The U.S. Securities and Exchange Commission (SEC) announced its enforcement results for fiscal year 2024, reporting a total of 583 enforcement actions on November 22, 2024.
While this marked a 26% decrease from the previous year, the SEC achieved a historic high in financial remedies, securing $8.2 billion in penalties and disgorgements, the largest amount in the Commission’s history.
The 583 enforcement actions in fiscal year 2024 represented a significant drop from the 790 actions filed in fiscal year 2023. The SEC’s Division of Enforcement filed 431 “stand-alone” actions, a 14% decrease compared to the previous year. Additionally, the Commission brought 93 “follow-on” administrative proceedings, a decline of 43%, and 59 actions involving delinquent filings by issuers, marking a 51% decrease.
Despite the decline in the number of cases, the SEC emphasized that the financial remedies obtained were the highest ever recorded, with $6.1 billion in disgorgement and prejudgment interest, and $2.1 billion in civil penalties. Notably, approximately 56% of the total remedies stemmed from the SEC’s landmark victory against Terraform Labs and its founder Do Kwon, who were charged in one of the largest securities fraud cases in U.S. history.
High-Profile Cases and Financial Remedies
The SEC’s success in securing substantial financial remedies was highlighted by its victory against Terraform Labs, where the court imposed a judgment exceeding $4.5 billion in disgorgement, interest, and civil penalties following a jury verdict. The case, which was the SEC’s first-ever crypto-related trial, marked a significant moment for the Commission’s enforcement efforts in the rapidly evolving digital asset space.
Other notable settlements in fiscal year 2024 included:
- Morgan Stanley: The firm agreed to pay approximately $249 million for its role in a multi-year fraud involving the disclosure of confidential information regarding “block trades.”
- FirstEnergy Corp.: The company paid a $100 million civil penalty for its involvement in a political corruption scheme.
- SAP: The German software giant settled charges related to bribery in several African countries and agreed to pay $98 million in disgorgement and prejudgment interest.
- Macquarie: The investment advisory firm settled for $79.8 million for overvaluing illiquid securities and conducting biased cross-trading practices.
Focus on Emerging Risks
The SEC’s enforcement efforts in fiscal year 2024 also highlighted its focus on emerging risks related to new technologies and market abuses. The Commission brought actions against companies and individuals involved in misstatements related to artificial intelligence, crypto asset fraud, and cybersecurity failures.
Among the most notable cases were:
- Artificial Intelligence: The SEC charged QZ Asset Management and investment advisers Delphia and Global Predictions for making false claims about their use of AI technology to generate returns.
- Crypto Fraud: The SEC filed charges against entities such as Silvergate Capital for misleading investors about its compliance with anti-money laundering regulations related to crypto transactions, and Barnbridge DAO for failing to register its offerings of crypto securities.
- Cybersecurity: The SEC reached settlements with several companies, including The Intercontinental Exchange and Equiniti Trust Company, for failing to disclose or mitigate cybersecurity risks in compliance with federal regulations.
Whistleblower Program and Proactive Compliance
The SEC also reported a record number of tips, complaints, and referrals in fiscal year 2024, totaling 45,130, including over 24,000 whistleblower tips. This surge in tips contributed to a series of high-impact enforcement actions. The Commission issued $255 million in whistleblower awards, underscoring the growing role of whistleblowers in uncovering potential violations.
In a broader push for market integrity, the SEC commended proactive compliance efforts by industry participants. Numerous public companies, broker-dealers, and investment advisers self-reported violations or cooperated with investigations, leading to reduced civil penalties in some cases. The Commission particularly noted its initiatives addressing off-channel communications (such as recordkeeping failures) and violations of the Marketing Rule related to misleading investment advertisements.
Market Integrity and Individual Accountability
In terms of individual accountability, fiscal year 2024 saw significant actions against individuals involved in market abuse and fraud. The SEC secured settlements and judgments against former executives and professionals from various firms, including:
- Do Kwon: The founder of Terraform Labs was ordered to pay over $200 million following his conviction in the crypto fraud case.
- Silvergate Capital Executives: The former CEO and Chief Risk Officer settled charges over misleading statements regarding the company’s crypto-related compliance.
- Mass Ave Global: The CEO was penalized for misleading investors about the performance of the firm’s flagship fund.
Additionally, the SEC’s focus on gatekeepers such as auditors and legal professionals led to significant enforcement actions. Notably, the SEC investigated audit firms like BF Borgers and Prager Metis for failures in maintaining independence and for violations that affected numerous SEC filings.
Looking Ahead
The SEC’s enforcement results for fiscal year 2024 reflect both a decrease in the total number of actions and a continued focus on securing substantial financial remedies and addressing emerging risks.
SEC Chair Gary Gensler said, “The Division of Enforcement is a steadfast cop on the beat, following the facts and the law wherever they lead to hold wrongdoers accountable.”
As the Commission adapts to new challenges in an evolving financial landscape, including the rise of artificial intelligence, cryptocurrency, and cybersecurity threats, its efforts to maintain market integrity and protect investors remain central to its mission.
Gensler implemented reforms to enhance efficiency, resiliency, and integrity in U.S. capital markets; as the agency held wrongdoers accountable and returned billions to harmed investors.
Gensler will step down from the Commission effective at noon on January 20, 2025, when President-elect Donald Trump will take office for the second time.
Under a second Trump administration, the Securities and Exchange Commission is likely to see a series of changes including a revised rule-making agenda, a retreat from cryptocurrency enforcement, and the likely death of rules being challenged in court.
“There’s going to be a lot of rule-makings that just die,” said Anya Coverman, president and CEO of the Institute for Portfolio Alternatives, a trade organization advocating for alternative investments.
Though it’s not traditional for the SEC to completely shift its existing positions when a new administration comes in, “one can imagine that with some controversial issues, which include those in which lawsuits have been brought, that there may be more of a likelihood of the commission rethinking,” said Marc Elovitz, co-managing partner at law firm Schulte Roth & Zabel, and chair of its Investment Management Regulatory & Compliance Group.
“One of the things that the incoming Trump administration has said is they’re going to nominate new people to the Securities Exchange Commission that are more friendly toward crypto right now,” said Jared Pincin, associate professor of economics at Cedarville University.
It is likely new leadership will pursue an agenda that entails a return to basics, a narrower set of enforcement priorities focused on harm to the “Main Street” investor, smaller penalties, fewer sweeps, and a lighter touch on cryptocurrency and environmental, social, and governance (ESG) enforcement.
Even with Republican control of both the White House and Senate, it may take several months into the new Trump administration before a new SEC chair is nominated and confirmed.
During that time, Trump will designate an acting chair from the two current Republican commissioners, Hester Peirce or Mark Uyeda, with Peirce seeming more likely given her seniority among the two to serve until the new chair takes over.
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