SEC Writes Off $10 Billion in Fines It Can't Collect (msn.com) 31
The Securities and Exchange Commission wrote off nearly $10 billion in uncollected fines over the past decade, with $1.4 billion written off in 2023 alone, WSJ reported, citing internal data.
While the agency reported $4.9 billion in sanctions last year, it typically collects only two-thirds of imposed penalties. The SEC stopped disclosing collection rates in 2019. In fiscal 2024, it collected just 23% of $8.2 billion in reported sanctions, including a $4.4 billion judgment against cryptocurrency firm Terraform Labs that will likely go unpaid due to bankruptcy proceedings.
While the agency reported $4.9 billion in sanctions last year, it typically collects only two-thirds of imposed penalties. The SEC stopped disclosing collection rates in 2019. In fiscal 2024, it collected just 23% of $8.2 billion in reported sanctions, including a $4.4 billion judgment against cryptocurrency firm Terraform Labs that will likely go unpaid due to bankruptcy proceedings.
Bankruptcy limitation (Score:2)
Is bankruptcy not limited to protecting you only from legal losses? If a business breaks the law to the point the SEC is looking to collect, then bankruptcy should mean the debt is transferred to the C-suite and majority stock holders, personally.
Re: Bankruptcy limitation (Score:4, Informative)
Pierce the corporate veil (Score:5, Informative)
Like it or not, one of the points of corporations is to limit liability vs doing stuff personally.
There's a concept of "piercing the corporate veil", which means that if you're not running your corporation in a serious manner the protections don't apply.
I've only heard this used when a small business owner doesn't have annual meetings, or doesn't do the annual meetings in a specific manner. Having dinner in a restaurant with the other owners is sufficient, but you have to take notes and have appropriate records &c. If you don't have a formal annual meeting, the IRS deems the corporation not being run in a serious manner, and *poof* you're liable. And there's no warning, and it happens after the fact.
I would imagine that a company committing crimes would be sufficient to pierce the corporate veil, but IANAL, so maybe someone who *is* a lawyer could explain further?
I think it's more a case of the SEC being lazy, self-identifies as overworked, and doesn't want to bother.
Re:Pierce the corporate veil (Score:5, Informative)
Over $14B was recovered from Bernie Madoff's investors who withdrew profits before the collapse, as those payments were deemed fictitious gains funded by later investors.
FTX (Sam-Bankman Fried) has been targeted by an avalanche of clawback lawsuits including targeting his friends and parents to recover money that was improperly paid in the first place. Ironically these lawsuits are in jeopardy as FTX approaches full repayment of its creditors, calling into question whether anybody incurred 'losses' in the first place.
https://www.nytimes.com/2024/0... [nytimes.com]
Re: (Score:2)
You're not suggesting that there has to be a harmed party for a Civil Lawsuit to have standing, are you?
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Lines (Score:2)
When a company files for bankruptcy, their accounts are frozen and put under administration per a judge. Depending on what type of bankruptcy it is, creditors are arranged in priority to be paid off. First in line, under every contingency, is the government. If the company owes the government *any* money, they get paid first.
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OK, but if there's still debt owing due to illegal actions by corporate officers, they should be on the hook for it. Or in jail for a term determined by the amount due, but long enough to ensure they choose to pay.
Civil (Score:3)
SEC sanctions are not criminal, they are civil. The SEC does not file criminal charges, the DOJ does.
It's arranged this way on purpose. The requirements to find a company liable for a tort are much less than criminal liability.
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Going bankrupt != Breaking the law
The consequences for each are different.
Regulation (Score:2)
The SEC is a regulatory agency, not a law enforcement agency. They fine people in civil court. They can't put you in jail. If they find fraud in an investigation they'll lateral the case over to the DOJ for criminal charges.
"take the money and run" (Score:2)
I would like to see some statistics on this, to sell where the money went. Did they just piss it away on bad risks and bad decisions and folded, or did the individuals/groups that set up the companies ride off into the sunset on massive cash-out bonuses and golden parachutes as the companies imploded?
