Fines Disgorgement Injunctions Debarment: The US Perspective

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26.1 Introduction

This chapter provides an overview of the potential fines, penalties and other collateral consequences to corporates and individuals facing enforcement actions brought by authorities under US federal law. The government’s use of monetary fines and penalties has remained dynamic as authorities pursue enforcement in traditional areas such as the Foreign Corrupt Practices Act (FCPA), money laundering statutes and the Racketeer Influenced and Corrupt Organizations Act (RICO), and emerging areas such as cybersecurity and cryptocurrency, and apply traditional enforcement to new areas, such as false opioid marketing and covid-19 fraud under the False Claims Act (FCA).

In recent years, both the US Department of Justice (DOJ) and the US Securities and Exchange Commission (SEC) have exacted significant financial penalties through enforcement actions and settlements. For example, in the fiscal year ending on 30 September 2022, the DOJ obtained more than US$2.2 billion in total settlements and judgments from FCA cases alone, on top of US$5.6 billion in the prior fiscal year.[2] While this total dollar amount is less than half of the previous year’s number, the prior year’s total was largely attributable to the DOJ’s US$2.8 billion FCA settlement with major pharmaceutical company Purdue Pharma for its alleged role in the opioid crisis.[3] The fiscal year 2022 figure is consistent with the numbers seen in fiscal year 2020.[4]

In fiscal year 2022, the US Attorney’s Office for the Eastern District of Louisiana alone collected over US$1 billion in criminal and civil actions, over US$850 million of which came from penalties imposed on BP Exploration & Production Inc owing to the fallout of the 2010 Deepwater Horizon oil spill.[5] Other US Attorneys’ Offices across the country posted large collection numbers for 2022, including over US$168 million by the Middle District of Florida,[6] over US$53 million by the Western District of Oklahoma,[7] over US$50 million by the District of South Carolina,[8] and over US$41 million by the District of Colorado.[9]

In fiscal year 2022, the SEC filed 760 enforcement actions, including 462 new enforcement actions, and obtained judgments and orders totalling approximately US$6.439 billion in disgorgement and penalties.[10] The total number of actions filed represented a 9 per cent increase in total enforcement actions over the prior year.[11]

Regulators remain focused on coordinated enforcement efforts aimed at economic fairness. The DOJ’s strategic plan for financial years 2022–2026 promises that it will ‘aggressively prosecute corporate crime, not only by holding companies accountable for their criminal conduct, but also by prosecuting the individuals who commit and profit from corporate malfeasance’.[12] The DOJ also recently revised its corporate enforcement policies to clarify that cooperation credit is only available for companies that provide all available non-privileged information about all individuals involved in or responsible for the misconduct at issue – regardless of their position, status or seniority.[13] In September 2022, each division of the DOJ was instructed to review its policies on voluntary self-disclosure by corporates so that each has in place a policy that incentivises voluntary self-disclosure, cooperation and remediation.[14]

The SEC has reiterated its focus on (1) ‘robust enforcement’ by positioning itself as ‘the cop on the beat’ for the ‘entire securities waterfront’, (2) ‘robust remedies’, including a focus on prophylactic relief ‘such as officer and director bars, associational bars, suspensions, conduct-based injunctions and undertakings’ and (3) ‘robust compliance’ aimed at restoring trust by requiring companies to guard against emerging risks.[15] As anticipated, regulators ramped up enforcement in areas such as cybersecurity, cryptocurrency and covid-19 fraud.[16] Companies should expect to see this increased enforcement activity continue, which will likely lead to increased penalties and fines.

26.2 Standard criminal fines and penalties available under federal law

26.2.1 Financial penalties

Many federal statutes contain their own fining provisions, which typically include a maximum amount. Additionally, for some crimes, the Alternative Fines Act provides for an alternative maximum fine of double the gross gain received, or the gross loss caused to another, from the unlawful activity.[17] Under the securities fraud statute, where a fine is imposed against an officer, director, employee, agent or shareholder of a corporate issuer, the fine may not be paid, directly or indirectly, by the corporate issuer.[18]

The DOJ may also seek asset forfeiture to deprive those who violate the law of the proceeds of their crime and to compensate victims. There are three types of forfeiture under federal law: criminal, civil judicial and administrative.[19] Criminal forfeiture is available where there is a conviction and is generally limited to the property involved in the illegal activity for which the defendant has been convicted.[20] Civil judicial forfeiture is available where the government can prove that certain property was derived from, or used to commit, criminal activity. A civil judicial forfeiture action is brought in rem, and no criminal conviction is required.[21] Administrative forfeiture is an in rem action that permits forfeiture through a process before the agency seizing the assets rather than in federal court. It is available where no one contests the forfeiture.[22] For certain offences, the DOJ may seek both criminal and civil forfeiture.[23]

Recent examples of forfeiture include (1) nearly US$1.1 billion in assets recovered in connection with various cases concerning the 1MDB (the Malaysian sovereign wealth fund) money laundering and bribery scheme,[24] (2) more than US$200 million forfeited in 2022 by FCA US LLC (formerly Chrysler Group LLC) related to its conspiracy to misrepresent compliance with US emission standards,[25] and (3) more than US$700 million in assets forfeited by Russian oligarchs related to Ukraine sanctions.[26]

Under United States Code (USC) provisions relating to criminal penalties, corporates and individuals may also be required to pay restitution, taking into consideration the amount of loss sustained by each victim, the financial resources of the defendant and any other factors a reviewing court deems appropriate.[27]

26.2.2 United States Sentencing Guidelines

Federal courts must consider the US Sentencing Guidelines (the Sentencing Guidelines) in imposing a criminal sentence in corporate and individual sentencings, but they are not required to impose sentences within Sentencing Guidelines ranges (and often impose sentences well below guidelines).

