Blackstone and BlackRock Disclose SEC Inquiries in WhatsApp Probe

Blackstone and BlackRock Are Being Investigated in SEC’s Texting Sweep

Blackstone Inc. and BlackRock Inc. are among the money managers facing scrutiny in a US regulatory crackdown on Wall Streeters’ once-prolific use of unauthorized messaging platforms.

Blackstone was contacted by the Securities and Exchange Commission in October for information on retention of electronic business communications and text messages, the firm said in a filing on Friday.

BlackRock said in a separate filing on Friday that it is responding to requests from the SEC in connection with an industry-wide investigation related to certain types of electronic communications.

Both firms said they are cooperating with the SEC’s inquiries.

SEC’s ‘Hammer’ Approach to Custody Revamp Worries Money Managers

Were the rule adopted as proposed, money managers would have to re-evaluate many custodial agreements. Investment firms would also have to wrestle with additional complexities around whether their arrangements comply with the expanded rule—something that can already be a sensitive judgment call.

“It’s not a simple matter of more paperwork,” Avellaneda said.

As proposed, the rule could have a “hugely detrimental impact” on firms with limited resources, Bernstein said.

Almost 90% of the investment advisers that are registered with the SEC have 50 or fewer employees and one or two offices, according to IAA statistics.

And although crypto’s expansion is helping drive the proposal, there’s no indication of widespread problems with safeguarding traditional funds and securities, the group said.

“We don’t see the problem that requires this kind of hammer approach, as opposed to a scalpel approach,” Bernstein said.

Sam Bankman-Fried Cosplayed as a Genius. The Facts Reveal His Incredible Stupidity

All of this implies two ways Bankman-Fried may have been thinking about his long-term game plan. He may have simply thought he could do nothing but win, and that all the money he was stealing would magically regenerate somehow through his deranged financial and influence-peddling machinations. This species of stupidity would have flowed from Bankman-Fried’s apparently incurable case of elite delusion.

A more grounded theory of mind might suggest Bankman-Fried thought he could simply buy off politicians by funneling enough illegal, stolen donations to them. This is stupid in a more basic and embarrassing way: However cynical you may be about the U.S. justice system, relying on political connections for legal protection is a fairly poor strategy. Enron CEO Kenneth Lay was personal buddies with President George W. Bush. Elizabeth Holmes had Henry Kissinger on her board. They were both convicted nonetheless.

SEC’s Coinbase Insider Trading Case Is ‘Backdoor Rulemaking,’ Trade Association’s CEO SaysThe Chamber of Digital Commerce is trying to stop a case brought by the U.S. Securities and Exchange Commission (SEC) against a former Coinbase (COIN) employee accused of insider trading. The organization’s founder, Perianne Boring, said if the SEC succeeds, many digital assets could be defined as securities.

“We see this action as seriously concerning and would have significant ramifications for the entire digital asset industry,” Boring said Friday on CoinDesk TV’s “First Mover” about the group’s “friend of the court” (amicus) brief in the SEC action before the U.S. District Court in Washington, D.C.

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Nonetheless, “a ruling that embraces the SEC’s position and endorses its tactics could have negative implications for the digital asset ecosystem,” Boring said.

She added the only regulatory guidance provided by the SEC has been in “the form of nonbinding speeches and statements that have been conflicting from administration to administration.”

Kraken Settles SEC Charge That Its SAAS Model Was an Illegal Securities Offering

In addition to recent settlements involving crypto asset lenders, the Kraken settlement is an example of the SEC pursuing enforcement actions against “centralized crypto companies” and claiming that existing securities laws apply to crypto-related financial products. Following the Kraken settlement, SEC Chair Gary Gensler gave an interview on CNBC in which he asserted that the settlement “should put everyone on notice in this marketplace.” He also released a YouTube video stating “[W]hether they call their services ‘lending,’ ‘earn,’ ‘APY’ or ‘staking,’ that relationship should come with the protections of federal securities laws.”

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In his CNBC interview, Chair Gensler said that SAAS providers must make full disclosure to the investing public. He has never explained, however, how the SEC will enable that disclosure to occur. The SEC has permitted only a couple of crypto asset products to be registered under the securities laws — and none of them involved loan products or SAAS — and those offerings happened before Mr. Gensler was installed to lead the SEC. The crypto industry is left being told that it must register and make disclosure while being afforded no realistic opportunity to register. Small wonder, then, that so much of the industry has migrated off-shore. A solution is needed in Washington, D.C. to keep the technology and the talent here at home.

Kodak – BloombergIn general, it is the position of this newsletter (though it is not legal advice) that:

--You should not do insider trading.

--If you must do insider trading, you should not text your accomplice about it.

--If you must do crimes and text your accomplices about them, you should not use cutesy codenames for your crimes. You should use boring codenames for your crimes. If you are paying bribes, don’t call them “chickens”! Call them “consulting fees”! That’s ambiguous! If you call them “chickens,” everyone knows that (1) they are not chickens but (2) they are crimes.

Similarly if you worked at a chemical company that was helping out with Eastman Kodak Co.’s random pivot from being a blockchain company (?) in the blockchain boom to being a hydroxychloroquine company (?) in the pandemic, and you learned of that pivot and an accompanying huge government loan to Kodak, ?????(1) you should not have insider traded on that information, (2) you certainly shouldn’t have texted your cousin with that information so that he could insider trade on it, and (3) ugh come on with this: