SEC Accuses Unicoins of Billion-Dollar Fraud, Are Regulatory Standards Changing Again?

On May 21, 2025, the SEC once again brought cryptocurrency regulation into the spotlight. Unicoin was accused of raising over $100 million through false statements, claiming its token was backed by assets worth billions of dollars, when in reality, its value was far below expectations.

Over the past decade, SEC's regulation of the cryptocurrency industry has gone through ups and downs, from cracking down on fraudulent ICOs to comprehensive enforcement actions against major exchanges. With a new pro-crypto chairman in place, regulation seemed to have eased, with the dismissal of several old cases. But now, with new lawsuits emerging, is strict regulation making a comeback?

SEC's "Regulatory Storm"

Since the SEC took its first enforcement action against cryptocurrency in 2013, the industry has remained a regulatory "gray area." The core regulatory tool of the SEC is the 1946 Howey Test, used to determine whether an asset is a security, involving "an investment of money, a common enterprise, expectation of profits from the efforts of others." While this standard is clear-cut in traditional finance, it has sparked numerous controversies in the complex environment of DeFi and the token economy. SEC has long relied on piecemeal enforcement actions rather than clear rules to govern the digital asset industry, resulting in a lack of predictability in the market, leaving investors and companies in compliance limbo.

In the early days of cryptocurrency, initial token offerings sprouted up like mushrooms, but many projects were suspected of fraud. In 2017, the SEC released the "DAO Report," explicitly stating that tokens could be considered securities, marking the formal entry of regulation. In the same year, in December, the SEC sued PlexCorps, accusing it of raising $15 million through false advertising, kicking off a tough crackdown on fraudulent ICOs. In 2018, the BitConnect case took center stage as the platform raised over $2 billion through a Ponzi scheme-style investment plan, falsely promising high returns, and was eventually ordered to pay a huge fine in 2021. The common denominator in these early cases was that project parties deceived investors through false statements or misappropriation of funds. SEC's enforcement goal was clear: to protect investors from the harm of the "wild west" crypto market.

In 2021, when Gary Gensler took office as SEC Chairman, the cryptocurrency industry faced a "regulatory storm." Gensler advocated for "enforcement as regulation," believing that the vast majority of crypto assets are securities and must comply with federal securities laws. In June 2023, the SEC filed a major lawsuit against Binance and Coinbase, accusing them of operating as unregistered securities exchanges, involving dozens of tokens such as BNB, SOL, and ADA.

Binance has been accused of illegally selling securities and market manipulation, while Coinbase has been charged with providing unregistered brokerage and clearing services. These lawsuits not only rocked the market but also led to a 5.2% to 17.2% drop in the prices of related tokens. Meanwhile, the Ripple case that began in 2020 has become an industry benchmark, with the SEC accusing Ripple of raising $1.3 billion through unregistered XRP sales. In 2023, a court ruled that XRP may not necessarily be a security when traded on the secondary market, but its programmatic sales were still deemed illegal. This split decision highlighted the complexity of regulatory definitions. The 2022 Terraform Labs case further exposed market risks, with the SEC alleging that its founder Do Kwon manipulated the market through TerraUSD and LUNA, resulting in investors losing billions of dollars.

These cases reflect the tough stance of the Gensler era, using high-profile litigation to delineate regulatory boundaries and attempting to bring the crypto industry into the traditional financial framework. However, the enforcement during the Gensler era was based on the 1933 Securities Act, trying to forcefully fit brand-new digital assets into the traditional framework, lacking adaptability and clarity.

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Crypto-Friendly Regulatory Shift

Since returning to the White House, Trump has always prominently featured "crypto-friendly" as one of his key political declarations. On April 10, 2025, the SEC under Trump welcomed its new chairman, Paul Atkins, bringing a significant change in regulatory direction. Known for his pro-market stance, Atkins emphasizes regulating the crypto industry through clear rules rather than just enforcement. In February 2025, the SEC dismissed civil suits against Ripple, Coinbase, and Kraken, marking the end of the Gensler era's landmark cases.

Furthermore, the SEC abolished Staff Accounting Bulletin 121 (SAB 121), restoring crypto asset custody as an off-balance-sheet item and clarifying that self-mining and pool activities generally do not constitute securities. These measures are seen as "unshackling" the crypto industry, aiming to alleviate corporate compliance burdens and spark innovation. The SEC's previous "patchwork enforcement" lacked user-friendliness and failed to provide a predictable compliance path, while Atkins's initiatives are trying to change this status quo.

More importantly, Atkins spearheaded the formation of the Crypto Mom's Task Force, led by SEC Commissioner Hester Peirce, aimed at collaborating with the industry to develop clear rules covering stablecoins, meme coins, and DeFi. On February 21, Peirce issued a public statement inviting feedback from the public on crypto assets and blockchain technology, posing over 100 questions spanning four categories, including security-type crypto assets, tokens in investment contracts, tokenized securities, and non-security crypto assets.

The efforts of this task force are not limited to the SEC alone but also align with the digital asset executive order signed by Trump on January 23, establishing an interagency digital asset working group involving agencies such as the SEC, Commodity Futures Trading Commission (CFTC), among others. This interagency collaboration aims to address the longstanding issue of regulatory overlap in the industry, such as the SEC considering tokens as securities, the CFTC viewing them as commodities, and the Consumer Financial Protection Bureau (CFPB) categorizing them as "funds" under the Electronic Fund Transfer Act. Atkins' pro-market stance and the establishment of the task force are seen as a new dawn for the industry, signaling a transformation from "penalty-driven" to "guidance-driven" oversight.

