United States: DOJ and SEC cryptocurrency policy and enforcement

DOJ appealed the dismissal to the Seventh Circuit Court of Appeals. During the pendency of that appeal, on 7 April 2025, Deputy Attorney General Todd Blanche published the memorandum discussed above setting forth, among other things, DOJ’s position that prosecutors “should not charge regulatory violations in cases involving digital assets including but not limited to unlicensed money transmitting . . .”. Thereafter, DOJ withdrew its appeal on 23 April 2025, and filed a voluntary motion to dismiss the case below.

United States v Gugnin (Evita)

In June of 2025, the DOJ unsealed an indictment against Iurii Gugnin, a resident of New York and citizen of Russia, in connection with alleged financial improprieties involving his company, Evita. The indictment alleges that Gugnin served as the President, Treasurer, and Compliance Officer of Evita. Gugnin is alleged to have used Evita to “enable foreign customers – many of whom held funds at sanctioned Russian banks – to provide him with cryptocurrency, which he then laundered through cryptocurrency wallets and US bank accounts”. The indictment further alleges that these funds were then converted to US dollars or other fiat currencies and were used to make payments through bank accounts in Manhattan. According to the indictment, this process masked the source and counterparties of the transactions. The indictment also alleges that Gugnin misrepresented to banks and exchanges that he did not do business with entities in Russia, when, as alleged in the indictment, many of Gugnin’s customers were located in Russia and Gugnin had accounts at two sanctioned banks.

Gugnin was charged with bank and wire fraud, sanctions violations under the International Emergency Economic Powers Act (IEEPA), operating an unlicensed money transmitting business, and failing to implement an effective AML compliance programme.

United States v Karony (SafeMoon)

In May of 2025, DOJ prosecutors obtained a jury verdict against Braden John Karony on counts of conspiracy to commit securities fraud, wire fraud and money laundering. The charges against Karony arose in connection with the operation of a decentralised digital asset called “SafeMoon”. Karony was found to have deceived investors about whether SafeMoon executives were able to access SafeMoon’s “liquidity pool” and use funds from the liquidity pool for their own benefit. SafeMoon had previously achieved a market capitalisation of US$8 billion. Karony was found to have diverted funds from SafeMoon investors for his personal benefit.

United States v Lam, et al.

In March of 2025, DOJ unsealed an indictment charging more than a dozen individuals with an alleged “cyber-enabled racketeering conspiracy throughout the United States and abroad that netted them more than $263 million”. DOJ alleged that hackers gained access to websites and servers to obtain information related to cryptocurrency wallet holders. Representing themselves as crypto exchange representatives, DOJ alleged that the conspirators cold-called victims and used social engineering to deceive victims that their crypto accounts had been hacked. DOJ alleged that once personal account information was retrieved and cryptocurrency was stolen, conspirators laundered the stolen cryptocurrency and turned it into dollars, which was then used, among other things, to purchase lavish items and services for their personal benefit.

The specific charges in the case include RICO conspiracy, conspiracy to commit wire fraud, conspiracy to launder money and obstruction of justice.

Parallel prosecutions and fraud

The DOJ sometimes pursues criminal prosecutions in parallel and in coordination with civil cases brought by the SEC on securities and related fraud theories. While not discussed in depth here, examples include the criminal cases against Sam Bankman-Fried and FTX, against Michael Alan Stollery and Titanium Blockchain Services, and against Celsius and Alex Mashinsky. These cases are, on their face, similar to more traditional securities and commodities fraud cases, with executives accused of making fraudulent misrepresentations about their companies and operations, among other allegations.

Key takeaways from DOJ enforcement actions

Recent DOJ crypto prosecutions indicate that, consistent with the Administration’s stated priorities, DOJ will enforce cryptocurrency cases where DOJ believes that fraudulent conduct has victimised others, and where defendants are alleged to have engaged in serious, knowing and wilful violations of federal criminal laws.

Moreover, DOJ will continue to prosecute BSA and AML violations against digital asset companies. DOJ will also continue to pay close attention to, and identify and prosecute, instances of individuals and crypto exchanges that allow US customers to transact with sanctioned countries. DOJ will also likely continue to work closely with other US and ex-US agencies to investigate and prosecute illicit conduct in the cryptocurrency space.

US Securities and Exchange Commission enforcement

The SEC is charged with, among other things, enforcing the Securities Act of 1933 (the Securities Act) and the Securities Exchange Act of 1934 (the Exchange Act). The Securities Act requires that offers to sell securities are registered with the SEC. The Exchange Act regulates the secondary market for trading securities and requires any exchange, broker or clearing house involved in the offer or sale of securities to register with the SEC. A central issue in virtually every enforcement action brought by the SEC against a cryptocurrency exchange has been whether the exchange is involved in the offer or sale of “securities”. If so, then the exchange is required to register with the SEC and its failure to do so is unlawful and subject to potential penalties. Consequently, liability in these cases depended on the answer to the question: “Is the cryptocurrency at issue a security?”

