"Big Law" Rides Crypto Implosion to $600 Million in Fees (and Counting)

Crypto Implosions Spark Big Law With $600 Million Haul

Big Law’s bill for major crypto bankruptcies has so far run upwards of $600 million, and there’s no end in sight.

Major law firms to date have requested more than $567 million in six major crypto bankruptcies. The true figure is likely north of $600 million, since firms working on three of the six cases haven’t filed their bills with courts for some recent months.

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The biggest winner will likely be Sullivan & Cromwell, which is working on only one crypto case: Sam Bankman-Fried’s doomed crypto exchange FTX Trading Ltd. The firm has billed more than $153 million from November 2022 through last November, according to court documents.

FTX Bankruptcy Judge Says New Probe Should Be Limited and Fast

A federal judge moved to limit the cost and length of a new outside investigation of FTX Trading, the fraud-tainted crypto firm, saying its insolvency case should not be disrupted by another multimillion-dollar probe.

US Bankruptcy Judge John Dorsey sided with lawyers for FTX and its creditors, who argued that the new investigation ordered by an appellate court should be short and limited in scope. Earlier this month, a federal appeals court in Philadelphia ordered the appointment of an examiner for the Chapter 11 case, but left the details of any investigation up to Dorsey.

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Dorsey said the examiner should review the various investigations into FTX done by the company’s restructuring professionals, as well as any outside probes by regulators and prosecutors. He also said the examiner should review any potential conflicts of interest involving FTX lawyers. The entire process should take no more than 45 days and conclude with a report by the examiner summarizing the probes, he added.

Pastor Got His Crypto Scam Audited

Whatever. But for some reason they decided to go to a crypto auditing firm called Hacken, whose website tells me that they have done smart contract audits for crypto things including Binance. “Defendants touted the safety of INDXcoin and the KWE by telling investors that the coin and the exchange had undergone a rigorous audit.” How’d the audit go?

“The auditor, Hacken, told Defendants their products’ ‘security score”’was zero out of ten. Additionally, wrote Hacken, ‘[c]onsidering all metrics, the total score of the report is 0 out of 10.’” …

Quiet ESG Task Force Still Digging for Fraud, SEC Official Says

SEC enforcement lawyers still are looking for securities fraud tied to environmental, social and governance issues as the agency’s ESG Task Force approaches its third anniversary, a senior commission official said Wednesday.

The Securities and Exchange Commission task force was designed as a “clearinghouse of information” without staff focused solely on bringing ESG cases when it launched in March 2021, SEC Enforcement Division Director Gurbir Grewal said. He was responding to a question at a Northwestern University securities conference about the status of the group, which the SEC last directly tied to a case against Deutsche Bank AG in September …

What’s Uniting the SEC’s Crypto Cases

Over the past week, we’ve heard from two different judges question lawyers with the SEC and crypto exchanges (Coinbase and Binance) about whether the federal agency has any sort of case against either crypto trading platform. Last week’s newsletter focused on the hearings held that week (of course) but this week’s rescheduled hearing in the SEC’s case against Binance also had some interesting comments from District Judge Amy Berman Jackson.

“Where’s the SEC been? Does that matter … why is it that if they’re trying to achieve legislation, is that some suggestion there’s something missing in the statute to cover this? Why are we doing this on a coin-by-coin, case-by-case, judge-by-judge litigation which depends on the … vagaries of the individual districts … as opposed to issuing a reg that tells everybody ‘this is it?'” she asked.

British billionaire Joe Lewis pleads guilty to insider trading

British billionaire Joseph Lewis pleaded guilty Wednesday in New York federal court to securities fraud related to insider trading.

Lewis’ company, Broad Bay Ltd., also pleaded guilty in the same proceeding to participating in a scheme to hide his ownership of shares of a pharmaceutical company by making false filings and misleading financial statements.

Broad Bay will pay $50 million in penalties as part of its plea.

“Lewis abused inside information he gained through his access to corporate boardrooms to tip off his friends, employees, and romantic interests,” said Manhattan U.S. Attorney Damian Williams, whose office prosecuted the case.

“Now, he will pay the price with a federal conviction, the prospect of time in prison, and the largest financial penalty for insider trading in a decade.”

Hewlett Packard Enterprise tells SEC it was breached by Russia’s ‘Cozy Bear’ hackers

Hackers with suspected ties to the Russian government gained access to the technology manufacturer Hewlett Packard Enterprise Co.’s (HPE) cloud-based email environment, the company said Wednesday.

In a filing with SEC regulators on Wednesday afternoon, HPE said it was notified on December 12 that hackers connected to Cozy Bear, also known as Midnight Blizzard, had breached its network and spent months exfiltrating data. The company did not respond to requests for comment about who notified them of the incident.

“The Company, with assistance from external cybersecurity experts, immediately activated our response process to investigate, contain, and remediate the incident, eradicating the activity,” the company explained.

“Based on our investigation, we now believe that the threat actor accessed and exfiltrated data beginning in May 2023 from a small percentage of HPE mailboxes belonging to individuals in our cybersecurity, go-to-market, business segments, and other functions.”