5 Biggest SEC Crypto Settlements
Key Takeaways
- The SEC has imposed substantial settlements on crypto companies for violations, such as selling unregistered securities and misleading practices.
- Binance paid $100 million after facing 13 charges, including operating unregistered exchanges, while Ripple settled $125 million for institutional XRP sales deemed securities.
- BlockFi’s $100 million settlement highlighted the risks of unregistered interest accounts, and Coinbase agreed to a $350 million settlement over similar unregistered operations.
- Following the TerraUSD collapse, Terraform Labs faced the harshest penalty of $4.47 billion for misleading investors, fraud, and selling unregistered securities.
Crypto and the SEC – an ongoing tug-of-war that’s defined much of the industry’s development. With future President Donald Trump pledging to curb the SEC’s authority and promising a brighter future for crypto, that dynamic may be about to change dramatically. His plan comes after a particularly intense regulatory period under SEC Chair Gary Gensler. But how harsh has the SEC actually been on crypto companies?
In this article, we’ll look at the five biggest settlements the SEC has wrung from crypto companies. You’ll learn who paid what, where they went wrong, and what it means for the future of cryptocurrency regulation.
5 Biggest SEC Crypto Settlements
Here’s a snapshot of the five largest settlements between the SEC and cryptocurrency companies in recent years. These cases underscore the SEC’s compliance focus and firm stance on what constitutes securities.
| Project/Company | Year | Offense | Settlement Amount |
|---|---|---|---|
| Binance | 2023 | Operating an unregistered exchange; offering unregistered securities | $100 million |
| Ripple Labs | 2020 | Selling unregistered securities (XRP tokens) | $125 million (partial) |
| BlockFi | 2023 | Offering unregistered securities through interest accounts | $100 million |
| Coinbase | 2023 | Operating an unregistered exchange | $350 Million |
| Terraform Labs | 2023 | Selling unregistered securities; alleged fraud | $4.47 billion |
Binance – $100 Million
Binance, the world’s largest cryptocurrency exchange, was under the SEC’s microscope in 2023. Founded in 2017 by Changpeng Zhao (CZ), it quickly became the largest cryptocurrency exchange in the world. However, major issues with Binance’s operations emerged over time, and the SEC investigated the company’s practices.
Binance’s misleading claims about its operations sparked the SEC’s concerns. For example, Binance said that Binance.US was a separate entity for U.S. customers. Investigations revealed that Zhao and Binance still controlled it behind the scenes.
Moreover, the SEC found that Binance misrepresented its trading controls and concealed the manipulation of trading volumes. The company also mixed customer funds with those of affiliated entities, like Merit Peak and Sigma Chain, which raised serious red flags.
As a result, Binance violated several U.S. securities laws, particularly around operating unregistered exchanges, broker-dealers, and clearing agencies. The SEC accused the company of allowing U.S. customers to use Binance.com without proper registration, which violated regulations.
The SEC ultimately filed 13 charges against Binance and Zhao, including operating as an unregistered exchange and offering unregistered securities. In June 2023, Binance agreed to a $100 million settlement, alongside stricter oversight and operational changes for its U.S. branch, BAM Trading Services.
Ripple Labs – $125 Million (Partial Settlement)
Ripple Labs, founded by Chris Larsen and Brad Garlinghouse, aims to facilitate cross-border payments using the XRP token and the XRP Ledger. By offering a decentralized alternative to traditional banking systems, the goal is to make financial transactions quicker and cheaper, especially in international payments and remittances.
However, in December 2020, the SEC took legal action against Ripple, alleging that the company had sold XRP as an unregistered security. The SEC argued that XRP met the security criteria under the Howey Test, determining whether an asset is an investment contract.
Ripple contested the accusations, claiming XRP was a currency, not a security, and that the company never held an initial coin offering (ICO) like many other crypto projects. Ripple also pointed out that XRP had been traded on exchanges for years, challenging the idea that the token was a new, unregistered asset.
The lawsuit dragged on, with Ripple receiving support from many in the crypto community who viewed the SEC’s move as a threat to the entire industry. In July 2023, Ripple won a partial victory when the court ruled that most XRP sales, especially on secondary markets, were not securities transactions. However, the court did find that sales to institutional investors violated securities laws.
