On Monday, January 20, 2025, President Trump will assume office for his second term, marking a pivotal moment for digital assets as his administration is anticipated to adopt a more crypto-friendly stance.
This approach contrasts sharply with the Biden administration’s stringent regulatory posture toward the sector. Under President Biden, the Securities and Exchange Commission (SEC) pursued enforcement actions against various individuals and businesses operating within the crypto space.
This article analyzes SEC enforcement activities from February 1, 2021, to October 10, 2024 during the Biden era. We examine the frequency of enforcement actions, the types of businesses and charges involved, and key insights for industry stakeholders.
The prevailing media narrative depicts the SEC’s approach to crypto under the Biden administration as increasingly aggressive. This perception is supported by data from the SEC’s public records. Enforcement actions grew steadily, beginning with 17 cases in 2021, rising to 23 in 2022, and peaking at 42 in 2023 before dropping to 13 during Biden’s final year in office.
According to Robert Whitaker, Merkle Science’s Director of Law Enforcement Affairs, the closure of a single institution was a pivotal catalyst for this regulatory surge in 2023:
“The closure of Signature Bank in 2023 marked a regulatory tipping point for the crypto industry in the US, leading to increased scrutiny and a chilling effect on banking relationships for crypto businesses. Despite official assurances from regulators that crypto banking was not prohibited, the practical reality made it increasingly difficult for institutions to maintain these partnerships, contributing to heightened regulatory actions and a slowdown in industry growth,” Whitaker explained.
Regulators shut down Signature Bank on March 12, 2023. Although the closure was not directly due to its involvement with cryptocurrency, concerns over its exposure to digital assets and venture capital—similar to the bank run faced by Silicon Valley Bank just days earlier—played a role in regulatory decisions.
The shutdown had far-reaching consequences for crypto businesses, as Signature Bank had developed Signet, a real-time, blockchain-based digital payments platform secured by custodian Fireblocks. The closure of Signet left clients unable to access critical services such as fund redemption and forced them to seek alternative banking partners.
Flagstar Bank eventually acquired Signature Bank, excluding its crypto-related assets. Signet was put up for sale separately, symbolizing the regulatory ambiguity surrounding crypto operations. The uncertainty stemming from this event underscored the growing oversight challenges that crypto firms faced after the bank’s closure.
SEC enforcement actions generally fall into two categories:
Without specific U.S. legislation governing cryptocurrency, the SEC applied the Howey Test—a legal standard originating from the 1946 Supreme Court case SEC v. W.J. Howey Co.—to determine whether digital assets constituted securities. The test assesses whether an asset involves an investment of money in a common enterprise with an expectation of profits derived from the efforts of others.
Robert Whitaker characterized the SEC’s approach as "regulation by enforcement,” which were as common as those against defendants charged with outright fraud.
"Some tokens, like Bitcoin and Ethereum, have clearer definitions, but the status of many others remains ambiguous. Instead of offering guidance, the SEC often skips straight to enforcement, leaving companies to defend themselves after the fact," he explained.
While this regulation by enforcement was ostensibly to protect consumers, there is some evidence coming to light that this strategy was part of Operation Choke Point 2.0. No matter its origins, regulation by enforcement has deterred entrepreneurs and investors from operating in the U.S. due to fears of retroactive charges. The incoming Trump administration has promised regulatory clarity through initiatives like a crypto advisory council and the appointment of an AI and crypto czar will reverse course toward a decidedly pro-crypto business environment.
There was no neat way to categorize the nature of the businesses involved. Some organizations genuinely operated as the business category it identified with. For example, if it called itself a liquidity provider, it offered liquidity to users. Categorization was difficult because many organizations publicly identified as one type of business, but actually had a different business model. In some cases, this discrepancy was due to outright fraud. For example, CryptoFX said it was a “crypto asset and foreign exchange” business, when in reality it was nothing more than a Ponzi scheme—digital assets just happened to be the flavor of the day.
Though categorizing the nature of involved businesses proved challenging, one clear trend emerged: the scale of financial stakes in these cases was significant. SEC press releases highlighted the total funds involved, whether from fraudulent sales, illegal fundraising, or misappropriated withdrawals. The aggregate amount during the Biden administration reached $26.3 billion.
Whitaker noted that crypto crimes often prey on diverse victims, regardless of their experience or background.
"Crypto crime doesn't discriminate—attorneys, real estate agents, teachers, and even seasoned investors have fallen victim. Scammers often combine social engineering and stolen identities, sometimes enhanced by deepfakes, to convincingly defraud their targets,” he said.
Many defendants chose to settle without contesting the SEC’s charges when apprehended. In SEC v. Rockwell Capital Management, for example, the defendants paid disgorgement and prejudgment interest of $1,602,089 and a civil penalty of $223,229 without admitting or denying the allegations. In total, these settlements sought by the SEC across all cases amounted to $810.2 million in civil penalties, disengorgement, injunctive relief, and other penalties.
Whitaker explained this tendency as a practical decision for startups facing SEC charges.
"Startups often opt to settle rather than endure years of costly legal battles. For many, paying a penalty is faster and more affordable than fighting prolonged enforcement. Only well-funded enterprises can sustain the financial and operational toll of such cases,” he said.
Whitaker emphasized that fostering market education is key to protecting consumers and businesses.
"Education empowers individuals to identify scams early. Building awareness helps reduce the risk of falling victim to deceptive schemes and enables informed decision-making,” he said.
While the Trump administration may signal a shift from the enforcement-heavy Biden era, one constant remains: compliance is essential for success in the crypto space. Proactively adopting robust compliance strategies—particularly in Know Your Customer (KYC), Anti-Money Laundering (AML), and Counter-Terrorist Financing (CFT) workflows—can safeguard businesses and their customers.
To accelerate compliance, consider leveraging Merkle Science’s Compass platform, powered by a customizable rule engine tailored to your risk needs. Contact Merkle Science today for a free demo.
