The United States Securities and Exchange Commission (SEC) has new regulatory limitations when it comes to punishing defendants with fines. The ruling would have altered the fines requested in some recent cases involving notable cryptocurrencies.
According to a June 23 summary of the US Supreme Court case. USA Liu v. SEC In Reviewing National Law, the court ruled that the SEC cannot impose fines, known as refunds, that exceed the profits made from illegal activities. Furthermore, such sanctions can only be “granted for the benefit of victims”, not imposed as punitive damages.
The ruling applies to all defendants, of course, but for crypto and blockchain companies facing possible SEC charges, this is effectively a stricter definition of “punishment must match crime” when it comes to of financial penalties. The commission is already limited in its compliance by a five-year statute of limitations.
Significant fines imposed by the SEC
The SEC’s case against crypto company BitClave included $ 3.8 million in interest and additional penalties. Similarly, Cointelegraph reported in April that the SEC charged a former pastor and his wife with stealing $ 500,000, part of which was obtained through a bogus crypto offer backed by a bottled water business.
In that case, the SEC requested fines that matched all illegally earned earnings, plus interest and civil penalties, a total that would have easily exceeded the original amount the couple allegedly stole.
However, according to the recent ruling, the maximum fine the SEC could impose would be $ 500,000, which could only be used to pay those who were allegedly swindled by the two.
And if the married couple had used some of the money to provide the water they were offering, then the funds spent would have to be deducted from the total when the SEC calculated the appropriate fine.
As one of the largest financial regulators in the United States, the SEC is actively fighting fraudulent activities related to digital assets and blockchain.