(or did they have parasite consultants / suppliers that were rigged to massively overcharge to "launder out" money from the company, in a process similar to "hollywood accounting")
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They put several crypto companies out of business with unpayable fines.
That was the play - collecting the money wasn't the goal. The crowd went wild at the recent fintech conference when Trump promised to fire Gensler.
These actions were all illegal under the Major Questions Test that SCOTUS has recently reinforced.
There are no "losses", just a trail of bodies.
Re:"take the money and run" (Score:5, Insightful)
"They put several crypto companies out of business with unpayable fines."
Like that's a bad thing. Won't anyone think of the organized criminals!
"That was the play - collecting the money wasn't the goal."
Right, as though the criminal justice system is inherently corrupt, and the people who commit crimes are innocent victims.
"The crowd went wild at the recent fintech conference when Trump promised to fire Gensler."
Yeah for organized crime, Trump's discovered your game and wants a piece!
"These actions were all illegal under the Major Questions Test that SCOTUS has recently reinforced."
According to you, the courts are corrupt, so why does this matter?
"There are no "losses", just a trail of bodies."
As long as they're the right bodies.
I don't understand "writes off" (Score:2)
That's usually a concept used in reporting profits and losses. Reporting law requires that entities honestly take debts owed but are likely not collectible off of their books and subtract it from profit.
The SEC has no profit and loss statement per se. Debts (fines) owed can stay on the books forever. The statistics would be interesting. How much money is slipping through their fingers and where? What can we do to tighten up the collection process?
Re: I don't understand "writes off" (Score:1)
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Bit more than that as when the law takes an interest in my dealings, seizure of my assets up to jail time are on the table, as well as compounding fines. Wonder how you get into the "that's alright. You've suffered enough" line in dealing with the law.
Further, corporate death sentence isn't just fining some holding company endless amounts, but annulling their corporate charter. Then the really interesting prospects of RICO investigations and personal liability open up, with no possibility of selling the str
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Re:I don't understand "writes off" (Score:5, Insightful)
Honestly, it's 'pro-corporate' who should be most enthusiastic about corporate governance, since their position is that you can implement them safely and honestly, and those who don't must be making specific mistakes that ought to be learned from and remedied; while 'anti-corporate' gives you the option of not getting into the weeds because you suspect the arrangement of being inherently and uncorrectably subject to abuse; so particularly notable examples are just object lessons in why they must be done away with rather than narrower lessons about the importance of specific reporting requirements, internal controls, arrangements particularly subject to principal-agent problems, or the like.
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Fining a company into insolvency and bankruptcy amounts to a financial death sentence
How many fines reach this level? Few, I'd guess. In light of all the comments made about fines that amount to X number of days of a companies profits.
Bankruptcy isn't always what you think it is. Assets disappear and resurface in new companies in the same line of business. With the same customer lists, key personnel and technologies. SEC gets a bunch of used office furniture. They know this, so they don't do it often.
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If my ass doesn't pay a fine (Score:3, Interesting)
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When was the last time the SEC fined you? The hidden narrative here is that many of these unrecoverable fines were slapped on businesses deemed undesirable by the SEC. Not that individuals are being sent to some kind of debtor's prison.
Well it's a good thing the SEC (Score:2)
And no none of these fines were slapped on businesses deemed undesirable. The only one doing anything against businesses deemed undesirable are Republicans in red states going after PornHub. They will use that to come after VPNs next and tighten their grip on the internet and begin the censor you.
What you didn't think I noticed You're use of right wing coded language?
Who gets the money? (Score:3)
I have yet to see a satisfactory answer to that question.
Can't collect on fines (Score:2)
But I'm damn sure they collected on their bonuses and golden parachutes.
SEC can't collect fines, IRS can't collect unpaid (Score:2)