Crypto Companies Paid $2.5B in Fines since 2009—Banks Pay 4X more Yearly
Image courtesy of Pixabay.

Crypto Companies Paid $2.5B in Fines since 2009—Banks Pay 4X more Yearly

Crypto enforcement actions exceeded $2.5B and it's still called the "wild west of finance"—but are banks any better?
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

Regulators in the U.S. have been calling crypto the “wild west” of finance ever since one can remember. Back in 2014, the U.S. watchdog entitled bitcoin the “wild west” of finance, stating that it is not backed by any government or central bank. And just a couple of weeks ago, Senator Elizabeth Warren again called crypto the “wild west”. 

While cryptocurrencies do carry a certain level of risk, they are not unregulated. In the US, crypto-related businesses are subject to many of the same laws and regulations that financial services businesses are. These regulations also include financial penalties, which have enforced the crypto world to pay more than $2 billion in fines since 2009.

Crypto World Has Paid Billions in Penalties

According to a recent report from the leading blockchain analytics firm Elliptic, US regulators have imposed $2.5 billion in penalties against businesses and individuals dealing in crypto. The reasons for these penalties include fraud, breaches of AML regulations, offering unregistered securities, and sanctions violations.

The first major penalty dates back to 2014 when the SEC ordered Trendon T. Shavers to pay just over $40 million in penalties. The online entity Shavers was accused of operating a Ponzi scheme that deceived investors and swiped more than 700,000 bitcoins.

Another major business to fall victim to the US watchdog was BTC-e. Being a Russia-based crypto-asset exchange, BTC-e failed to comply with the Bank Secrecy Act — yet another regulation primarily subjected to the money services business. Consequently, FinCEN imposed a penalty of $122 million on the business. 

The bulk of the U.S. penalties came in 2020 when SEC charged Telegram Group Inc. for violating federal securities laws. At that time, Telegram had offered unregistered digital tokens called “Grams”. Subsequently, the messaging software firm consented to return more than $1.2 billion to investors and to pay an $18.5 million civil penalty.

All in all, the crypto businesses have paid $2.5 billion in penalties. The majority of these penalties relate to unregistered securities offerings which saw a substantial rise in 2017 and account for $1.38 billion in fines. Other major categories of penalties include fraud which accounts for $928 million, and AML violations that have constituted $183 million. 

Image courtesy of Elliptic.

Dr. Tom Robinson, Elliptic’s co-founder and chief scientist, stated while summing up the report:

“Our analysis of crypto asset-related enforcement actions in the U.S., demonstrates that crypto is far from being the “wild west” of finance. Regulators have successfully used existing laws to halt and penalise illicit activity that has exploited crypto assets – from Ponzi schemes to money laundering operations – and to hold businesses accountable for compliance failures.”

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U.S. Banks Paid $11.11 Billion in Fines in 2020

Data acquired from the Bank Fines Report 2020 indicates a total of $15.13 billion in aggregated bank fines have been imposed last year. Of these fines, US banks account for a large sum of $11.11 billion or 73.4% of the issued fines. The fines have emerged from 12 cases, with the Goldman Sachs case being the most prominent one.

Goldman Sachs was fined more than $5 billion by regulators around the world in 2020 for its part in the Malaysian 1MDB scandal — a globe-spanning fraud that saw billions looted from the Malaysian fund. For its role in the scandal, Goldman was imposed to pay $2.9 billion to the US Justice Department and other global regulators, on top of the $2.5 billion it had consented to pay to the Malaysian government.

Another US bank, Wells Fargo, was fined $3 billion for opening fake accounts to reach tough sales targets. The leading US bank JPMorgan was also fined $920 million because of its role in the manipulation of precious metals and Treasury markets. And 9 more U.S. banks were fined for violating regulations, which amassed a whopping $11.11 billion in fines in 2020 alone.

U.S. regulators collected $2 billion in fines from crypto businesses in a matter of 12 years. However, they amassed more than $11 billion from banks in just one year. Comparing these, one could argue that banks are much more profitable than crypto to US regulators.

Moreover, contemplating the staggering fraud present in the core of the current financial system—banks—it is pretty astonishing how officials insist on the superiority of this system. 

Do you think crypto is the “wild west” of finance? Let us know in the comments below.

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