For corporates, the calculation of the applicable fine under the Sentencing Guidelines is made by (1) identifying a ‘base fine’,[28] (2) identifying the minimum and maximum multipliers that, combined with the base fine, create a ‘fine range’[29] and (3) considering whether any factors warrant adjustments, whether upwards or downwards, to that range.[30]

To calculate the base fine, the first step is to identify the ‘offence level’, which depends on the characteristics of the crime. The ‘base offence level’ is set according to the nature of the conduct or the statute violated and then the overall offence level will increase or decrease depending on factors outlined in the Guidelines Manual.[31] The total offence level helps to determine the base fine, which is the greatest of the amount specified in a table that translates the offence level into a base fine, the pecuniary gain to the organisation from the offence or the pecuniary loss from the offence caused by the organisation, ‘to the extent the loss was caused intentionally, knowingly, or recklessly’.[32]

The second step is to calculate the culpability score, which yields the minimum and maximum multipliers to be applied to the base fine. The culpability score is based on the defendant’s characteristics. Relevant factors may include the size of the organisation and the degree of participation in, or tolerance of, the wrongdoing; the defendant’s prior criminal history; whether the defendant violated an order or injunction, or violated a condition of probation by committing similar misconduct to that for which probation was ordered; whether the defendant was found to have obstructed justice; the existence of an effective compliance programme; and self-reporting, cooperation and acceptance of responsibility.[33] The potential multipliers can range from 0.05 (a reduction to one-twentieth the base fine) to 4.0 (four times the base fine), depending on the culpability score. The fine range reflects the minimum and maximum multipliers as applied to the base fine. In addition to the fine, any gain to the corporate from an offence that is not otherwise part of the corporate’s restitution or remediation is subject to disgorgement.[34]

Finally, the Sentencing Guidelines allow for adjustments from the fine range. This may include a reduction for substantial assistance to the government in its investigation of others[35] or remedial costs that exceed the gain to the corporate.[36] Unlike the factors considered for calculating the offence level and culpability score, the detriments or benefits that result from adjustments are not quantified. The court at its discretion may impose a fine above, within or below the fine range. For negotiated resolutions, a corporate, through its counsel, will often negotiate the fine range with the government.

26.3 Civil penalties

Civil monetary remedies can include penalties, disgorgement and prejudgment interest. Each of these has a different purpose and method of calculation.

The SEC may seek civil monetary penalties from any person who violates or causes a violation of the securities laws. For example, the Securities Act of 1933 and the Securities Exchange Act of 1934 authorise three tiers of civil penalties, and the civil penalties sought under these statutes can range from under US$10,000 to over US$1 million, per violation. Less serious civil violations fall into the first tier, where the penalty is no more than US$11,162 for individuals or US$111,614 for corporates for ‘each act or omission’ violating the federal securities laws. The second tier applies to violations involving fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement, for which the maximum penalty is US$111,614 for individuals and US$558,071 for corporates for each act or omission. Finally, the third tier applies to violations involving fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement that directly or indirectly resulted in ‘substantial losses . . . to other persons’ or ‘substantial pecuniary gain to the person who committed the act or omission’. Third-tier penalties are limited to US$223,229 for individuals and US$1,116,140 for corporates for each act or omission.[37]

Where the defendant’s conduct involved multiple violations, the SEC may seek a penalty for each violation. Courts will accordingly consider, in addition to which appropriate tier to apply, whether the conduct constituted multiple violations. For example, in a November 2021 case involving a ‘prime bank’ fraud scheme, a federal court granted the SEC’s request that the defendants receive third-tier civil monetary penalties and that the penalties be calculated by multiplying the statutory maximum penalty per violation.[38] To determine the number of violations, the court counted ‘each of the transactions in which the individual Defendant took a leading role’.[39]

Civil penalties for insider trading depend on the profits generated by the illicit trading. A district court can order civil penalties up to three times the profit gained or loss avoided by the violative trade.[40] The DOJ likewise may seek civil penalties in certain types of matters, such as violations of federal financial, health, safety, civil rights and environmental laws.[41]

26.4 Disgorgement and prejudgment interest

The SEC and the DOJ may seek disgorgement to prevent an entity or individual from profiting from illegal conduct and to deter subsequent misconduct.[42] In 2021, Congress made several changes to the US securities laws regarding the SEC’s ability to recover funds though disgorgement.[43] Specifically, certain disgorgement-related provisions of the Securities Exchange Act of 1934 were amended to (1) expressly grant the SEC statutory authority to pursue disgorgement as a remedy for civil enforcement actions in federal court, (2) extend the statute of limitations for all disgorgement actions involving fraud and scienter from five years to 10 years and (3) direct courts to apply a 10-year statute of limitations for all other claims seeking equitable remedies, such as injunctions, bars, suspensions and cease-and-desist orders, greatly expanding the time frame in which the SEC can seek disgorgement and increasing the total disgorgement it can collect.

This legislation was a reaction to the US Supreme Court’s decisions in two cases: Kokesh v. SEC (holding that disgorgement is subject to a five-year statute of limitation) and Liu v. SEC (holding that the SEC could only seek disgorgement that does not exceed the defendant’s net profits and suggesting in dicta that disgorgement may be an equitable remedy and therefore not available, for example, where money cannot be returned to investors). An August 2022 decision from the Middle District of Florida was the first to directly address the SEC’s authority since the new legislation. The court ordered nearly US$115,000 in disgorgement even though it was not possible to identify specific investors who were harmed by the defendants, with the amount to be given to the US Treasury.[44]

The SEC may also seek prejudgment interest on any disgorgement amount. The rules that apply to administrative proceedings brought by the SEC require that such amounts be included in any disgorgement,[45] and courts may determine whether prejudgment interest is appropriate in civil actions.[46] The interest rate applied is typically the ‘underpayment’ rate set by the Internal Revenue Service.[47] There is no single approach for measuring when the clock begins to run on interest calculations. In some cases, it has been measured from the date the ill-gotten funds were received and runs up to the date of judgment;[48] in others, it may run from multiple dates where the matter involves multiple transactions[49] or, where the applicable dates are difficult to identify, from the date of the complaint.[50]

26.5 Injunctions

The DOJ may seek affirmative relief through an injunction if it is deemed necessary to advance the public interest. Injunctive actions may be specifically provided for by statute,[51] used to enforce statutes that do not specifically provide for injunctive relief[52] or sought from an appellate court pursuant to the All Writs Act.[53]

