Several cryptocurrency industry stakeholders have lawsuits pending in the U.S. and other jurisdictions after a busy year for government prosecutors and digital asset lawyers.
2023 saw the cryptocurrency industry’s largest court case to date, with a multibillion-dollar settlement between the industry’s largest exchange and several U.S. regulators. But 2024 promises another series of court battles against illegal activities and cryptocurrency defendants.
The U.S. Securities and Exchange Commission (SEC) has sued several cryptocurrency companies in what some advocates are calling a “regulation by enforcement” campaign for blockchain assets.
According to SEC Chairman Gary Gensler, most of these cryptocurrency assets qualify as securities and fall within the scope of existing financial policies. He sees the ecosystem as rife with fraud and non-compliance.
The Commodity Futures Trading Commission (CFTC) has joined forces with Gensler’s SEC in filing 47 lawsuits involving digital asset operators accused of fraud and Ponzi schemes. In fact, the CFTC scored its biggest ever victory after imposing a $3.4 billion fine on Stellenbosch’s Cornelius Johannes Steynberg.
New cases are likely to emerge due to unresolved litigation and ongoing enforcement actions. Here are seven cryptocurrency stories to watch at press time:
Binance
Binance, the largest cryptocurrency exchange, has reached a record $4.3 billion settlement with the CFTC, the U.S. Department of Justice, and the Treasury Department. Former CEO Changpeng Zhao also resigned and pleaded guilty to at least one felony charge.
However, the SEC is still suing Binance and notably did not participate in the multi-agency resolution announced in November. The SEC said Binance violated securities laws by operating an unregistered exchange and offering illegal securities, such as the BUSD stablecoin, a joint venture with Paxos.
New Binance CEO Richard Teng will lead the company through the SEC lawsuit and adjust to the oversight agreements reached with the authority.
Celsius
A bankrupt cryptocurrency lender has been accused of defrauding thousands of investors led by former CEO Alex Mashinsky. Mashinsky denied any wrongdoing after being arrested last July and charged with seven offences.
His trial is scheduled to begin in September, and Celsius is expected to file claims from the CFTC and SEC. The third lawsuit filed by the Federal Trade Commission has been settled.
coinbase
Like Binance, the SEC sued Coinbase last June. Coinbase reportedly failed to register as an exchange and illegally provided staking-as-a-service to U.S. investors. Coinbase is scheduled to face the securities watchdog in the U.S. District Court for the Southern District of New York after denying the allegations.
The rulemaking petition was also denied, although the cryptocurrency exchange’s CEO Brian Armstrong said Coinbase would not give up.
FTX
FTX founder Sam Bankman-Fried was found guilty on all seven charges, including fraud at his exchange and cryptocurrency trading firm Alameda Research, but he was also found guilty on some charges. A second trial may be held to resolve the issue.
Federal prosecutors could charge Bankman-Fried with illegal political donations and bribing foreign government officials. A New York court is expected to sentence the fallen cryptocurrency mogul in March. At the same time, a second FTX trial is taking place. Bankman-Fried’s bid to delay sentencing has already been rejected.
Kraken
Kraken may have pulled out of New York, but the SEC is still filing a lawsuit against the cryptocurrency exchange founded by Jesse Powell. The SEC accused Kraken of commingling customer funds and operating an unregistered stock exchange. Kraken promised to respond.
Kraken CEO David Ripley said the company does not list its securities and the SEC does not have a regulatory structure to register compliant cryptocurrency companies.
ripple
Ripple’s partial victory in its multi-year legal battle with the SEC over the sale of XRP was seen by many in the cryptocurrency industry as a turning point. The SEC said Ripple’s sales of XRP to institutional and retail investors violated securities laws.
Judge Analisa Torres ruled that XRP sales on exchanges are not unregistered securities, while institutional offerings are. Negotiations are expected to determine possible penalties for Ripple based on its sales to sophisticated investors, so either side may appeal the outcome.
tornado cache
The U.S. Treasury sanctioned Tornado Cash in August 2022 for allegedly facilitating money laundering and other criminal activities. The co-founder of an Ethereum-based mixing service is also expected to take legal action.
Tornado Cash developers Roman Storm and Roman Semenov were charged with sanctions evasion and aiding money laundering. Both defendants denied the charges, and Storm was arraigned in a Manhattan court.
Another developer, Alexey Pertsev, spent nearly nine months in prison before being released in the Netherlands ahead of his trial in March.