tl;dr
The article discusses the United States Commodity Futures Trading Commission (CFTC) announcing a record-breaking $17.1 billion in monetary relief for fiscal year 2024, largely due to enforcement actions involving digital assets. The CFTC brought 58 new actions, with the primary reason for the record...
CFTC RECORDS $17B MONETARY RELIEF IN 2024, THANKS TO DIGITAL ASSETS The United States Commodity Futures Trading Commission (CFTC) has announced a record-breaking $17.1 billion in monetary relief for fiscal year 2024, largely down to enforcement actions involving digital assets. “The resolution of digital asset cases that resulted in the agency’s largest recovery ever, this record amount included $2.6 billion in civil monetary penalties and $14.5 billion in disgorgement and restitution,” said the CFTC.
In FY 2024, the agency brought 58 new actions, including precedent-setting digital asset commodities cases, but one, in particular, was the primary reason for the record haul: the agency’s crackdown on defunct digital asset exchange FTX, which collapsed in November 2022.
The FTX case accounted for $12.7 billion in CFTC restitution and disgorgement, becoming the “largest recovery for victims and sanctions in CFTC history.”
Formerly one of the world’s leading digital asset exchanges and spearheaded by the poster boy for effective altruism and crypto-advocacy Sam Bankman-Fried, in 2022, it was revealed that FTX had been secretly diverting customer funds to its sister company, Alameda Research, for risky trading. A leaked balance sheet exposed Alameda’s reliance on illiquid FTX-issued native tokens (FTT), sparking investor panic. Binance’s decision to sell its FTT holdings accelerated the crisis, leading to a run on withdrawals that FTX could not fulfill. Attempts to secure bailout funding failed, and FTX was forced to file for bankruptcy in the U.S. in November 2022.
This series of events kicked off the “crypto-winter” of 2022/23, as well as a number of civil and criminal cases. The CFTC’s case involved fraud claims against the exchange, its sister firm Alameda Research, and several executives, including founder Bankman-Fried. The settlement ordered $8.7 billion in restitution and $4 billion in disgorgement, making it the largest recovery in the agency’s history.
Meanwhile, CFTC Director of Enforcement Ian McGinley commented that “our actions in FY 2024 reflect our commitment to holding recidivist actors accountable, obtaining meaningful monetary relief and sanctions, and implementing robust remediation measures.”
The CFTC announcement comes a few short weeks after fellow U.S. finance sector regulator, the Securities and Exchange Commission (SEC), also recorded a record FY 2024 haul, likewise thanks to a particularly profitable digital asset case.
In its November 22 annual report, the SEC announced that it had obtained orders for $8.2 billion in financial remedies for the year ending September 30, “the highest amount in SEC history.” The $8.2 billion consisted of $6.1 billion in disgorgement and prejudgment interest, also the highest amount on record, and $2.1 billion in civil penalties, the second-highest amount on record.
Over half of this impressive haul came from the SEC’s jury trial win against Terraform Labs and its disgraced former CEO, Do Kwon.
In February 2023, the SEC charged Terraform and Kwon with securities fraud and offering and selling securities in unregistered transactions. In April 2024, a jury unanimously found the company and its founder liable for securities fraud, with Terraform and Kwon subsequently agreeing to pay a $4.47 billion settlement.
“The Division of Enforcement helps promote the integrity of our capital markets to benefit investors and issuers alike,” said SEC Chair Gary Gensler, revealing the agency’s record financial remedies in November.