Court Orders Double Whammy for Theranos' Holmes: Prison and $452 Million in Restitution

Elizabeth Holmes loses bid to avoid prison, must pay $452 million

Disgraced Theranos CEO Elizabeth Holmes appears to be soon bound for prison after an appeals court Tuesday rejected her bid to remain free while she tries to overturn her conviction in a blood-testing hoax that brought her fleeting fame and fortune.

In another ruling issued late Tuesday, U.S. District Judge Edward Davila ordered Holmes to pay $452 million in restitution to the victims of her crimes. Holmes is being held jointly liable for that amount with her former lover and top Theranos lieutenant, Ramesh “Sunny” Balwani, who is already in prison after being convicted on a broader range of felonies in a separate trial.

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Davila will now set a new date for Holmes, 39, to leave her current home in the San Diego area and report to prison.

SEC Can’t Seal Docs Tied to Hinman’s Ether Speech, Judge in Ripple Suit Rules

A federal judge ruled that the U.S. Securities and Exchange Commission cannot seal documents tied to former official William Hinman’s 2018 speech on crypto and securities to Ripple in the regulator’s ongoing lawsuit against the company closely associated with the XRP cryptocurrency.

District Judge Analisa Torres, of the U.S. District Court for the Southern District of New York, ruled that the documents tied to that speech, in which the former SEC Director of Corporation Finance stated that in his view, ether was not a security, cannot be sealed in a court order. A magistrate judge in the same court, Sarah Netburn, first ruled in January 2022 that those documents needed to be turned over to Ripple as part of the ongoing discovery process.

SEC Charges Microcap Company and Its Executives with Fraud

The Securities and Exchange Commission today announced that Quanta, Inc., a Burbank, California-based biopharmaceutical company that develops and sells a scorpion venom product called Escozine, its CEO, Arthur Mikaelian, and his son and Quanta’s executive vice president in charge of operations, Grant Mikaelian, have agreed to settle fraud charges without admitting or denying the allegations in the SEC’s complaint. As part of the settlement, the Mikaelians consented to officer and director bars and to pay civil penalties.

According to the SEC’s complaint, in a July 23, 2021 press release, Quanta and Arthur Mikaelian misrepresented the FDA staff’s response to the company’s proposed clinical trial of Escozine as a Covid-19 treatment. As the complaint alleges, the press release misrepresented that the FDA staff’s response validated the clinical study conducted in the Dominican Republic and that the FDA’s staff had recognized the potential therapeutic benefits of Escozine….

EU states approve world’s first comprehensive crypto rules

European Union states on Tuesday gave the final nod to the world’s first comprehensive set of rules to regulate cryptoassets on Tuesday, piling pressure on countries such as Britain and the United States to play catch up.

An EU finance minister meeting in Brussels approved rules that were thrashed out with the European Parliament, which gave its approval in April.

The rules are expected to be rolled out from 2024.

Crypto, Bitcoin Should Face Same Rules As Gambling, UK MPs Say

Retail investing in unbacked cryptoassets like Bitcoin should be regulated like gambling because they are highly volatile and have “no intrinsic value,” an influential panel of UK lawmakers said.

The Treasury Select Committee, a cross-party group of members of Parliament, “strongly recommended” such treatment for trading of digital tokens in a report published Wednesday.

Where’s Shaq? Lawyers for FTX Investors Struggle to Serve Him Papers

Shaquille O’Neal, the 7-foot-1-inch NBA Hall of Famer turned actor, sports analyst and entertainer, is all over TV and has millions of social-media followers. He is one of the most recognizable people on the planet. There’s one group of people who’s had trouble finding Shaq, and that is the process servers hired to formally notify him he’s being sued.

O’Neal is one of several celebrities named in a proposed class-action lawsuit filed by FTX investors against the collapsed cryptocurrency exchange and the stars who appeared in its advertisements. The other celebrity defendants, including Tom Brady, Gisele Bündchen, Larry David, Naomi Osaka and Steph Curry didn’t contest their service of process.

In that regard, they were layups compared with O’Neal.

Lawyers for the plaintiffs say they have tried to serve O’Neal at his homes and studio and tossed the legal papers at his fast-breaking SUV. They say he’s dodging them.

Have the SEC’s Delay Tactics Made Its Petition for Rulemaking Process Vulnerable to Challenge? A Look at In re Coinbase Inc. and SEC’s Nullification of 5 U.S.C. § 553(e) by Inaction

Last week, Coinbase launched its first counteroffensive against the Securities Exchange Commission’s (“SEC”) aggressive enforcement posturing in the cryptoeconomy. The cryptocurrency trading platform filed a petition for writ of mandamus asking the Third Circuit to make the SEC act on its petition for rulemaking. The filing raises important questions about administrative power in several respects including agency nullification of the Administrative Procedure Act (“APA”).

First, petitions for mandamus requesting an agency to act on rulemaking petitions are rare, possibly nonexistent until now. Second, Coinbase, having recently received a “Wells notice,” is under threat of enforcement by the SEC. Third, the petition does not push a particular outcome beyond getting the Commission to take an action, any action, that is final and appealable under the APA section 704. Fourth, it articulates a theory of “unreasonably delayed” that the courts have not addressed when reviewing agency inaction regarding rulemaking petitions, i.e., that the unreasonable delay inquiry is relative.

But Coinbase’s petition also misses a critical issue—that SEC’s lassitude is the rule not the exception.

Traders Do Less Crime at Home

I suppose two theories of work-from-home and financial crime would be:

1. If you work at the office, you are less likely to do crimes, because you are around your co-workers and they can see you doing the crimes and you don’t want that.

2. If you work at the office, you are more likely to do crimes, because you are around your co-workers and they can see you doing the crimes and you do want that.

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Which theory is right? Here is “Work-from-Home and the Risk of Securities Misconduct,” by Douglas Cumming, Chris Firth, John Gathergood and Neil Stewart….