Rather than define the necessary and sufficient conditions for what constitutes a security, the Securities Act provides an enumerative definition that merely lists examples of potential securities, including “any note, stock, treasury stock, security future, security-based swap, bond . . . [or] investment contract”. This last term, “investment contract”, is the broadest and most frequently analysed by regulators and courts. If cryptocurrencies are investment contracts, then they are securities, and if they are securities, then crypto exchanges ought to have registered with the SEC before facilitating crypto transactions.

The term “investment contract” is not defined in the Securities Act. However, the United States Supreme Court developed a four-part test for identifying investment contracts in the case of SEC v W J Howey Co. Under what has become known as the Howey test, an investment contract exists when there is an investment of money in a common enterprise with an expectation of profit to be derived from the efforts of others.

Prior SEC regulatory guidance

While the Howey test provides a means for analysing whether or not a given investment instrument is a security, it does not necessarily resolve the question of whether cryptocurrency generally (or individual cryptocurrencies specifically) constitute securities, and different parties have reached different conclusions on these issues. Indeed, several cryptocurrency exchanges have raised the uncertainty of the application of the Howey test to cryptocurrencies when faced with enforcement actions for failure to register under the Exchange Act. In doing so, these exchanges have highlighted what they view as inconsistent guidance from regulators.

For example, in June 2018, the SEC’s Director of Corporation Finance, William Hinman, said that transactions in bitcoin and Ether are not securities transactions. Similarly, the CFTC maintains that prominent cryptocurrencies bitcoin, Ether and Litecoin are commodities, not securities. In congressional testimony in May 2021, then SEC Chairman Gary Gensler stated that “the exchanges trading in these crypto assets do not have a regulatory framework [] at the SEC” and that “it is only Congress that could really address” this lack of a framework. Commenting on a lack of SEC rulemaking for cryptocurrency, SEC Commissioner Hester Peirce stated in 2023:

[I]f we seriously grappled with the legal analysis and our statutory authority, as we would have to do in a rulemaking, we would have to admit that we likely need more, or at least more clearly delineated, statutory authority to regulate certain crypto tokens and to require crypto trading platforms to register with us. And Congress might decide to give that authority to someone else.

These and other statements have been frequently cited by cryptocurrency exchanges fighting enforcement actions brought on the basis of an exchange’s failure to register with the SEC.

On 25 July 2017, the SEC issued the DAO Report, which cautioned cryptocurrency market participants (ie, “those who would use . . . [a] distributed ledger or blockchain-enabled means for capital raising”) to comply with federal securities law by registering any securities offered for sale in the United States and, for cryptocurrency exchanges to register with the SEC if “engaging in the activities of an exchange”. Courts frequently reference this warning in the DAO Report as a basis for notice of potential enforcement against unregistered exchanges.

2025 SEC regulatory changes

Consistent with Trump administration policies, SEC has charted a new course with respect to cryptocurrency regulation. Shortly after his confirmation by the United States Senate, new SEC Chair, Paul S Atkins, declared a “new day at the SEC” for cryptocurrency. He stated that that his intention is to “develop a rational regulatory framework for crypto asset markets that establishes clear rules of the road for the issuance, custody, and trading of crypto assets while continuing to discourage bad actors from violating the law”. Chair Atkins also stated that policymaking “will no longer result from ad hoc enforcement actions” and that instead, “the Commission will utilize its existing rulemaking, interpretive, and exemptive authorities to set fit-for-purpose standards for market participants”. To this end, SEC Commissioner Hester Peirce, head of the SEC’s Crypto Task Force, has proposed a “regulatory sandbox” that would allow firms to use distributed ledger technology to issue, trade and settle securities transactions with an exemption from certain SEC registration requirements. This proposal aims to “allow firms to use innovative trading systems for eligible tokenized securities” and to operate “automated market making system[s] for tokenized securities . . .”.

While no new regulatory framework for cryptocurrency has yet been adopted, the SEC has withdrawn a number of prior positions on cryptocurrencies and the scope of the Howey test. For example, the SEC’s Division of Corporation Finance released a “Statement on Certain Protocol Staking Activities”. Staking occurs when a party agrees to commit a certain amount of a digital asset for a specified period for use in verifying blockchain transactions. The Division’s current view is that staking activities “do not involve the offer and sale of securities” within the scope of Sections 2(a)(1) of the Securities Act of 1933 or Section 3(a)(10) of the Securities Exchange Act of 1934 and that “participants in these activities do not need to register” with the Commission. This is a departure from the position SEC took in enforcement actions against Coinbase and Binance, for example, where SEC not only took the position that staking constitutes the offer and sale of a security but prevailed on that issue on a motion to dismiss. Similarly, SEC has issued new guidance stating offering certain stablecoins and certain “meme coins” does not constitute the offer or sale of a security. Moreover, SEC also rescinded a staff bulletin requiring companies to record cryptocurrencies as liabilities on their books, discouraging some financial institutions from offering custody services for digital assets.