Likewise, the SEC may seek a preliminary or permanent injunction when it appears that a person is engaged in, or is about to engage in, acts or practices constituting a violation of the securities laws.[54] For example, in February 2023, the SEC obtained a preliminary injunction against the companies Reliable One Resources, Inc and Quantum Filtration, Inc, after the Eastern District of Texas federal court found a likelihood that the companies made material misrepresentations and omissions in statements to investors.[55]

26.6 Other consequences

In addition to these criminal and civil penalties, defendants may face other consequences as a result of a US criminal or civil action. Investigation or prosecution by authorities in one jurisdiction may also lead to investigations, prosecutions or resolution short of prosecution by authorities in other jurisdictions. For example, in January 2020, the largest foreign bribery settlement to date was entered into between airplane manufacturer Airbus and authorities in France, the United Kingdom and the United States. Airbus agreed to pay combined penalties of over US$3.9 billion to resolve anti-corruption and export control violations.[56]

This trend shows no signs of slowing: in April 2022, Stericycle agreed to pay over US$84 million to resolve parallel investigations by authorities in the United States and Brazil into the bribery of foreign officials in Brazil, Mexico and Argentina.[57] In December 2022, a US-based subsidiary of Honeywell International Inc agreed to pay over US$160 million to resolve parallel foreign bribery investigations by the DOJ, the SEC and Brazilian authorities for offering bribe payments to a high-ranking executive at Brazil’s state-owned oil company.[58]

In addition, in connection with certain types of enforcement actions, such as FCPA enforcement, money laundering and sanctions violations, corporates may also be required to retain corporate compliance monitors. For example, the DOJ announced two FCPA resolutions that required companies to retain independent compliance monitors: the April 2022 resolution with Stericycle[59] and a May 2022 FCPA and commodity price manipulation resolution with Swiss mining and commodities trading company Glencore.[60]

In September 2022, the DOJ announced that it would not require companies to retain a compliance monitor where a corporate voluntarily self-discloses misconduct, cooperates and, at the time the investigation is resolved, has implemented an effective compliance programme.[61] Further, in March 2023, the DOJ’s Criminal Division announced that prosecutors should not apply presumptions for or against monitors and instead should consider several non-exhaustive factors (including self-disclosure and remediation) on a case-by-case basis when assessing the need for a monitor.[62]

Finally, in some circumstances, individuals or entities may be barred or suspended from doing business with the executive branch of the US government.[63]

26.7 Remedies under specific statutes

By way of example, the fines, penalties and other remedies associated with particular federal criminal statutes of potential interest are outlined below.

26.7.1 False Claims Act

The FCA imposes liability on any person who knowingly submits a false claim to the government, causes another to submit a false claim to the government or makes a false record or statement that is material to the government’s decision to pay a claim.

Financial penalties under the FCA can be significant. In addition to a fine of up to US$10,000 (plus inflation) for each false claim, those found liable must also pay treble the amount of damages that the government sustained because of the false claim as well as the government’s legal fees for litigating the action.[64] Under certain conditions, those who self-report the violation to the government are still liable for not less than double damages.[65]

The FCA also establishes a mechanism for private enforcement pursuant to its qui tam provisions. In accordance with these provisions, a private individual known as a ‘relator’ may file suit on behalf of the government for recovery of FCA damages.[66] A common relator is a corporate whistleblower.[67] When a qui tam action is filed, the government must investigate the relator’s allegations and either (1) intervene in the suit and take primary responsibility for prosecuting the action, or (2) decline to intervene and allow the relator to proceed alone.[68] In either circumstance, the relator is entitled to receive a percentage of any funds recovered for the government and may also recover legal fees.[69]

Since the FCA was enacted, the government has recovered more than US$72 billion in FCA judgments and settlements.[70] During fiscal year 2022, the DOJ recovered more than US$2.2 billion in FCA judgments and settlements.[71] Of that US$2.2 billion, more than US$1.7 billion in FCA judgments and settlements were related to matters involving the healthcare industry. Notably, the government and whistleblowers were party to 351 settlements and judgments – the second-highest number in a single year.[72] Also in 2022, the DOJ secured a record US$48.5 million settlement based on alleged small-business contracting fraud and US$100,000 in individual penalties levied against the corporate executive responsible.[73]

Since the onset of the covid-19 pandemic and continuing today, the government also secured FCA judgments and settlements for improper receipt of Paycheck Protection Program loans, Economic Injury Disaster Loans and unemployment insurance proceeds, all intended for pandemic-related business and employment expenses.[74] Through its COVID-19 Fraud Enforcement Task Force, as at March 2022 when figures were last announced, the DOJ had criminally charged over 1,000 defendants related to approximately US$1.1 billion in alleged loan fraud and had initiated civil investigations into over 1,800 persons for another US$6 billion.[75]

These numbers have only increased since then. In August 2023, a nutritional supplement company agreed to injunctions and to pay more than US$1 million in civil penalties following partial summary judgment in a lawsuit alleging deceptive marketing of purported covid-19 treatments, in violation of the Federal Trade Commission Act and the COVID-19 Consumer Protection Act.[76] The DOJ, together with the US Federal Trade Commission, also obtained permanent injunctions and civil penalties in actions against three distributors of essential oils and nutritional supplements for similarly deceptive covid-19-related marketing.[77]

26.7.2 Foreign Corrupt Practices Act

The FCPA criminalises bribery of foreign officials, either directly or through an intermediary, to obtain business or some other benefit. Its anti-bribery provisions apply not only to all US corporates and persons, but also to foreign corporates that issue securities within the United States or file certain reports with the SEC, as well as these issuers’ officers and employees, among others. It also criminalises actions taken in the United States by foreign corporates or their agents in furtherance of an improper payment or offer. Its books and records and internal controls provisions also require corporates that issue securities within the United States or file reports with the SEC to keep accounting records that accurately reflect the corporate’s transactions and to maintain a system of internal controls.[78]

