30 million
On February 9, 2023, the cryptocurrency exchange platform Kraken was under investigation by the SEC to determine whether it violated certain regulations by offering unregistered securities to US investors. The current investigation is in the later stages, and it is unclear which tokens or products are under review.
On February 10, Kraken reached a settlement with the SEC and paid a $30 million fine. Kraken will immediately terminate its crypto-staking service for US customers.
Block.One (EOS)
Reason for the lawsuit: accused of raising billions of dollars with an unregistered initial coin offering (ICO) over the course of nearly a year.
Amount settled: $24 million
In September 2019, the SEC filed a lawsuit against Block.one, alleging that the company provided false and misleading information to investors about EOS, a security that Block.One offered and which was unregistered. In this lawsuit, the SEC gave a settlement condition for Block.One to pay a fine of $24 million. Block.One readily agreed to the settlement, which was only a tiny fraction of its total funding of $4 billion, or 0.6%.
The punishment for the largest fundraising in the cryptocurrency industry at the time had an important impact on how subsequent crypto practitioners viewed regulation. At the time, the community had a similar joke saying that "punishment" was not the right word, but "encouragement" was.
After the settlement statement was released, EOS rose 10%.
Tezos
Reason for the lawsuit: conflict between founders and the Tezos foundation resulted in the delayed launch of Tezos' mainnet, and investors did not receive their XTZ.
Amount fined: $25 million
In July 2017, Tezos launched an ICO and raised $232 million, but when the foundation was making a lot of money, Tezos’ co-founders accused Tezos Foundation Chairman Johann Gevers of issuing $1.5 million worth of XTZ without authorization in October 2017. They sued their affiliated company, Dynamic Ledger Solutions, demanding a $25 million settlement fee.
The internal strife between the founders and the foundation directly led to the delay of Tezos' mainnet launch. Law firm Block & Leviton began investigating Tezos in October 2017 and filed a class action lawsuit on behalf of nearly 30,000 investors in mid-December.
In the end, the Tezos class action lawsuit lasted nearly three years. In March 2020, the Tezos Foundation announced that it would seek a settlement and pay a $25 million fine to the SEC.
LBRY
Reason for the lawsuit: Selling its native LBC Token without registering with the SEC, in violation of securities laws.
Amount fined: $20 million
On November 8, 2022, the cryptocurrency company and blockchain content distribution platform LBRY were accused of selling its native LBC Token without registering with the SEC, in violation of securities laws. On December 1, LBRY announced that it had lost the case, and stated that it had been "choked by US law and debt."
While the LBRY protocol and blockchain will continue to exist, LBRY Inc. CEO Jeremy Kauffman stated that the specific amount of the fine from the SEC has not yet been received, but is estimated to be $20 million.
NVIDIA
Reason for the lawsuit: Failure to disclose the impact of cryptocurrency mining on the company's business.
Amount fined: $5.5 million
On May 6, 2022, the SEC disclosed a settlement charge against technology company NVIDIA Corporation (stock ticker: NVDA) for failing to fully disclose the impact of cryptocurrency mining on the company's gaming business. It is understood that NVIDIA has refused to respond to the results of the SEC's investigation, but has agreed to pay a fine of $5.5 million.
Kik Interactive (Kin)
Reason for the lawsuit: Sale of digital asset securities to US investors without registering the offering and sales following US securities laws.
Amount fined: $5 million
On October 21, 2020, the US Securities and Exchange Commission (SEC) announced that a federal court had made a final judgment in the case of Canadian communication platform Kik Interactive Inc., ruling that Kik had violated federal securities laws with a $100 million ICO in 2017.
On June 4, 2019, the SEC filed a lawsuit in the United States District Court for the Southern District of New York, accusing Kik of selling digital asset securities to US investors without registering the offering and sales in accordance with US securities laws.
On September 30, 2020, the court approved the SEC's motion for summary judgment, ruling that the sale of Kik's "Kin" Token was a sale of investment contracts and therefore a sale of securities and that Kik violated federal securities laws when it conducted the transaction. Kik also had to pay a fine of $5 million.
Friedman LLP (former auditor for Tether)
Reason for the lawsuit: "Continuously violating federal securities laws" and engaging in a significant amount of "improper professional conduct."
Amount fined: $1 million
On September 27, 2022, the SEC filed a lawsuit against Friedman LLP, the former auditing company for USDT issuer Tether, for "continuously violating federal securities laws" and engaging in a significant amount of "improper professional conduct."
The company has reached a settlement with the SEC. As part of the settlement agreement, Friedman LLP has agreed to provide appropriate audit procedure training for its employees and will pay a civil penalty of $1 million and $564,138 in illegal gains and interest. Friedman LLP provided audit services to Tether from May 2017 to January 2018.
EtherDelta
Reason for the lawsuit: operating an unregistered digital currency trading platform
Fine amount: $388,000
The US Securities and Exchange Commission (SEC) sued Zachary Coburn, the founder of the digital currency trading platform EtherDelta, for operating an unregistered digital currency trading platform. Stephanie Avakian, co-director of the SEC's enforcement division, pointed out that EtherDelta should have registered with the SEC or qualified for exemption from registration as required.
On November 8, 2018, the SEC announced that Zachary Coburn had agreed to pay $300,000 in disgorgement, $13,000 in prejudgment interest, and a $75,000 penalty to the SEC.
Telegram (TON)
On December 3, 2017, TON released a 132-page white paper. To raise funds, on January 12, 2018, TON officially announced its ICO. TON originally planned to divide the closed financing into three stages, but unexpectedly raised $1.7 billion in the second stage, twice the expected amount, so the third stage was canceled.
On October 12, 2019, just as the TON mainnet was about to go live, the US Securities and Exchange Commission (SEC) suddenly sent a lawsuit letter. In the lawsuit letter, the SEC stated that they had characterized the financing process of GRAM as "illegal online digital asset securities sales" and were prepared to take "emergency action and obtain temporary restraining orders" against the two offshore entities that participated in its Token GRAM private placement because they violated securities laws.
In court, to limit the sale of GRAM, the US court made an incomprehensible demand. The court not only required Telegram not to sell GRAM in the United States but also worldwide. Helplessly, Telegram had to announce the abandonment of TON.
