This installment of the Fraud by the Numbers series, we turn to the latest U.S. Securities and Exchange Commission (SEC) statistics on enforcement actions against individuals. For those who are unfamiliar, the SEC provides a link specific to actions against individuals (aka SEC Action Lookup – Individuals (SALI)).
 
Like other U.S. Government Agencies, including the U.S. Department of Justice (DOJ), the SEC brings enforcement actions against companies and individuals alike through the Division of Enforcement in federal courts and administrative tribunals. In December 2024, the SEC announced FY 2024 filings and settlements against entities and individuals for a variety of securities law violations. General highlights are as follows:

– 583 total enforcement actions filed
– $8.2 billion in financial remedies ($6.1 billion in disgorgement and prejudgment interest)
– $2.1 billion in civil penalties

From these statistics, some involved either charges brought against individuals or protecting whistleblowers pursuant to Rule 21F-17. The SEC settled charges against seven (7) public companies for violating Rule 21F-17 in connection with employment, separation, and other agreements (Employee Documents). Specifically, each entity was charged with violations of rules prohibiting interference with an individual’s communications with SEC staff about possible securities law violations. Civil penalties spanned from $19,500 to $1.3 million and all entities had included provisions in their Employee Documents requiring waivers of monetary awards for participating in whistleblower programs.

The total individual enforcement actions are more difficult to ascertain; however, it is known that 124 individuals were barred from serving as officers and directors of public companies. This represents the second highest number in a decade. Additionally, there were some notable cases where companies and individuals held accountable. For example:

– SEC v. Terraform Labs PTE LTD.—a $4.5 billion verdict and “one of the largest securities frauds in U.S. history” and the Division’s “first-ever crypto-related trial.” On April 5, 2024, a jury in the Southern District of New York found Terraform Labs and Do Kwon (the company’s co-founder) liable for “orchestrating a years-long fraud involving crypto assets securities that led to massive investor losses when the scheme unraveled.”  A unanimous jury verdict led the parties “to pay more than $4.5 billion” in total remedies, “the highest remedies ever obtained by the SEC following a trial.” In individual penalties, Kwon agreed to pay more than $200 million.
– SEC v. NanoBit Limited et al. – an ongoing action filed in the U.S. District Court for the Central District of California charged five entities and three individuals in scams involving fictitious crypto assets. “The SEC’s two complaints allege that the defendants solicited investors via social media apps, lied to them to gain their trust and confidence, and then stole their money. These charges are the SEC’s first enforcement actions alleging these types of scams.” Again, this action underscores the SEC’s commitment to individual accountability.
 
In sum, individuals, whether as owners, executives or traders, may face personal liability. Depending on the type of conduct, individual enforcement is likely to occur, especially when individual investors are harmed through fraudulent schemes.

This piece was written by Rachel Rose.