Violations of the FCPA can result in heavy penalties. For one, corporate entities may be subject to financial penalties of up to US$2 million per violation of the FCPA’s anti-bribery provisions,[79] US$25 million per violation of the FCPA’s accounting provisions,[80] or up to twice the gross pecuniary gain or loss from the violation pursuant to the Alternative Fines Act.[81] In addition, civil penalties for FCPA anti-bribery and accounting provisions violations may apply.[82]

Individuals may be either fined up to US$100,000 (US$250,000 under the Alternative Fines Act or twice the gain or loss from the violation) or imprisoned for up to five years, or both, for a criminal violation of the FCPA’s anti-bribery provisions.[83] For criminal violations of the FCPA’s accounting provisions, individuals can be subject to a fine of up to US$5 million or imprisonment for up to 20 years, or both.[84] Individuals may also face civil penalties for FCPA anti-bribery and accounting provisions violations.[85] For civil violations of the FCPA’s anti-bribery provisions, individuals can be subject to a fine of up to US$24,793, while for a civil violation of the accounting provisions, they can be subject to a fine of up to US$1,166,140.[86] Issuers, as defined under the FCPA, are prohibited from paying these individuals’ criminal and civil fines.[87]

The DOJ may also bring a civil action to seek an injunction against domestic concerns and persons other than issuers to prevent a current or imminent FCPA violation.[88] Likewise, the SEC may seek injunctions to prevent FCPA violations from occurring.[89]

Disgorgement is often a key component of a civil FCPA resolution. In October 2021, Credit Suisse agreed to pay the SEC nearly US$100 million to resolve FCPA charges related to Mozambican bond offerings. More than US$34 million of this was disgorgement.[90] In December 2022, Swiss global electrification and automation company ABB Ltd agreed to pay the SEC and the DOJ a combined US$460 million to resolve FCPA charges arising out of a bribery scheme in South Africa. This included more than US$72 million in disgorgement, but the amount was deemed satisfied by the company’s reimbursement of its ill-gotten gains to the South African government in a related inquiry.[91]

The DOJ has revised its FCPA Corporate Enforcement Policy (CEP) to further incentivise companies to develop and maintain corporate compliance programmes.[92] Its ‘default’ is not declination, non-prosecution or deferred prosecution, but rather an affirmative finding of corporate liability. For corporates seeking to avoid the heaviest penalties, the CEP establishes a presumption that, ‘absent aggravating circumstances’ such as involvement by executive management in the misconduct or significant profit to the corporate from the misconduct, a corporate will receive a declination if it ‘has voluntarily self-disclosed misconduct in an FCPA matter, fully cooperated, and timely and appropriately remediated’.

Still, even if aggravating circumstances are present, the revised CEP also permits discretionary declination if a company can show (1) it promptly made a voluntary self-disclosure when it became aware of the alleged misconduct, (2) at the time of the misconduct and the disclosure, it had an effective compliance programme and internal accounting controls to identify the misconduct and facilitate voluntary self-disclosure, and (3) it provided ‘extraordinary’ cooperation to the DOJ and undertook ‘extraordinary’ remediation.[93]

Under those circumstances, the DOJ may decline prosecution altogether or may recommend a 50 to 75 per cent reduction off the low end of the US Sentencing Guidelines fine range, except in the case of a recidivist.[94] Where a corporate does not voluntarily self-disclose but nevertheless fully cooperates and timely and appropriately remediates, the DOJ will recommend up to a 50 per cent reduction off the low end of the Guidelines. However, these companies are not presumptively entitled to a reduction, and only those demonstrating ‘extraordinary cooperation and remediation’ will receive the most substantial reductions.[95] To be eligible, the corporate must pay all disgorgement, forfeiture and restitution from the misconduct at issue.

26.7.3 Federal criminal money laundering

The principal federal criminal money laundering statutes are 18 USC Sections 1956 and 1957. Section 1956 generally prohibits a person from knowingly engaging in financial transactions with the proceeds of certain unlawful activities to promote further unlawful activity, concealing the proceeds, evading taxes or avoiding reporting requirements. Section 1957 prohibits a person from knowingly engaging in a monetary transaction involving property valued at more than US$10,000 that derives from specified unlawful activities. Both sections target proceeds resulting from specified illegal activities, such as bribery of a foreign official, fraud by or against a foreign bank, and certain smuggling and export control violations.[96]

Any violation of Section 1956 is punishable by up to 20 years’ imprisonment, or a fine of up to US$500,000 or twice the value of the property involved, or both. Such violations can also incur a civil penalty up to the greater of US$10,000 or the value of the property involved in the offence, plus asset forfeiture. For Section 1957, the maximum penalty is 10 years’ imprisonment or a fine of up to twice the value of the property involved, or both.[97] In early 2022, a former Goldman Sachs director was convicted by jury of a money laundering conspiracy, among other charges, for misappropriating more than US$2.7 billion from 1MDB.[98]

The 2021 National Defense Authorization Act introduced further reforms to anti-money laundering laws, including requirements for additional beneficial ownership information with the aim of eliminating shell companies and specific disclosures about ultimate beneficial owners. The Act greatly increased corporate and individual penalties for repeat violations of federal anti-money laundering laws, including civil penalties of triple the profit realised from the activities or double the maximum penalty for the violation.[99] Individuals may also be subject to damages based on profit realised pursuant to the violation – and where such violations are deemed ‘egregious’, individuals may be precluded from serving on the board of a US financial institution for a decade.[100]

26.7.4 Cryptocurrency

Cryptocurrencies create both opportunities and legal challenges such as fraud, insider trading, market manipulation, money laundering, unregistered exchanges and difficulty of tracing virtual funds. The recent unprecedented rise in the global use of cryptocurrencies has brought significant focus to the technology at both federal and state levels. In the past few years, many US states have introduced laws defining and regulating cryptocurrency, and at times using cryptocurrencies as a tool for economic opportunities.[101]

In September 2022, the US Treasury Department and other federal agencies submitted nine reports to President Biden that urge regulators, including the SEC and the US Commodity Futures Trading Commission (CFTC), to ‘aggressively pursue investigations and enforcement actions against unlawful practices in the digital assets space’ and ‘issue guidance and rules to address current and emergent risks’.[102]

