Crypto VS Government FIGHT!

GM, Anon! The battlefield is set, and the conflict is only intensifying!

In today's edition, we're here to bring you up to speed on the ongoing crypto regulatory situation—trust us, it's crucial. We've compiled a neatly organized recap of all the major SEC vs. Crypto cases. Given the relentless noise and chaos in crypto, it's easy to miss it all!

So what’s all the fuss about, well…

DeFi giant Uniswap Labs has been singled out for a momentous legal clash with the SEC. This unfolding event represents a crucial juncture as the SEC initiates its inaugural action against the DeFi sector. At the core of this confrontation is the Wells Notice received by Uniswap, foreshadowing an imminent lawsuit from the SEC. While the exact nature of the allegations remains undisclosed, this maneuver indicates a looming legal tempest over DeFi.

How can this affect you? Depending on how this all goes down, the claws of the law could restrict your crypto movements and maybe even lead to a future where DeFi participants need to undergo KYC procedures—a dystopian nightmare for those involved in crypto, severely impacting users' rights and freedoms.

Stay tuned for part two of this series, where we'll provide you with the best security practices and guide you on navigating your way forward, ensuring you're prepared for whatever the future might bring.

SEC vs Crypto: A Comprehensive Timeline

The U.S. Securities and Exchange Commission (SEC) was established in 1934. Prior to its launch, the stock market was nothing short of the "Wild West," where manipulation, insider trading, and outright deceit were the order of the day. The SEC's mission was clear: protect investors and maintain fair, orderly, and efficient markets.

However, when it comes to cryptocurrencies, the SEC finds itself at a crossroads between its foundational mandate and the challenges posed by this new, emerging market.

Critics argue that the regulatory body, perhaps wary of the decentralizing force of crypto that could diminish governmental control, has at times wielded its powerless as a guardian and more as a bully, stifling innovation under the guise of protection.

This detailed timeline chronicles the major milestones and actions taken by the SEC against various crypto entities. 

From landmark lawsuits to controversial charges, the SEC vs Crypto saga has it all!

December 22, 2020: The SEC Sues Ripple

The SEC's legal action against Ripple Labs Inc. and its executives for conducting a $1.3B unregistered securities offering via XRP token sales was one of the most pivotal moments in crypto regulation. 

This lawsuit signaled the SEC's firm stance on ICOs and token sales that it considers securities offerings.

August 9, 2021: Poloniex Faces SEC Charges

Crypto exchange Poloniex settled with the SEC for $10M. The SEC alleged Poloniex violated investor-protection laws by not registering its operations with federal regulators

September 1, 2021: SEC Charges Bitconnect Promoters

Ahh…Bitconnect.

BitConnect, launched in 2016, was a crypto platform that promoted itself as a revolutionary opportunity for investors to earn significant returns. Central to its operation was a lending program where users could exchange their Bitcoin for BitConnect tokens (BCC). 

SEC took action against Bitconnect's promoters for defrauding investors out of $2B through a Ponzi scheme. 

February 14, 2022: BlockFi's Settlement with the SEC

SEC accused BlockFi Lending LLC of illegally offering and selling its crypto lending product without proper registration. This is the first time the SEC had taken such an action, also alleging that BlockFi broke rules under the Investment Company Act of 1940.

March 8, 2022: Ormeus Coin Fraud Charges

The SEC charged siblings John and Jon Atina Barksdale with defrauding investors through the Ormeus Coin offering, alleging over $124M in fraudulent activities. 

As per the filing, Ormeus Coin misled investors about the scale, worth, and claimed profitability of its cryptocurrency mining assets.

July 21, 2022: Insider Trading Charges at Coinbase

The SEC charged a former Coinbase manager and two others in an insider trading case involving $1.1M. 

The SEC stated that Ishan Wahi, a former Coinbase employee, and his brother Nikhil Wahi were involved in a scheme to trade based on advance information about announcements concerning at least nine crypto asset securities that were to be listed for trading on the Coinbase platform.

August 1, 2022: Forsage Ponzi Scheme Allegations

The SEC's action against Forsage and 11 individuals for running a $300M Ponzi scheme through a smart contract platform emphasized the regulatory scrutiny on DeFi projects operating without compliance.

September 30, 2022: Allegations Against Arbitrade and Cryptobontix

The SEC accused Arbitrade and Cryptobontix of conducting a gold-backed pump-and-dump scheme called "Dignity," netting $36.8M. This case shed light on the risks associated with asset-backed crypto projects and fraudulent schemes.

October 3, 2022: Kim Kardashian's SEC Penalty

Kim Kardashian agreed to pay $1.26M in penalties to the SEC for promoting EthereumMax tokens without adequate disclosures. Kardashian endorsed EthereumMax in an Instagram post in June 2021, while Floyd Mayweather displayed the company's logo on his boxing shorts during a highly publicized match.

December 13, 2022: FTX Collapse and Subsequent Charges

In the wake of the FTX collapse, the SEC charged founder Sam Bankman-Fried with defrauding investors. This was another major case and brought into light the consequences of mismanagement and alleged fraudulent activities within major crypto exchanges.

January 4, 2023: SEC Charges CoinDeal Founders

The SEC charged Neil Chandran, Garry Davidson, Michael Glaspie, Amy Mossel, Linda Knott, and the companies AEO Publishing Inc., Banner Co-Op, Inc., and BannersGo, LLC for their roles in a fraudulent investment scheme called CoinDeal. 

This scheme involved raising over $45M through the sale of unregistered securities and defrauding more than 10,000 individuals.