SEC enforcement actions against cryptocurrency exchanges

One of the most salient changes in SEC policy has been the dismissal of cases against cryptocurrency exchanges brought under the prior administration.

SEC v Coinbase, Inc

On 6 June 2023, the SEC filed a complaint against the cryptocurrency exchange, Coinbase, Inc. The SEC’s complaint alleged that Coinbase violated section 5 of the Exchange Act (15 USC section 78f) by operating a “national securities exchange” and violated section 17A of the Exchange Act by operating a “clearing agency with respect to securities” (15 USC section 78q-1(b)), all while failing to register as either a securities exchange or securities clearing agency with the SEC.

To prevail on these claims, the SEC was required to show that at least one of the digital assets traded on Coinbase’s platform met the definition of a “security” under section 2(1) of the Securities Act, which in turn required a showing that the digital assets in question were investment contracts under the Howey test. To meet that burden, the SEC dedicated more than half of its complaint to detailing the characteristics of 13 separate digital currencies offered on the Coinbase platform and attempting to show how each of these coins satisfied the Howey court’s definition of “investment contract”. Generally, the SEC alleged that these coins satisfied the:

• “investment of money” prong because they could be obtained for fiat currency;
• “common interest” prong because the prices of the assets of coin purchasers and coin creators rise and fall together;
• “expectation of profits” prong because the coin creators generally sought to grow the user base and thus drive up the value of an asset; and
• “efforts of others” prong because the coin purchasers were told they could rely on the hard work, expertise and experience of the coin creators to increase the value of the coins in question.

In its 4 August 2023 motion for judgment on the pleadings, Coinbase argued that none of the digital assets listed on its exchange met the basic definition of an “investment contract” because none involved an actual contract with ongoing contractual obligations. Digital assets, Coinbase argued, were acquired in a secondary market and did not give rise to a contractual relationship. Consequently, they were nothing more than an asset sale. Coinbase also argued that, to meet the requirement of a common enterprise, the funds must be pooled, with a pro rata distribution of profits, which does not take place when a digital asset is purchased.

On 27 March 2024, the court denied Coinbase’s motion. The court cited Howey for the proposition that the investment contracts are “a flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profit”. The court rejected the assertion that prior statements from regulators created any confusion with respect to the inclusion of crypto assets within the definition of “investment contract”. Specifically, the court noted that the July 2017 publication of the DAO Report should have put Coinbase on notice of the SEC’s position that “those who would use . . . distributed ledger or blockchain-enabled means for capital raising [should] take appropriate steps to ensure compliance with the U.S. federal securities laws”. The court also referenced guidance in the SEC’s April 2019 Framework for “Investment Contract” Analysis of Digital Assets, which warned that those “engaging in the offer, sale, or distribution of a digital asset” should consider “whether the digital asset is a security” that would trigger the application of “federal securities laws”, and which provided a framework for determining if a digital asset was a security. These publications, the court reasoned, “signaled” the SEC’s “view that whether an offer and sale of crypto-assets was in fact an offer and sale of securities was dependent on individualized facts and circumstances”.

On 7 January 2025, the court certified these issues for an interlocutory appeal and stayed discovery in the case. Then on 27 February 2025, Coinbase and SEC entered into a joint stipulation dismissing the case. In announcing the dismissal, acting SEC Chair Mark Uyeda stated: “For the last several years, the Commission’s views on crypto have been largely expressed through enforcement actions without engaging the general public. It’s time for the Commission to rectify its approach and develop crypto policy in a more transparent manner”. Following the dismissal of its case against Coinbase, SEC similarly settled or dismissed pending cases against a number of digital asset companies, including, for example, cases brought against Binance, Ripple, Dragonchain and Consensys Software, among others.

While these settlements signal a major shift in SEC policy, they do not relieve digital asset companies from all risks related to securities law compliance. Resolving a lawsuit with the SEC for failure to register under Section 5 of the Securities Exchange Act (15 USC section 78e), for example, does not necessarily resolve every other federal securities dispute. Apart from the federal government, states may also continue to enforce their own securities regulations. Moreover, while DOJ and SEC may elect not to bring enforcement actions against crypto exchanges based on the meaning of statutory terms such as “security” or “commodity”, that does not prevent private individual litigants or investor classes from bringing such suits.

Key takeaways from SEC enforcement actions

The recent settlement and dismissal of multiple SEC cases against cryptocurrency exchanges and recent policy guidance from the SEC Chair Atkins and the SEC’s Division of Corporation Finance provide some direction to market participants. However, they do not relieve digital asset companies from the obligation to comply with state and federal securities laws, as applicable, nor from the risk of private litigation. Enforcement of the federal securities laws by the SEC against cryptocurrency enterprises will continue, especially in areas where conduct involves fraud, deceit and market disruption.

The information in this article is accurate as at 15 August 2025.

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