The number of convictions for crypto-related crimes has surged in recent years.
Crypto criminals often receive significantly harsher sentences compared to traditional financial offenders.
The majority of crypto-related convictions involve fraud and money laundering, which is also common in other markets.
The United States has led the charge in imposing harsh penalties.
Critics argue that crypto criminals are being treated unfairly compared to traditional financial offenders.
Recently, the crypto industry has witnessed a surge in criminal prosecutions.
And no, this isn’t related to Sam Bankman-Fried or even Changpeng Zhao alone. So far, individuals have been sentenced to a collective 272 years in jail over the last decade alone.
This surge in legal action against high-profile crypto figures has sparked debate about fairness.
Said debate is especially heated when compared to crime fighting in traditional finance.
The stark difference in regulatory scrutiny has therefore led to the question:
Are crypto criminals facing unfairly harsh penalties?
Social Capital Markets released a recent report, detailing the recent trend of jailings for crypto crimes.
The report notes that convictions have jumped by 267% between 2019 and 2023 alone.
This shows a more aggressive approach to tackling illegal activities within the crypto space.
A surge in convictions despite crashes in crime count
The chart above shows a steady rise in conviction count between 2018 and 2024, despite fluctuations in the number of crimes committed.
One of the most notable cases of this is that of Ross Ulbricht. For context, Ulbricht was the founder of the notorious Silk Road darknet marketplace.
The Silk Road founder was sentenced to double life imprisonment plus 40 years in 2015.
This set the stage for what many perceive as a pattern of iron-handed punishments for crypto offenders.
His sentence remains the most severe to date with more than 10% of US crypto convicts receiving sentences of over 20 years.
It is interesting to note that the longest prison sentences for crypto crimes are mostly related to fraud and money laundering.
This makeup about 60% of all cases, with the average sentence for the top 10 sitting at more than 20 years.
For example, Karl Sebastian Greenwood (the co-founder of the infamous OneCoin Ponzi scheme) was sentenced to 20 years in prison.
This makes sense considering his role in what is considered one of the largest scams in crypto history.
However, the 20-year sentence is still regarded as exceptionally harsh in comparison.
Crypto crimes and sentences passed.
Things get even crazier from here.
Social Capital Markets notes that a staggering 63% of these convictions have occurred within the last three years.
The crypto market has grown considerably during this time—which explains the increasing attention from authorities who seek to curb illegal activities.
Unsurprisingly, the United States has led the charge in imposing these harsh penalties.
The country’s famously harsh stance has set a global standard for cracking down on crypto under agencies like the DOJ, FBI, CFTC and the SEC.
While this approach points to crypto being held to the same high standards as traditional financial systems, it has also fueled controversy.
This is because many within the crypto community now argue that these punishments are unfair compared to how traditional financial criminals are treated. Consider the 2008 Financial Crisis for example.
Wikipedia describes this event as "the Great Recession" which began in 2007 and lasted until 2009.
This event caused several major banks and investment firms (like Lehman Brothers) to collapse.
The crisis spread from the U.S. to other countries and millions of people lost their jobs.
Eventually, governments around the world had to inject massive amounts of money into the financial system to prevent a worldwide crash.
Interestingly the executives responsible for this catastrophe managed to avoid jail time by paying settlements and fines.
This has led to accusations of bias in the legal system.
There have been several claims that crypto figures are being made an example of while traditional offenders escape harsher penalties.
This difference in sentencing between crypto criminals and traditional financial offenders is no minor issue.
For example, Sam Bankman-Fried (the disgraced founder of the collapsed FTX exchange) received a severe sentence for his fraudulent activities.
Most of his crimes are related to misusing client funds: A fact which is now disputed by his lawyers because FTX allegedly has the assets to pay back according to Bloomberg.
Bankman-Fried’s punishment is still largely framed within the context of his crypto-involvement.
Critics have also pointed out that most of the financial cases (like Bankman-Fried’s) are no different from traditional finance crimes.
They are unrelated to blockchain technology and only happen to involve cryptocurrencies.
Overall Social Capital Markets suggests that the harsh sentences being handed down could be an effort to set a strong example.
A signal of sorts to the rest of the world, that illegal activities within crypto will not be tolerated.
At the same time, this could be seen as a sign that the industry is gradually being integrated into the broader regulatory framework that governs traditional finance.
In conclusion, the challenge lies in finding a balance between discouraging criminal activity and encouraging innovation within the space.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.