The SEC Received Over $4.3 Billion from Penalties in 2019
Blockchain, Business

The SEC Received Over $4.3 Billion from Penalties in 2019

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According to the U.S. Securities and Exchange Commission’s (SEC) Annual Report for the fiscal year 2019, more than $4.3 billion were collected due to disgorgement and penalties. Out of the funds collected, approximately $1.2 billion were returned to harmed investors.


The SEC’s 2019 Annual Report Explained

2019 was a busy year for the SEC. The commission led a total of 862 enforcement actions, of which 526 constituted standalone actions.

The cases covered a wide array of categories, including issuer disclosure, accounting violations, auditor misconduct, investment advisory issues, securities offerings, market manipulation, insider trading, and broker-dealer misconduct.

A large number of Initial Coin Offering (ICO)-related cases made significant headlines throughout the year.

Two ongoing high-profile cases— where both entities are being sued by the SEC— include Kik and Telegram.

Throughout the year, several blockchain-based companies which previously leveraged the ICO as a fundraising mechanism settled with the SEC. The majority of charges included unregistered securities offerings.

In September for example, the SEC announced a settlement with Block.one, where Block.one agreed to pay a $24 million civil penalty. Charges originally stemmed from a 2017-2018 ICO which raised more than $4 billion.

Additional firms such as SimplyVital Health, Bitqyck, 1Broker, ICO Rating and Plexcoin either settled with or have been charged by the SEC.

SEC Chairman Jay Clayton has publicly said on multiple occasions that virtually every ICO he has seen— minus Ethereum— constitutes a securities offering. Yet hardly any ICOs followed the respective securities laws and regulations.

As a result, the blockchain space has seen a transition from the ICO to the Security Token Offering (STO).

Out of a concern for regulatory compliance, companies are leaving the ICO behind, and turning to the STO as a viable alternative to raise funds.

So far, the nascent security token industry has raised nearly $1 billion through assets including equity, real estate, investment funds, and even fine art.

What do you think of the SEC’s actions throughout 2019? We want to know what you think in the comments section below.


Image courtesy of the SEC.

November 6, 2019

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Tim Fries Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firms specializing in sensing, protection and control solutions (IoT).