US enforcement agencies had already demonstrated a strong interest in the area, particularly in light of the global cryptocurrency crash in 2022. From January to June 2022 alone, the DOJ criminally charged several cryptocurrency executives, brokers and promoters in cases alleging more than US$2 billion in losses accompanied by parallel civil actions with the SEC and the CFTC.[103] In February 2022, US law enforcement seized over US$3.6 billion in cryptocurrency linked to the 2016 hack of Bitfinex – the DOJ’s largest financial seizure to date.[104] In December 2022, the SEC charged FTX CEO Sam Bankman-Fried and other executives with orchestrating a US$1.8 billion scheme to defraud equity investors, seeking injunctions against future securities law violations, an injunction that prohibits Bankman-Fried from selling any securities and disgorgement of Bankman-Fried’s illegal gains and a civil penalty.[105]

After the collapse of FTX in November 2022, state and federal actors have been under intense pressure[106] to clarify and enforce crypto industry regulations. In February 2023, the SEC reached a US$30 million settlement with Kraken, one of the largest US crypto exchanges, to discontinue its unregistered offer and sale of securities through cryptoasset ‘staking’ services.[107] Further, former NBA Hall of Famer Paul Pierce agreed to pay US$1.409 million in penalties, disgorgement and interest after the SEC found he failed to disclose his personal holdings in cryptoasset securities while promoting EMAX tokens online.[108]

In March 2023, the SEC obtained an asset freeze and other emergency relief against Miami-based BKCoin Management LLC in connection with a ‘Ponzi-like’ cryptoasset fraud scheme worth US$100 million.[109] In April 2023, the DOJ seized an estimated US$112 million linked to six virtual currency accounts that were allegedly used to launder proceeds from long-term online confidence scams.[110] In July 2023, the SEC brought charges against Hex founder Richard Heart – who allegedly conducted unregistered securities offerings that raised more than US$1 billion in cryptoassets from investors – seeking injunctive relief, disgorgement and penalties.[111]

Given the increasing risk of abuse related to cryptocurrencies, US authorities will likely continue to prioritise its regulation, and the trend in increasing fines and penalties will likely continue as enforcement ramps up.

26.7.5 Export controls and trade sanctions

The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) administers and enforces most US economic sanctions. The US Commerce Department’s Bureau of Industry and Security and the DOJ’s National Security Division also enforce some aspects of US sanctions.

Generally, these sanctions, such as the blocking of assets and trade restrictions, are used to accomplish national security and foreign policy objectives. The sanctions can be either comprehensive for a jurisdiction or targeted to particular individuals (known as specially designated nationals or SDNs) and entities, such as the sanctions imposed on certain persons and companies in response to Russia’s 2022 invasion of Ukraine,[112] or on one Chinese government entity and specific officials pursuant to the global Magnitsky Human Rights Accountability Act.[113]

Asset seizure in the United States and internationally operates as one method for sanctions enforcement. For example, in 2022, the DOJ and the Treasury Department launched two task forces – the transatlantic Russian Elites, Proxies and Oligarchs Task Force and Task Force KleptoCapture – to freeze more than US$30 billion in sanctioned Russians’ assets, including financial accounts, real estate and high-value goods (including aeroplanes and yachts).[114] In 2023, the DOJ sought forfeiture of US$75 million in luxury properties owned by a Russian oligarch.[115]

Fines for violations of sanctions regulations can be significant. From January to July 2023, OFAC settled nine enforcement actions, with civil penalties totalling more than US$556 million.[116] In 2022, it settled 16 enforcement actions for nearly US$43 million.[117]

Criminal penalties for wilful violations of OFAC sanctions can include fines up to US$1 million per violation or imprisonment for up to 20 years, or both.[118] The US authorities can also pursue fines and penalties against an organisation of up to US$500,000 or twice the pecuniary gain or loss derived from the offence,[119] as well as forfeiture.[120] Further, penalties for violations of the Trading with the Enemy Act, which provides the statutory authority for the Cuba sanctions, can be up to US$105,083 per violation (which may be adjusted for inflation), and criminal penalties can reach US$1 million.[121] Financial penalties for violations of the International Emergency Economic Powers Act, which underlies other sanctions programmes, are also possible; associated civil penalties can be up to US$250,000 or twice the amount of the unlawful transaction, and criminal penalties permit a fine of up to US$1 million and imprisonment for up to 20 years.[122]


[1] Matthew Kutcher is a partner and Alexandra Eber, Matt K Nguyen and Kimberley Scimeca are associates at Cooley LLP. The authors wish to acknowledge Rita D Mitchell of Willkie Farr & Gallagher LLP, who authored the chapter in previous editions on which this chapter is partly based. The authors further wish to acknowledge Cooley summer associates Jenny Portis and Alyn Wallace, who provided invaluable research assistance, and former Cooley associate Wazhma Sadat, who contributed to a prior edition of this chapter.

[2] US Department of Justice (DOJ), Press Release, ‘False Claims Act Settlements and Judgments Exceed $2 Billion in Fiscal Year 2022’ (7 Feb. 2023),

[3] DOJ, Press Release, ‘Justice Department Announces Global Resolution of Criminal and Civil Investigations with Opioid Manufacturer Purdue Pharma and Civil Settlement with Members of the Sackler Family’ (21 Oct. 2020),

[4] DOJ, Press Release, ‘Justice Department Recovers Over $2.2 Billion from False Claims Act Cases in Fiscal Year 2020’ (14 Jan. 2021),

[5] DOJ, Press Release, ‘U.S. Attorney’s Office Collects Over $1 Billion in Civil and Criminal Actions, over $10 Million in Forfeiture, and Seizes 341 Firearms in Fiscal Year 2022’ (8 Feb. 2023),

[6] DOJ, Press Release, ‘Middle District of Florida U.S. Attorney’s Office Collects More than $168 Million in Civil and Criminal Actions in Fiscal Year 2022’ (3 Jan. 2023),

[7] DOJ, Press Release, ‘U.S. Attorney’s Office Collects More than $53.5 Million in Fiscal Year 2022’ (20 Jan. 2023),

[8] DOJ, Press Release, ‘U.S. Attorney’s Office Collects over $50 Million in Civil and Criminal Actions in Fiscal Year 2022’ (24 Mar. 2023),

[9] DOJ, Press Release, ‘U.S. Attorney’s Office Collects $41,562,706.60 in Civil and Criminal Actions in Fiscal Year 2022’ (30 Dec. 2022),

[10] US Securities and Exchange Commission (SEC), Press Release, ‘SEC Announces Enforcement Results for FY22’ (15 Nov. 2022),

[11] Id.

