The U.S. Securities and Exchange Commission (SEC) has new regulatory limitations on punishing defendants with fines. The ruling would have altered the fines sought in some recent high-profile cases involving cryptomonies.
According to a June 23 summary of the U.S. Supreme Court case Liu v. SEC in the National Law Review, the court ruled that the SEC cannot impose fines, known as disgust, that exceed the profits earned from illegal activities. Moreover, such penalties can only be „awarded for the benefit of the victims“, not imposed as punitive damages.
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The ruling applies to all defendants, of course, but for blockchain and crypto companies facing possible SEC charges, it is actually a stricter definition of „punishment must match the crime“ when it comes to financial sanctions. The commission is already limited in its application by a five-year statute of limitations.
Significant fines imposed by the SEC
The SEC case against the crypto-currency company BitClave included $3.8 million in interest and extra penalties. Similarly, Cointelegraph reported in April that the SEC accused a former pastor and his wife of stealing $500,000, some of which was obtained through a fake crypto coin offering backed by a bottled water business.
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In that case, the SEC sought fines that equaled all ill-gotten gains, plus interest and civil penalties, a total that would have easily exceeded the original amount the couple allegedly stole.
However, under the recent ruling, the maximum fine the SEC could impose would be $500,000, which could only be used to pay those who had allegedly been defrauded by the two.
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And if the married couple had used some of the money to provide the water they were offering, the funds spent would have to be deducted from the total when the SEC calculated the appropriate penalty.
As one of the largest financial regulators in the United States, the SEC is actively fighting against fraudulent activities related to blockchain and digital assets.