Bloomberg Law's Deeeeep Dive into the SEC Whistleblower Program

SEC Enriches Fraudsters, Lawyers as Secrecy Shrouds Tips Program

An SEC whistleblower program designed to prevent another Bernie Madoff-type scandal often ignores its own rules, shields much of its work from the public, and has been a financial boon for law firms that hired former agency officials, a Bloomberg Law investigation has found.

Written into the Dodd-Frank financial reform law of 2010 and championed by Sens. Elizabeth Warren (D-Mass) and Chuck Grassley (R-Iowa), it was created to make sure tips about financial wrongdoing aren’t ignored as they were before Madoff’s $64.8 billion Ponzi scheme.

By that measure, it’s been successful: the Securities and Exchange Commission has gotten roughly 60,000 tips since 2012, and paid out more than $1.3 billion in awards.

But the review of all 561 SEC final orders revealed a program operating in secrecy far beyond its legislative mandate to protect whistleblowers’ identities. The agency won’t disclose names of companies involved in fraud, hasn’t identified all of the law firms that received money for their clients, and won’t even report the office’s annual budget.

Sign on the Dotted Line: Compliance Certifications by CEOs and CCOs A Likely Requirement

As it continues its focus not just on enforcement, but on compliance, members of the U.S. Department of Justice have foreshadowed a sea change for Chief Executive Officers and Chief Compliance Officers in corporate resolutions: namely, individual certifications as to the design and efficacy of a company’s corporate compliance program.

‘I Don’t Believe in Any Kind of “Gotcha” Regulation,’ CFTC Commissioner Says on SEC Insider Trading Case

Commodity Futures Trading Commission (CFTC) member Caroline D. Pham told CoinDesk TV Wednesday her agency should have had “a seat at the table” before the Securities and Exchange Commission brought insider trading allegations against a former manager at crypto exchange Coinbase (COIN).

Pham, who was sworn in as a commissioner in April, said the CFTC also has insider trading enforcement authority.

“I believe that anything that might impact or implicate the CFTC’s jurisdiction, it’s our job to go in there to enforce the law, and to make sure that we’re prosecuting wrongdoing,” Pham said on CoinDesk TV’s “First Mover” show. “If the CFTC is involved in some way, I think we have to have a seat at the table; or if our jurisdiction [is] involved, we have to have a seat at the table.”

SEC Charges Former CFO and Coo with Falsifying Books and Records and Circumventing Internal Controls to Misappropriate Funds

The Securities and Exchange Commission today announced it was charging Frank Okunak, the former Chief Financial Officer and Chief Operating Officer of a subsidiary of a public global advertising and marketing company, with falsifying books and records and circumventing accounting controls to misappropriate more than $16 million for his benefit.

The SEC’s complaint, filed in federal court in Manhattan, alleges that Okunak directed the creation of, and in some cases approved for processing and payment, falsified purchase orders and invoices that purported to relate to services being performed for his employer, but in reality did not. As described in the complaint, the purchase orders and invoices were instead used to direct funds to companies in which Okunak had an interest, companies performing services for companies in which he had an interest, and to pay for his personal expenses. For example, Okunak allegedly used falsified purchase orders and invoices to direct $2.5 million to a company he owned, and directed $90,000 to a sports complex operator to pay for his suite license fee. According to the complaint, Okunak circumvented internal controls by submitting false certifications that failed to disclose his conflict of interest and his knowledge of improper payments. We allege that Okunak also circumvented controls related to the onboarding and payment of vendors.

UK Says Crypto, NFTs Should Get Own Laws to Aid Ownership Claims – Bloomberg

The UK needs to reform legislation to specifically account for cryptocurrencies and nonfungible tokens, the country’s Law Commission said, arguing that existing laws aren’t robust enough to govern the fledgling sector.

Laws regarding personal property should be changed to include a distinct category for so-called “data objects”, which would encompass intangible, and sometimes unique, assets like crypto tokens, the commission said. The organization, an independent agency, makes recommendations to the government.

A Law Firm Is Seeking Disgruntled Bored Ape Yacht Club Investors for a Class Action Suit Alleging Yuga Labs Overpromised on Returns

The New York law firm Scott and Scott is looking to drum up plaintiffs to file a class action suit against Yuga Labs, alleging that the NFT juggernaut tapped celebrities to talk up the value of their tokens and lure in “unsuspecting investors” with the promise of high returns.

A slew of stars, including Gwyneth Paltrow, Eminem, and Madonna, acquired Bored Ape Yacht Club (BAYC) NFTs and promoted them on social media in the past year. In January, when Jimmy Fallon and Paris Hilton flouted their cartoon apes on national TV, it felt to many like a bad infomercial. Many of the new celebrity Ape collectors are with Creative Artists Agency (CAA), which owns a chunk of OpenSea, a popular marketplace for NFTs. (Madonna’s manager, Guy Oseary, represents Yuga Labs and is also a Yuga Labs investor.)

If it is to be successful, Scott and Scott will need to prove that BAYC NFTs are securities like stocks, bonds, or options. Legally, anyone issuing a security has to register it with the Securities and Exchange Commission to prevent fraud.