The Commodity Futures Trading Commission (CFTC) suit against FTX Limited and Alameda Research has netted the highest settlements since regulators began crypto enforcement actions against errant players.
According to a new Coingecko report, the firms associated with disgraced investor Sam Bankman-Fried (SBF) will pay $12.7 billion (bn) for defrauding their customers. The figure amounts to 40% of the roughly $32bn the watchdogs have collected to date.
The CFTC sued SBF, the now insolvent FTX Ltd, and Alameda in late 2022 for breaching the Commodities Exchanges Act and its regulations. That case concluded in early August 2024, with a New York court issuing the regulator consent orders compelling the SBF-linked companies to pay depositors $8.7bn in restrictions and another $4bn in disgorgement.
This FTX-Alameda settlement constitutes 65% of the reliefs regulators have won against rogue crypto firms by October 8th, 2024. The figure is more than thrice what Celcius ($4.7bn), Terraform Labs ($4.5bn), and Binance ($4.3bn) have paid for different violations. Genesis, Voyager, and Telegram are the other firms that have had billion-dollar payoffs for their run-ins with the law.
US regulators are intensifying their scrutiny of the crypto sector
A quick look at Coingecko’s data shows that American regulators have intensified their focus on crypto firms. That’s clear from the surge in the number of settlements and the total settlement values (TSV) won annually. For instance, the overseers have seen their 2024 TSV jump 79% from 2023 figures to $19.45 bn.
According to the report, that rise suggests this could be the regulators’ best year yet in terms of won lawsuits. Part of it states:
Even with a few months left in the year, 2024 has already recorded a 78.9% increase in settlement value compared to 2023. Given that US regulators show no signs of slowing down crypto industry scrutiny, 2024 may be on track to record more lawsuit settlements than last year.
~Coingecko
CFTC Commissioner Kristin N. Johnson alludes to that shift in her statement following the court’s ruling on the FTX-Almeda case. While describing the decision as historic, she insisted that the CFTC still had much work to do. Johnson elaborated that the agency’s focus must prioritize protecting customers in markets with regulatory gaps exposing them to high risks.
Stamping crypto fraud requires concerted efforts
Coingecko’s report also highlights the importance of collaboration in taming non-compliant players in the crypto space. The Securities and Exchange Commission (SEC) has been at the forefront of that drive, but other players are also vital in ensuring sector-wide compliance.
For instance, in addition to the FTX-Alameda case, the CFTC has prosecuted successful suits against Tether and the cryptocurrency’s parent company, Bitfinex. Other players pivotal in getting favorable decisions against errant actors include the enforcement arm of the Treasury Department, the New York Attorney General, and the North American Securities Administrators Association.
