Katrina Paglia believes many SEC lawsuits could quietly fade away under new SEC leadership. Meanwhile, the SEC repaid BitClave ICO investors $4.6 million as part of a settlement, and the FTX estate updated its timelines for creditor reimbursements. Legal tensions are also on the rise between the artist behind the "Just a Chill Guy" meme and the creators of the Just a chill guy (CHILLGUY) meme coin after he threatened legal action against the project for the unauthorized use of his artwork.
Gary Gensler’s Exit Sparks Hope for Lawsuit Settlements
The crypto industry may see a big shift in its legal landscape after the announcement that Securities and Exchange Commission (SEC) Chair Gary Gensler will step down on Jan. 20, 2025. According to Pantera’s Chief Legal Officer, Katrina Paglia, many securities lawsuits against crypto companies could “quietly go away” once Gensler departs.
At the North American Blockchain Summit on Nov. 21, Paglia suggested that the SEC might opt for settlements in ongoing cases rather than pursuing further litigation. Paglia shared that while it is unlikely the SEC will dismiss its claims outright, some cases could conclude with settlements where no party neither admits nor denies the allegations. Paglia believes that these outcomes will benefit all of the parties involved.
The SEC actively pursued aggressive enforcement actions against several high-profile crypto firms under Gensler’s leadership, including Ripple, Coinbase, Binance, Kraken, Uniswap, OpenSea, Consensys, Crypto.com, and Robinhood. Paglia now hopes that the regulatory approach might become a lot less combative in the near future. She even predicted that some Wells notices, which are formal warnings of potential legal action from the SEC, might also be quietly withdrawn as enforcement priorities change.
Adding to the optimism, Paglia mentioned rumors that SEC Commissioner Hester Peirce could temporarily take over crypto-related matters in the agency until a new chair is appointed. Peirce is well known for her more crypto-friendly stance, and could potentially influence the issuance of no-action letters.
Paglia concluded her talk by stating that she believes the regulatory tone could soften as early as January or February as some of the litigation pressures that have burdened the industry eases. The potential pivot away from Gensler’s stringent regulatory approach is seen as a very welcomed development by many in the crypto community, and many people now hope for a more constructive regulatory environment moving forward.
SEC Repays BitClave ICO Participants
The SEC recently distributed $4.6 million in reparations to investors who participated in the 2017 initial coin offering (ICO) of Ethereum-based search engine BitClave. The payments were announced on Nov. 20, and are part of a settlement BitClave agreed to in 2020 after the SEC charged the company for failing to register its ICO as a securities offering.
According to the SEC, the funds were sent through the BitClave Fair Fund after a notice and claims process. The agency stated that more than 9,500 investors, who collectively contributed $25.5 million to BitClave’s ICO, are now receiving their share of the settlement. The 2020 agreement required BitClave to return the full amount that was raised from its ICO and pay an additional $4 million in penalties, without admitting to any wrongdoing.
BitClave’s Consumer Activity Token (CAT) was launched in 2017, and promised potential value appreciation in its white paper. The SEC argued that the token constituted a securities offering due to claims that the token's value would increase as more service providers joined the platform. Alongside financial penalties, BitClave also agreed to burn 1 billion uncirculated CAT tokens and request their removal from cryptocurrency exchanges.
This happened during the SEC's broader crackdown on the crypto industry under President Joe Biden’s administration, In fact, more than 100 regulatory actions were pursued against various companies. However, the regulatory environment could soon shift as President-elect Donald Trump wants to position the United States as a global leader in cryptocurrency. Trump has also proposed the creation of a new White House post that will be dedicated to cryptocurrency policy.
FTX Estate Updates Reimbursement Timeline
Meanwhile, the FTX bankruptcy estate announced updates to its timeline for reimbursing creditors and former customers. The process is set to finalize in January of 2025. Initial payouts are expected to start in March of 2025.
The announcement was made on Nov. 21 and revealed plans for reimbursement arrangements with distribution agents who will manage the payout process and oversee a customer portal beginning in December. According to the interim CEO of FTX, John J. Ray III, the estate is still very committed to returning proceeds to creditors and customers as quickly as possible.
Despite a U.S. judge approving FTX’s reorganization plan in October, some creditors were not completely satisfied. A group of creditors that was led by Sunil Kavuri criticized the payout calculations, which are based on digital asset prices from the petition date. At this time, values were significantly lower. For instance, Bitcoin was trading at around $16,000 at that time, compared to its current higher value.
To maximize recoveries, the FTX bankruptcy estate launched a series of lawsuits targeting various entities. In October, it sued KuCoin to recover $50 million in allegedly locked assets and followed with a November complaint against Crypto.com to reclaim $11 million. Additionally, on Nov. 8, the estate filed a lawsuit against Anthony Scaramucci and SkyBridge Capital to recoup $100 million linked to sponsorship and investment deals with former FTX CEO Sam Bankman-Fried. Binance and its founder, Changpeng Zhao, are also facing legal action, with the FTX estate seeking $1.8 billion in alleged fraudulent transfers made before FTX’s collapse in 2022.
Chill Guy Creator Threatens Legal Action Against Meme Coin
In other legal news, the creator of the viral “Just a Chill Guy” meme threatened legal action against meme coins using his artwork without permission. The meme coin named Just a Chill Guy (CHILLGUY) was launched on the Solana network on Nov. 15 and quickly became popular. The token reached a market capitalization of $580 million at its peak. Now, the token trades at close to $0.40, with a market cap of around $400 million.
The artist, known as “PhillipBankss” on X, announced on Nov. 21 that he copyrighted the Chill Guy character and plans to issue takedown notices against unauthorized for-profit uses, including tokens and merchandise. While he stated that he does not mind brands capitalizing on the meme’s popularity, he is very against the use of his artwork in crypto-related projects without his consent. PhillipBankss also clarified on Nov. 18 that he did not endorse or approve the use of his art in crypto ventures.
The crypto community has mixed reactions toward the artist’s stance. Some believe legal action against a decentralized and anonymously launched token is almost impossible because blockchain-based projects are effectively immortalized. Others suggested the artist should capitalize on the meme’s success by creating non-fungible tokens (NFTs) or exploring other monetization strategies.
However, many also defended the artist’s decision due to his right to protect his intellectual property. Despite the controversy, the Chill Guy meme coin is still active.