[12] DOJ, FYs 2022-2026 Strategic Plan 53 (26 Aug. 2022),

[13] Attorney General Merrick B. Garland Delivers Remarks to the ABA Institute on White Collar Crime, Speech (3 Mar. 2022),; Deputy Attorney General Lisa Monaco, ‘Further Revisions to Corporate Criminal Enforcement Policies Following Discussions with Corporate Crime Advisory Group’, Memorandum (15 Sept. 2022) (Monaco Memorandum) at 7–8,

[14] Monaco Memorandum at 7–8.

[15] SEC, Testimony on ‘Oversight of the SEC’s Division of Enforcement’ Before the U.S. House of Representatives Committee on Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets (21 July 2022),

[16] See, e.g., SEC, Press Release, ‘SEC Nearly Doubles Size of Enforcement’s Crypto Assets and Cyber Unit’ (3 May 2022),; DOJ, Press Release, ‘U.S. Attorney’s Office Recovers Millions in PPP Fraud Judgments (7 June 2023),

[17] See 18 U.S.C. § 3571; S. Union Co. v. United States, 567 U.S. 343, 348–51 (2012).

[18] 15 U.S.C. § 78ff(c)(3).

[19] DOJ, Types of Federal Forfeiture, (last updated 17 Feb. 2022).

[20] Id.

[21] Id.

[22] Id.

[23] See, e.g., 18 U.S.C. § 982(a) (in connection with sentencing persons convicted of certain federal offences, including money laundering and other financial crimes, courts shall order criminal forfeiture of property ‘involved in such offense, or any property traceable to such property’); id. § 981(a) (property involved in certain federal offences, including money laundering and other financial crimes, ‘or any property traceable to such property’, is subject to civil forfeiture). Under the civil forfeiture statute, 18 U.S.C. § 981(a)(1)(C), property relating to a ‘specified unlawful activity’ as defined in 18 U.S.C. § 1956(c)(7) is subject to civil forfeiture. Among the ‘specified unlawful activities’ listed in 18 U.S.C. § 1956(c)(7) are racketeering, bribery of a public official, fraud by or against a foreign bank, export control violations and violations of the FCPA. Further, 28 U.S.C. § 2461(c) ‘permits the government to seek criminal forfeiture whenever civil forfeiture is available and the defendant is found guilty of the offense’. United States v. Newman, 659 F.3d 1235, 1239 (9th Cir. 2011).

[24] DOJ, Press Release, ‘United States Reaches Settlement to Recover More Than $49 Million Involving Malaysian Sovereign Wealth Fund’ (6 May 2020),

[25] DOJ, Press Release, ‘FCA US LLC Sentenced in Connection with Conspiracy to Cheat U.S. Emissions Tests’ (1 Aug. 2022),

[26] DOJ, Press Release, ‘United States Obtains Warrant for Seizure of Two Airplanes of Russian Oligarch Roman Abramovich Worth over $400 Million’ (6 June 2022),; DOJ, Press Release, ‘$300 Million Yacht of Sanctioned Russian Oligarch Suleiman Kerimov Seized by Fiji at Request of United States’ (5 May 2022),

[27] 18 U.S.C. § 3663(a)(1)(B)(i).

[28] U.S. Sent’g Comm’n, Guidelines Manual § 8C2.4 (Guidelines Manual),

[29] Id. §§ 8C2.6–8C2.7.

[30] Id. §§ 8C4.1–8C4.11.

[31] Base offence levels are set out in Chapter Two of the Guidelines Manual.

[32] Id. § 8C2.4.

[33] Id. § 8C2.5.

[34] Id. § 8C2.9.

[35] Id. § 8C4.1.

[36] Id. § 8C4.9.

[37] 15 U.S.C. § 77t(d)(2); 15 U.S.C. § 78u(d)(3)(B). Maximum civil penalty amounts are adjusted annually for inflation, as described in 17 C.F.R. § 201.1001. See also SEC, Inflation Adjustments to the Civil Monetary Penalties Administered by the Securities and Exchange Commission (as of 15 Jan. 2023), (last updated 17 Jan. 2023) (SEC Inflation Adjustments). The maximum civil penalty amounts noted above are for violations after 2 November 2015.

[38] SEC v. Baker, 2021 WL 9385893, at *8 (N.D. Ga. 8 Nov. 2021).

[39] Id.

[40] 15 U.S.C. § 78u-1(a)(2).

[41] See, e.g., 12 U.S.C. § 1833a (providing a civil money penalty provision to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 which allows the DOJ to seek civil penalties against persons who violate one of 14 enumerated statutes); 42 U.S.C. § 3614(d)(1)(C) (allowing the DOJ to seek civil penalties for violations of the Fair Housing Act 1968).

[42] See, e.g., Kokesh v. SEC, 581 U.S. 455, 459 (2017) (noting that the disgorgement remedy is intended ‘to deprive . . . defendants of their profits in order to remove any monetary reward for violating securities laws and to protect the investing public by providing an effective deterrent to future violations’); United States v. Rx Depot, Inc., 438 F.3d 1052, 1061 (10th Cir. 2006) (‘Disgorgement, which deprives wrongdoers of their ill-gotten gains, deters violations of the law by making illegal activity unprofitable.’).

