The US SEC has new regulatory limits on penalties over financial crimes, according to the US Supreme Court. The watchdog can not impose any penalties that exceed the profits obtained from the illegal acts.
24 June, 2020 | AtoZ Markets – The Securities and Exchange Commission (SEC) is also keeping a keen eye, as the nature of cryptocurrencies and investor hype around the industry encourage many fraudsters to lure victims into fraudulent schemes. Regulators were imposing heavy fines on crypto fraudsters and seeking punitive damages.
Court Sets Limits on SEC’s Ability to Impose Punitive Fines
The US Supreme Court limits the scope of the SEC to impose penalties for financial crimes, which mainly affects cryptocurrency fraud. The SEC cannot impose fines known as disgorgements that exceed the profits earned from the illegal activities of the involved companies. Moreover, such penalties may only impose in the interest of the victim and not as punitive damages.
However, the court limited the scope of what could seek via penalties to more than the net profit of the act at issue. The court also decided that the fines should generally go to the investor. Moreover, this ruling applies to all defendants. The court has already restricted SEC by five years statute of limitations. The court also said:
“Disgorged funds must be for the benefit of the harmed investors and consistent with equitable principles. SEC does not always return the entirety of disgorged proceeds to investors. It may instead deposit a portion of collections in a fund in the US Treasury. Merely depriving a wrongdoer of ill-gotten gains does not alone render disgorgement appropriate or necessary for the benefit of investors.”
SEC is one of the most significant financial regulators in the United States. The regulator is actively seeking out and fighting fraud related to digital assets and the blockchain technology industry.
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