January 12, 2023: Genesis and Gemini Earn Program Charged

The SEC charged Genesis and Gemini for offering unregistered securities via their Gemini Earn program, which promised high returns on deposits. 

The companies, connected to Digital Currency Group, did not register the program that raised billions from many investors. This violation skipped necessary investor protections, as per the SEC.

January 19, 2023: Nexo Settles with the SEC

Crypto lender Nexo agreed to a $45M settlement and announced the cessation of its U.S. operations for its earn interest product, following SEC accusations of offering an unregistered crypto lending product. 

February 9, 2023: Kraken Ceases US Staking Services

The SEC ordered Kraken to discontinue its U.S.-based staking service, alleging it offered unregistered securities with promised returns of up to 21%. Kraken settled the charges by ceasing its U.S. staking operations and paying $30M in penalties, highlighting the regulatory challenges facing staking services in the U.S.

February 13, 2023: Paxos and Binance USD Controversy

Paxos faced an SEC notice alleging that the stablecoin Binance USD (BUSD) is a security. In response, Paxos announced it would end its relationship with Binance and cease minting BUSD, sparking widespread discussions about the regulatory status of stablecoins.

February 16, 2023: SEC Charges Terraform and CEO Do Kwon

After Terra went caput in 2022, it was only a matter of time before the SEC officially charged Terraform Labs and CEO Do Kwon. The SEC's complaint details that from April 2018 to May 2022, Terraform and Kwon gathered billions from investors through the sale of crypto asset securities, largely in transactions that were not registered.

June 5, 2023: SEC Files Charges Against Binance

The SEC’s charges involve operating exchanges, broker-dealers, and clearing agencies without proper registration, falsely claiming that the Binance.US platform had effective trading controls and oversight, and offering and selling securities without registration.

June 15,  2023: BlackRock Files for Bitcoin ETF

BlackRock's application for a spot Bitcoin ETF marked a significant moment, reflecting growing institutional interest in crypto assets and the potential for regulatory approval of such investment products.

July 13, 2023: Ripple's Partial Victory in Court

US District Judge Analisa Torres of the US District Court for the Southern District of New York ruled that XRP is not a security in the context of programmatic sales but is considered a security when sold to institutional investors. This nuanced decision was seen as a partial victory for Ripple and prompted several crypto exchanges to announce plans to relist XRP.

August 9, 2023: SEC Sues Debt Box

The SEC sued Debt Box over a fraudulent $50M crypto scheme, securing a temporary asset freeze and restraining order. The Utah-based operation misled investors with "node licenses" claimed to mine crypto since March 2021. However, these were instantly created by code, not mined, leading to charges of selling unregistered securities under false claims.

August 29, 2023: Grayscale Wins Against SEC

On August 29, 2023, the U.S. District of Columbia Court of Appeals made a landmark decision favoring Grayscale against the SEC. The court found that the SEC had mistakenly denied Grayscale's application for a spot Bitcoin ETF. This ruling, supporting Grayscale, marked a major win for the crypto industry and may influence future SEC decisions.

On October 13, 2023, the SEC opted not to appeal a court ruling, leading to a reconsideration of Grayscale's application.

January 10, 2024: SEC Approves Spot Bitcoin ETFs

The SEC's approval of 11 spot bitcoin ETF proposals from prominent firms like BlackRock and Fidelity marked a watershed moment for the crypto industry. Many believe this is one of the most important dates in the history of crypto.

January 31, 2024: SEC Seeks to Withdraw Debt Box Lawsuit

In a surprising move, the SEC requested the court to dismiss its lawsuit against Debt Box, following threats of sanctions. This move could indicate potential challenges and reevaluations within the SEC's enforcement strategy.

March 7, 2024: ShapeShift Settles with SEC

ShapeShift agreed to a settlement with the SEC, consenting to stop certain operations and pay a fine. The SEC had accused ShapeShift of running a crypto "vending machine" from 2014 to January 2021, where it acted as both the market maker and trading counterparty.

March 12, 2024: Coinbase Accuses SEC of Regulatory Overreach

Coinbase filed a lawsuit against the SEC, accusing the agency of being unfair in not providing clear rules for the industry. This move was in response to the SEC's rejection of Coinbase's request for rulemaking, bringing a critical issue about future crypto regulation to the courts.

March 20, 2024: SEC Goes After Ethereum

The SEC started investigating whether to classify Ethereum's Ether (ETH) as a security. They issued subpoenas to companies demanding them to provide documents related to their interactions with the Ethereum Foundation, the non-profit that manages the blockchain. The investigation intensified after Ethereum switched to a proof-of-stake model in September 2022, which the SEC thinks could make ether akin to an investment contract and thus a security under its rules.

Many believe this is a desperate attempt on the SEC’s part to not approve spot Ethereum ETFs.

April 10, 2024: Uniswap Receives Wells Notice from SEC

Finally, we are here.

Uniswap was informed by the SEC of potential enforcement action, with concerns that the decentralized exchange might be operating as an unregistered securities broker and exchange. 

For an industry as innovative as crypto, it is essential for industry stalwarts to closely work with regulators and create laws that are tough, but fair. Innovation shouldn't suffer due to stifling regulation.

In the meantime, it's crucial for individuals to stay cautious on the regulatory front and stay informed about their responsibilities, particularly when it comes to taxes. 

As a timely reminder, don't forget that tax obligations in the US are due by April 15th! 

File your taxes and stay safe 💪

Before we say goodbye for today, hop on over to our lively Telegram community! Chat with our researchers, always ready to tackle your questions, and mingle with fellow enthusiasts!

That's it for today. Until next time, Anon!