[43] William M (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, H.R. 6395, 116th Cong. (2020),

[44] SEC v. Spartan Sec. Grp., Ltd., 620 F. Supp. 3d 1207, 1222–28 (M.D. Fla.2022). The decision is currently on appeal to the Eleventh Circuit. SEC v. Spartan Sec. Grp., Ltd., No. 22-13129 (11th Cir. filed 16 Sept. 2022).

[45] 17 C.F.R. § 201.600(a).

[46] E.g., SEC v. First Jersey Sec., Inc., 101 F.3d 1450, 1476 (2d Cir. 1996).

[47] Id. (citing SEC Rules and Regulations, 60 Fed. Reg. 32738, 32788 (23 June 1995)); see also 17 C.F.R. § 201.600(b). The underpayment rate charged by the Internal Revenue Service is three percentage points above the federal short-term rate and, for purposes of calculating interest on sums disgorged, is compounded quarterly. 26 U.S.C. § 6621(a)(2); 17 C.F.R. § 201.600(b).

[48] SEC v. DiBella, 2008 WL 6965807, at *3 (D. Conn. 18 July 2008); SEC v. GMC Holding Corp., 2009 WL 506872, at *6 (M.D. Fla. 27 Feb. 2009) (‘The time frame for the imposition of prejudgment interest usually begins with the date of the unlawful gain and ends at the entry of judgment.’ (quoting SEC v. Yun, 148 F. Supp. 2d 1287, 1293 (M.D. Fla. 2001)).

[49] SEC v. Savino, 2006 WL 375074, at *18 & n.10 (S.D.N.Y. 16 Feb. 2006) (calculating interest from the first day of the month following each improper trade).

[50] SEC v. United Energy Partners, Inc., 2003 WL 223392, at *2 & n.12 (N.D. Tex. 28 Jan. 2003) (using date of complaint for accrual of prejudgment interest award where dates on which defendant acquired disgorged funds were not clear), aff’d, 88 F. App’x 744 (5th Cir. 2004); GMC Holding Corp., 2009 WL 506872, at *6 (same).

[51] E.g., 29 U.S.C. § 178(a) (granting jurisdiction to district court to enjoin labour strikes during national emergencies).

[52] E.g., United States v. United Mine Workers, 330 U.S. 258 (1947).

[53] 28 U.S.C. § 1651(a); see also DOJ, Civil Resource Manual § 214,

[54] 15 U.S.C. § 77t(b); id. § 78u(d).

[55] Preliminary Injunction as to Defendants Reliable One Resources, Inc. and Quantum Filtration, Inc., SEC v. Reliable One Res., Inc., No. 6:23-cv-00006 (E.D. Tex. 8 Feb. 2023),; SEC, Press Release, ‘SEC Sues Texas Company and Two Executives to Halt $34 Million Scheme’ (14 Feb. 2023),

[56] DOJ, Press Release, ‘Airbus Agrees to Pay over $3.9 Billion in Global Penalties to Resolve Foreign Bribery and ITAR Case’ (31 Jan. 2020),

[57] DOJ, Press Release, ‘Stericycle Agrees to Pay Over $84 Million in Coordinated Foreign Bribery Resolution’ (20 Apr. 2022), (Stericycle Press Release).

[58] DOJ, Press Release, ‘Honeywell UOP to Pay Over $160 Million to Resolve Foreign Bribery Investigations in U.S. and Brazil’ (19 Dec. 2022),

[59] Stericycle Press Release.

[60] DOJ, Press Release, ‘Glencore Entered Guilty Pleas to Foreign Bribery and Market Manipulation Schemes’ (24 May 2022),

[61] Monaco Memorandum at 7–8.

[62] Memorandum, Assistant Attorney General Kenneth A. Polite, Jr., ‘Revised memorandum on Selection of Monitors in Criminal Division Matters’ at 2 (1 Mar. 2023),

[63] 48 C.F.R. §§ 9.406-1(c), 9.407-1(d).

[64] 31 U.S.C. § 3729(a)(1), (3).

[65] Id. § 3729(a)(2).

[66] 31 U.S.C. § 3730(b).

[67] DOJ, Press Release, ‘United States Attorney Rachael S Rollins Hosts Panel for Whistleblower Lawyers’ (27 July 2022),

[68] 31 U.S.C. § 3730(b)(1), (b)(4)(A)–(B).

[69] Id. § 3730(d)(1)–(2).

[70] DOJ, Press Release, ‘False Claims Act Settlements and Judgments Exceed $2 Billion in Fiscal Year 2022’ (7 Feb. 2023),

[71] Id.

[72] Id.

[73] DOJ, Press Release, ‘Government Contractor Agrees to Pay Record $48.5 Million to Resolve Claims Related to Fraudulent Procurement of Small Business Contracts Intended for Service-Disabled Veterans’ (23 Feb. 2022),

[74] See, e.g., DOJ, Press Release, ‘COVID-19 Task Force Nets Florida Duct Cleaning Company; Settles False Claims Act Allegations Relating to Improper Paycheck Protection Program Loan’ (28 Oct. 2021),; DOJ, Press Release, ‘Northern Virginia Company Settles False Claims Act Allegations of Improper Paycheck Protection Program Loan’ (11 Feb. 2022),

[75] DOJ, Press Release, ‘Justice Department Announces Director for COVID-19 Fraud Enforcement’ (10 Mar. 2022),

[76] DOJ, Press Release, ‘Permanent Injunctions and Judgment of Over $1 Million in Civil Penalties Entered in Case of Deceptive Marketing of Purported COVID-19 Treatments’ (3 Aug. 2023),

[77] DOJ, Press Release, ‘United States Obtains Permanent Injunctions and Civil Penalties in Actions against California, Georgia, and Utah Distributors of Essential Oils and Nutritional Supplements’ (3 Mar. 2023),

[78] 15 U.S.C. §§ 78dd-1(a), 78dd-2(a), 78dd-3(a), 78(m).

[79] Id. §§ 78dd-2(g)(1)(A), 78dd-3(e)(1)(A), 78ff(c)(1)(A).

[80] Id. § 78ff(a).

[81] 18 U.S.C. § 3571 (c)(2), (d).

