The U.S. legal landscape in 2023 sent a powerful message to the cryptocurrency world: the era of light-touch regulation is ending, and regulatory enforcement is accelerating. While this may raise concerns in the short term, it also signals that the crypto industry is growing up—and growing pains are part of the process.
As the following legal developments show, companies and founders in the space need to stay alert, informed, and proactive about compliance. This blog highlights three major U.S. legal cases in 2023 that carry significant implications—and lessons—for crypto companies and fintech businesses in general.
1. SEC Lawsuit Against Binance and CEO Changpeng Zhao
In June 2023, the U.S. Securities and Exchange Commission (SEC) filed 13 charges against Binance, one of the world's leading cryptocurrency exchanges, and its CEO, Changpeng Zhao. The allegations included operating unregistered exchanges, broker-dealers, and clearing agencies; misrepresenting trading controls; and the unregistered offer and sale of securities. The SEC also accused Binance of misleading investors about its ability to detect market manipulation and of misusing customer funds.
Key Takeaways:
- Regulatory Expectations Are Increasing: U.S. authorities are expanding their interpretation of securities laws and applying them to a wide range of crypto-related activities.
- Operating in the U.S. Comes with Legal Risks: Even global platforms may face legal challenges if they serve U.S.-based users or interact with U.S. markets, regardless of where the company is headquartered.
- Rules are still Evolving: The Binance case reflects broader uncertainty around how digital assets are classified and regulated in the U.S.—a situation that creates significant compliance challenges for crypto businesses.
If your fintech startup engages users across jurisdictions, understanding local restrictions is critical. For example, cryptocurrency transactions, offerings, and trading became illegal in China in 2021. Check out our blog for details: Understanding China’s 2021 Crypto Ban: What Cross-Border Fintechs Need to Know.
2. Arrest of Roman Storm, Co-Founder of Tornado Cash
In August 2023, Roman Storm, co-founder of the cryptocurrency mixer Tornado Cash, was arrested and charged with conspiracy to commit money laundering, sanctions violations, and operating an unlicensed money transmitting business. Authorities alleged that Tornado Cash facilitated the laundering of over $1 billion in criminal proceeds, including funds for North Korea's Lazarus Group. Despite claims that the platform was designed for financial privacy, the lack of controls to prevent misuse led to legal action.
Key Takeaways:
The Tornado Cash case highlights the delicate balance between privacy and compliance. While financial privacy is a core value in the crypto space, platforms need to build in safeguards to prevent misuse. Developers may face legal accountability if their tools are knowingly or negligently used for illicit purposes—especially if no preventative measures are in place. It also serves as a reminder that sanctions laws can apply even indirectly, and failing to address those risks can lead to serious legal consequences.
3. Conviction of Sam Bankman-Fried, Founder of FTX
In November 2023, Sam Bankman-Fried, founder of the once-prominent cryptocurrency exchange FTX, was convicted on seven criminal charges—including wire fraud, securities fraud, and money laundering. The verdict followed months of high-profile testimony and shocking revelations that he had misappropriated approximately $8 billion in customer assets, ultimately leading to FTX’s collapse and bankruptcy.
The trial became a defining moment for the crypto industry. It revealed just how quickly things can unravel in the absence of proper financial controls, ethical leadership, and regulatory oversight.
Key Takeaways:
The FTX saga is a reminder that ethical leadership isn't optional. Using customer funds for unauthorized purposes not only breaks the law—it destroys trust and damages the broader credibility of the crypto space. Startups and exchanges must prioritize strong financial controls and clear internal governance to prevent similar disasters.
Transparency with customers and investors is equally essential. Keeping stakeholders in the dark about how funds are used or how decisions are made only increases legal and reputational risks.
And for crypto investors, there’s an important lesson too: trade on platforms that are properly registered in your local jurisdiction. Doing so can offer better safeguards, oversight, and recourse in case something goes wrong.
If you're based in Canada, check out our earlier blog on the country's regulatory approach and how it supports investor protection through registered platforms:
Canada’s Legal Stand on Cryptocurrency: A 2022 Snapshot
What This Means for Crypto Startups
The legal actions of 2023 are a wake-up call. Regulators are watching closely, and enforcement is no longer theoretical—it's happening. For crypto startups, this means that compliance can’t be an afterthought. It needs to be part of the foundation.
Building strong internal controls from the start is essential. Whether it’s how customer funds are handled or how decisions are documented, having robust systems in place helps prevent missteps—and demonstrates responsibility to both users and regulators.
Before entering new markets, founders should consult legal experts who understand local laws and international implications. Regulatory frameworks vary widely across jurisdictions, and overlooking those differences can lead to serious consequences.
It’s also crucial to stay on top of evolving rules. The crypto legal landscape is changing fast, and companies that keep informed—and adapt quickly—will be better positioned to succeed.
Lastly, transparency builds trust. Being open and accountable to users, investors, and other stakeholders isn’t just good governance—it’s a competitive advantage.
Startups that ignore these realities may face legal trouble. Those who prepare, engage with the rules, and lead with integrity are far more likely to earn lasting trust—and grow.
Looking Ahead: Navigating Regulatory Uncertainties
The crypto industry is still young, but change is coming fast. More structured and consistent regulations are expected in the years ahead.
Companies that stay vigilant, adapt to new frameworks, and treat compliance as a competitive advantage will be better positioned for long-term success.
I remain hopeful. Regulation doesn’t have to stifle innovation—it can help legitimize and stabilize the space. The future of digital assets depends on how the industry responds today.