By 2024, Ripple was ordered to pay a $125 million penalty related to its institutional sales of XRP, but it avoided the harsher fines the SEC had initially sought. Garlinghouse and Larsen faced no further charges, but Ripple was told to cease violating securities laws moving forward. While the case helped clarify XRP’s legal standing, Ripple’s legal journey is far from over.
BlockFi – $100 Million
BlockFi, a pioneer in crypto lending, marketed its interest-bearing accounts as a way for users to earn passive income. Founded in 2017 by Zac Prince and Flori Marquez, BlockFi set out to combine crypto with traditional financial services.
It allowed users to earn interest on cryptocurrency deposits, take loans using their crypto as collateral, and trade digital assets. The company positioned itself as an alternative for those wanting more options in the growing crypto market.
Problems began with its popular BlockFi Interest Account (BIA) product. Customers handed over their crypto, which BlockFi lent to institutional borrowers to generate returns. The SEC later argued that these accounts operated as unregistered securities, violating U.S. law. Investors did not receive enough information about risks or how their funds were used. BlockFi also allegedly overstated the safety of its lending practices and misrepresented its collateral levels.
In February 2022, the SEC charged BlockFi with selling unregistered securities and operating as an unregistered investment company. The company agreed to pay a $100 million settlement – $50 million to the SEC and $50 million to state regulators. BlockFi also had to stop offering U.S. customers BIAs. This marked one of the largest enforcement actions against a crypto company and highlighted increasing scrutiny of the industry’s compliance with securities laws.
Coinbase – $350 million
Coinbase, a household name in crypto, is no stranger to regulatory tussles. Established by Brian Armstrong in 2012, Coinbase planned to simplify cryptocurrency trading for everyday users. It created a platform to buy, sell, and store digital currencies, growing into one of the biggest crypto companies in the U.S. The company went public in 2021, showing its ambition to bring cryptocurrency closer to mainstream finance.
Trouble began when the SEC investigated Coinbase for its staking services and listing certain cryptocurrencies, which the agency argued were unregistered securities. The SEC accused Coinbase of operating as an unregistered exchange, broker, and clearing agency, roles that require legal approval under U.S. securities laws. The SEC also claimed that Coinbase misled investors by promoting its services as compliant while knowingly violating regulations.
In March 2024, a court ruled in favor of the SEC, affirming its regulatory authority over crypto assets. Coinbase agreed to pay $350 million to settle charges related to selling unregistered securities and failing to register its operations. The SEC asked the company to delist certain tokens and adjust its staking services. Coinbase’s legal battle drew attention to unresolved debates on cryptocurrency regulation and classification under U.S. law.
Terraform Labs – $4.47 billion
Terraform Labs, co-founded by Do Kwon, set out to change how financial systems work through blockchain. It launched TerraUSD (UST), an algorithmic stablecoin, and Luna, a governance token, aiming for a decentralized, stable system. Things fell apart in May 2022 when UST’s algorithm couldn’t handle a massive sell-off. The stablecoin lost its dollar peg, Luna crashed, and $40 billion vanished from the crypto market, leading to widespread panic.
Investigations revealed Terraform had misled investors about UST’s reliability, with evidence pointing to fraud and deceptive marketing. The SEC accused the company and Kwon of selling unregistered securities and defrauding investors. In April 2024, a jury found them guilty of fraud. By June 2024, a $4.47 billion settlement was reached, including $4.05 billion in penalties for Terraform and $80 million for Kwon. He was also banned for life from working in crypto.
Closing Thoughts
The SEC’s enforcement actions under Gary Gensler have left a lasting mark on the crypto industry. Through massive settlements and regulatory scrutiny, it’s clear that compliance is no longer optional for crypto companies.
While some see the SEC’s approach as heavy-handed, others argue it’s a necessary step to bring order to a chaotic market. As debates over regulation continue, the future of cryptocurrency will depend on how the industry adapts to evolving legal frameworks.
Will Trump’s vision of a crypto-friendly future come to pass? Only time will tell, but one certain thing, regulation will play a central role in crypto’s next chapter.
