Is the SEC Unfairly Targeting Crypto Companies?

Sometimes the odds seem stacked against companies when it comes to SEC regulation. Governments around the world can impose severe fines that damage a company’s bottom line and reputation. And this fact is not lost on celebrities who own or invest in Bitcoin, NFTs or other digital assets.

But recently, high-profile figures have gone easier on their actions than corporations. Celebrities get a slap on the wrist as companies face the full wrath of tough regulatory action.

If the U.S. government is committed to equality under the law—and if corporations are people, too—why does the SEC fine people differently?

Corporate vs. Celebrity Punishments

Companies and high-profile individuals are often in the news for the fines and penalties they receive. Social media has made it easier to get attention to a number of topics. From fake promotions and scams to banking or healthcare fraud, exploits can have devastating consequences.

Regulators are becoming increasingly strict in imposing penalties on both companies and celebrities for any type of illegal activity. Penalties vary from large fines to prison terms and even long-term bans from doing business. These penalties aim to ensure that those who break the law will no longer be able to engage in shady dealings without repercussions.

Companies pay high fines

In recent years, large companies have faced hefty fines for what some might consider shady practices. Insider trading, securities fraud and misuse of cryptocurrency and NFTs have resulted in fines. These breaches of trust, when discovered, end up costing the companies dearly in both regulatory measures and consumer confidence.

Crypto service provider BlockFi agreed to pay $100 million in fines after the SEC accused it of “failing to register the offerings and sales of its crypto lending product.” It also failed to comply with the registration provisions of the Investment Companies Act of 1940. This case was the first of its kind, which makes one wonder. Was the punishment intentionally severe to send a message to the industry?

In January, the SEC charged Genesis and Gemini with “unregistered offers and sales of crypto-asset securities.” Customers can lend crypto assets to Genesis and earn interest for doing so. However, the Gemini Earn Lending program was unable to maintain enough liquidity. Therefore, many investors could not (and still cannot) withdraw their money. Again, this program was not registered with the SEC.

A few days later, Nexo agreed to pay $45 million in fines for an offer similar to Gemini’s. It also had to promise to stop its “unregistered offer and sale” of its earned interest product (EIP).

Celebrities vs. SEC

Last October, the SEC fined Kim Kardashian $1.26 million for failing to disclose an EthereumMAX approval. According to the SEC, her actions qualified as a violation of federal securities laws. But even before the SEC got involved, some investors accused Kardashian of artificially inflating the value of the asset.

And just in March, the SEC hit eight celebrities, including Lindsay Lohan and Jake Paul, with similar allegations. Even worse, crypto entrepreneur Justin Sun allegedly told the celebrities not to reveal his endorsements. Given that his tokens were the assets in question, the problem was obvious, and the SEC stepped right in. But even in this case, the SEC fined these celebrities even less than Kim Kardashian.

Is justice blind?

There are obviously many factors that play into how the SEC measures fairness. The size and scope of the breach, the intentions behind the act and the damage caused play a role. But there seems to be a huge difference between what the SEC thinks is wrong, and what the SEC thinks is illegal.

In the case of BlockFi, the firm failed to register activity under a law that did not clearly include them. This could have been an honest mistake due to the ambiguity of what the SEC thinks of as crypto. On the other hand, these celebrities knew that hyping an asset in exchange for payment is a conflict of interest. Or if they didn’t know, they should have.

Justice from the SEC can be a mercurial thing at times. It is more complex than simply weighing up the size of the breach and how much damage was caused. What it seems to depend on is whether the SEC considers a given act to be illegal, even if it could have been done in good faith.

Potential solutions

It can be unnerving to see that celebrities often get away with more than big companies. Unfortunately, this is not a new phenomenon. Although traditional legal systems have failed to apply fair punishments to both sides, there are still steps we as citizens can take to push for justice.

Protesting decisions made by governments and courts, and petitioning politicians and lawmakers to hold people accountable, can be ways for individuals to make a difference. We must strive for education on both sides so that everyone can better understand their own advantages and disadvantages. Honesty must be paramount from the beginning for this plan to work. Transparent contracts, open communication of expectations and collaboration are all necessary steps to achieve this.

Through joint efforts, we can work together towards a brighter future. Ideally, it will be one that holds both celebrities and corporate cultures equally accountable for their actions. As long as we do our part, maybe one day we will finally reach a place of righteousness and justice.

One of the biggest issues surrounding celebrities and companies today is finding a way to find equality under the law.