Related Reading: "New Chair Takes Office, SEC Turns Into ‘Crypto Daddy’"

Why More Lawsuits Now?

Despite Atkins dismissing multiple lawsuits since taking office, a series of lawsuits this year have sparked speculation about whether regulation is tightening. These cases include the Unicoin case, Nova Labs case, crypto executive fraud case, and Coinbase user data investigation. Why is the SEC initiating lawsuits frequently amidst a backdrop of loose policies? The answer lies in the regulatory bottom line, industry complexity, and the transitional period of rulemaking.

The Unicoin case may be a significant landmark case for 2025. The SEC has accused Unicoin and its executives of raising over $100 million through false statements, claiming their token was backed by assets worth billions, when in reality, its actual value was far below expectations, misleading over 5,000 investors. Additionally, the company is alleged to have conducted the sale of 37.9 million unregistered warrants. Fraud remains a regulatory red line for the SEC, aligning closely with its core mission of investor protection. Even amidst enforcement easing, the SEC will continue to focus on fraud and Ponzi schemes, particularly targeting retail investor protection.

The controversy surrounding unregistered securities issuance has not been definitively resolved. The allegations in the Unicoin case are not limited to fraud but also involve the sale of unregistered securities. Although Atkins advocated for rulemaking, the applicability of the Howey Test has not been fully clarified. During Gensler's tenure, there was an attempt to categorize all tokens as securities, while the new task force tried to distinguish between different types of crypto assets, such as security tokens and non-security tokens. This more precise regulation has shifted the focus of 2025 cases toward specific violations rather than a comprehensive challenge to the legitimacy of exchanges or tokens.

Furthermore, the SEC's demands for data transparency are increasing. On May 15, the SEC launched an investigation into Coinbase, questioning its alleged exaggeration of "verified users" in its IPO filing, potentially misleading investors. The Coinbase case had two tracks: the SEC accused its trading platform of unlawfully operating an unregistered securities exchange, while Coinbase filed a lawsuit requesting the SEC to establish clear rules. In early 2025, the Third Circuit Court ruled that the SEC's reasons for denying Coinbase's rulemaking request were inadequate and ordered further explanation. Subsequently, the SEC withdrew its lawsuit at the Second Circuit Court, indicating a shift in regulatory focus. This case marks the SEC's transition from merely focusing on securities definition to a broader compliance review, particularly in financial disclosure.

The complexity of the crypto industry and regulatory lag are deep-rooted causes of new litigation. From DeFi to NFTs to asset-backed tokens, the rapid market developments have made it challenging for regulatory frameworks to keep pace. Emerging models such as asset-backed tokens in the Unicoin case have forced the SEC to test regulatory boundaries through enforcement actions. The "turf wars" between the SEC, CFTC, and CFPB have intensified regulatory uncertainty, while Atkins' task force and cross-agency working groups are trying to address this issue. Nevertheless, the rulemaking process takes time, and litigation remains a primary tool in the short term to fill regulatory gaps.

Is Crypto Regulation on the Verge of "Reversal" Again?

The new litigation in 2025 shows significant differences in targets, scope, and impact compared to the past decade, reflecting the evolution of the SEC's regulatory strategy. First, enforcement targets are more focused. During Gensler's tenure, the SEC attempted to bring most crypto assets into the securities framework through lawsuits against leading companies like Binance and Coinbase, designating 68 tokens as securities, causing widespread market upheaval. In contrast, the new litigation in 2025 focuses more on specific violations, such as fraud and unregistered sales in the Unicoin case, avoiding attacks on the entire ecosystem, indicating that the SEC is more inclined to target the "bad actors." Enforcement during Gensler's time was based on the outdated 1933 Securities Act, lacking adaptability, while the new task force aims to create "fair rules" suitable for digital assets.

Secondly, the scope of litigation is more precise. Historical cases such as the Ripple and Binance cases involved billions of dollars in transactions and multiple tokens, affecting the entire market. In contrast, the Unicoin case involved $100 million, the Nova Labs case settled for only $200,000, and the Coinbase investigation was limited to data disclosure issues without impacting its core business. The scale and impact of new cases are more limited, avoiding drastic market fluctuations.

Furthermore, the regulatory tone is more moderate. Litigation during Gensler's tenure was often accompanied by strong statements, such as "almost all crypto assets are securities," triggering a strong industry backlash. Under Atkins' leadership, the SEC focuses more on industry cooperation, as seen in the revocation of SAB 121 and the establishment of a crypto task force, demonstrating support for innovation. The language of new litigation focuses on specific violations rather than denying the entire industry, revealing a more moderate regulatory stance. Hester Peirce's public request for comment action is "quite unusual," reflecting the SEC's emphasis on industry cooperation.

Lastly, legal disputes have decreased. In the Ripple case, the court made a split ruling on XRP's security status, highlighting the limitations of the Howey test. In contrast, new lawsuits such as the Unicoin case are mainly based on fraud and unregistered sales, resulting in fewer legal disputes and avoiding the complexity of defining token attributes. This precise enforcement helps reduce industry uncertainty. With the emergence of clear rules, there may be more private securities litigation and class-action lawsuits in the future, while the SEC's enforcement resources will focus more on traditional fraud and Ponzi schemes.