Anticipate 7 Cryptocurrency Lawsuits Looming in 2024
The crypto industry is facing a wave of lawsuits in the United States and other jurisdictions, as government prosecutors and digital asset lawyers remain busy. Despite experiencing the largest court case in crypto history in 2023, along with a multi-billion dollar settlement between the industry’s largest exchange and various U.S. regulatory bodies, 2024 is expected to bring another round of court battles as crypto defendants defend themselves against allegations of illegal activities.
The U.S. Securities and Exchange Commission (SEC) has filed lawsuits against multiple crypto businesses as part of what some proponents have called a “regulation by enforcement” campaign targeting blockchain assets. SEC Chair Gary Gensler believes that the majority of these crypto assets should be classified as securities and fall under existing financial regulations. He sees the crypto ecosystem as being plagued with fraud and non-compliance.
The Commodity Futures Trading Commission (CFTC) has also been active in keeping up with the SEC, having filed 47 lawsuits against digital asset operators accused of fraud and running Ponzi schemes. The CFTC achieved its biggest victory to date by imposing a $3.4 billion fine on Cornelius Johannes Steynberg of Stellenbosch.
As unresolved litigation and enforcement actions continue, new cases are likely to emerge. Here are seven crypto cases to watch:
1. Binance: Crypto’s largest exchange, Binance, reached a record-breaking $4.3 billion settlement with the CFTC, the U.S. Department of Justice, and the Treasury Department. Former CEO Changpeng Zhao stepped down and pleaded guilty to at least one felony charge. However, the SEC is still suing Binance for breaking securities laws by operating an unregistered exchange and offering illegal securities.
2. Celsius: The bankrupt crypto lender is accused of defrauding thousands of investors under the leadership of ex-CEO Alex Mashinsky. Mashinsky will face trial in September while Celsius faces lawsuits from the CFTC and SEC.
3. Coinbase: Similar to Binance, Coinbase was sued by the SEC in June for allegedly failing to register its exchange and illegally providing staking-as-a-service to U.S. investors. Coinbase will face off against the SEC in a Southern District Court of New York.
4. FTX: FTX founder Sam Bankman-Fried has been convicted on all seven charges, including fraud at his exchange and crypto trading firm Alameda Research. A second trial may address severed counts, and Bankman-Fried could face additional lawsuits for unlawful political donations and bribing foreign government officials.
5. Kraken: Although Kraken pulled out of New York, the SEC still has a case against the crypto exchange for commingling customer funds and operating an unregistered securities exchange.
6. Ripple: Ripple achieved a partial victory in its multi-year legal battle against the SEC over XRP sales. The court ruled that XRP sales on exchanges were not unregistered securities, while institutional offerings were. Negotiations will determine possible penalties for Ripple based on sales to sophisticated investors.
7. Tornado Cash: The U.S. Treasury has sanctioned Tornado Cash for allegedly facilitating money laundering and other criminal activities. The co-founders of the Ethereum-based mixing service, Roman Storm and Roman Semenov, are facing legal action for sanctions evasion and aiding money laundering.
As these cases unfold, the crypto industry will continue to navigate the legal landscape and face the challenges posed by regulators and enforcement agencies.