[82] 15 U.S.C. §§ 78ff(c)(1)(B), 78u(d)(3); 17 C.F.R. § 201.1001; SEC Inflation Adjustments.

[83] 15 U.S.C. §§ 78dd-2(g)(2), 78dd-3(e)(2); 18 U.S.C. § 3571 (b)(2)–(3), (d).

[84] 15 U.S.C. § 78ff(a).

[85] Id. §§ 78ff(c)(2)(B), 78u(d)(3); 17 C.F.R. § 201.1001; SEC Inflation Adjustments.

[86] Id.

[87] 15 U.S.C. § 78ff(c)(3).

[88] Id. §§ 78dd-2(d), 78dd-3(d).

[89] Id. § 78u(d)(1).

[90] SEC, Press Release, ‘Credit Suisse to Pay Nearly $475 Million to US and UK Authorities to Resolve Charges in Connection with Mozambican Bond Offerings’ (19 Oct. 2021),

[91] SEC, Press Release, ‘ABB Settles SEC Charges That It Engaged in Bribery Scheme in South Africa’ (3 Dec. 2022),; DOJ, Press Release, ‘ABB Agrees to Pay Over $315 Million to Resolve Coordinated Global Foreign Bribery Case’ (2 Dec. 2022),

[92] DOJ, ‘Assistant Attorney General Kenneth A. Polite, Jr. Delivers Remarks on Revisions to the Criminal Division’s Corporate Enforcement Policy (17 Jan. 2023),

[93] Id.

[94] Id.

[95] Id.

[96] 18 U.S.C. §§ 1956–1957.

[97] Id.

[98] DOJ, Press Release, ‘Former Goldman Sachs Investment Banker Convicted in Massive Bribery and Money Laundering Scheme’ (22 Apr. 2022),

[99] 31 U.S.C. § 5321(f).

[100] Id., §§ 5321(g) & 5322(e).

[101] See, e.g., Office of the Governor of California, Executive Order N-9-22, (4 May 2022),; N.Y. State Attorney General, Press Release, ‘Attorney General James Proposes Nation-Leading Regulations on Cryptocurrency Industry’ (5 May 2023),

[102] White House, Fact Sheet: White House Releases First-Ever Comprehensive Framework for Responsible Development of Digital Assets (16 Sept. 2022),

[104] DOJ, Press Release, ‘Two Arrested for Alleged Conspiracy to Launder $4.5 Billion in Stolen Cryptocurrency’ (8 Feb. 2022),

[105] SEC, Press Release, ‘SEC Charges Samuel Bankman-Fried with Defrauding Investors in Crypto Asset Trading Platform FTX’ (13 Dec. 2022),

[106] David Yaffe-Bellany, ‘Government Cracks Down on Crypto Industry with Flurry of Actions’, The New York Times (18 Feb. 2023),

[107] SEC, Press Release, ‘Kraken to Discontinue Unregistered Offer and Sale of Crypto Asset Staking-As-A-Service Program and Pay $30 Million to Settle SEC Charges’ (9 Feb. 2023),

[108] SEC, Press Release, ‘SEC Charges NBA Hall of Famer Paul Pierce for Unlawfully Touting and Making Misleading Statements about Crypto Security’ (17 Feb. 2023),

[109] SEC, Press Release, ‘SEC Files Emergency Action Against Miami Investment Adviser BKCoin and Principal Kevin Kang for Orchestrating $100 Million Crypto Fraud Scheme’ (6 Mar. 2023),

[110] DOJ, Press Release, ‘Justice Department Seizes Over $112M in Funds Linked to Cryptocurrency Investment Schemes’ (3 Apr. 2023),

[111] SEC, Press Release, ‘SEC Charges Hex Founder Richard Heart with Misappropriating Millions of Dollars of Investor Funds from Unregistered Crypto Asset Securities Offerings that Raised more than $1 Billion’ (31 July 2023),

[112] Dep’t of State, Press Release, ‘United States Imposes Additional Sanctions and Export Controls on Russia in Coordination with International Partners’ (19 May 2023), (imposing sanctions on more than 200 entities, individuals, vessels and aircraft); Dep’t of State, Fact Sheet, ‘Imposing Additional Sanctions on Those Supporting Russia’s War Against Ukraine’ (20 July 2023),

[113] Dep’t of the Treasury, Press Release, ‘Treasury Targets Iranian-Backed Hizballah Officials for Exploiting Lebanon’s Political and Financial System’ (9 July 2019),

[114] DOJ, Press Release, ‘Russian Elites, Proxies, and Oligarchs Task Force Joint Statement’ (29 June 2022),; DOJ, Press Release, ‘Attorney General Merrick B. Garland Announces Launch of Task Force KleptoCapture’ (2 Mar. 2022), opa/pr/attorney-general-merrick-b-garland-announces-launch-task-force-kleptocapture; DOJ, Press Release, ‘United States Obtains Warrant for Seizure of Two Airplanes of Russian Oligarch Roman Abramovich Worth Over $400 Million’ (6 June 2022),; DOJ, Press Release, ‘$90 Million Yacht of Sanctioned Russian Oligarch Viktor Vekselberg Seized by Spain at Request of United States’ (4 Apr. 2022),

[115] DOJ, Press Release, ‘Task Force KleptoCapture Unseals Two Cases Charging Evasion of Russian Economic Countermeasures’ (24 Feb. 2023),

[118] See, e.g., 50 U.S.C. § 1705(c).

[119] 18 U.S.C. § 3571.

[120] 18 U.S.C. § 981.

[121] 31 C.F.R. § 501.701; Continuation of the Exercise of Certain Authorities Under the Trading With the Enemy Act, Presidential Determination No. 2022-22 (2 Sept. 2022) (extending the expiration of Cuba sanctions pursuant to the Trading with the Enemy Act until September 2023),

[122] 50 U.S.C. § 1705; 31 C.F.R. § 501; Christopher A Casey, Ian F Fergusson, Dianne E Rennack and Jennifer K Elsea, Cong. Rsch. Serv., R45618, The International Emergency Economic Powers Act: Origins, Evolution, and Use (2019),

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