Court Rules Secondary Market Crypto Sales are Securities Transactions in Wahi Case

U.S. Judge Says Secondary Market Crypto Sales are Securities Transactions in Coinbase Insider Trading Case

In an insider trading case involving Coinbase’s former product manager Ishan Wahi, his brother Nikhil Wahi, and their friend Sameer Ramani, a U.S. court ruled on March 1, that the trading of certain crypto assets on a secondary market, which Coinbase is, are securities transactions.

“The court’s analysis remains the same even to the extent Ramani traded tokens on the secondary market,” the ruling said. “… Each issuer continued to make such representation regarding the profitability of their tokens even as the tokens were traded on secondary markets. Thus, under Howey, all of the crypto assets that Ramani purchased and traded were investment contracts.

SEC Charges Advisory Firm HG Vora for Disclosure Failures Ahead of Ryder Acquisition Bid

The Securities and Exchange Commission today announced settled charges against New York-based investment adviser HG Vora Capital Management LLC for its failure to make timely ownership disclosures in the lead-up to its May 2022 acquisition bid for trucking fleet company Ryder System Inc. HG Vora agreed to pay a $950,000 civil penalty to settle the SEC’s charges.

Under the federal securities laws, a company that owns more than five percent of a public company’s stock must report its position and whether it has a control purpose, which is an intention to influence or control the company. According to the SEC’s order, on Feb. 14, 2022, HG Vora disclosed that it owned 5.6 percent of Ryder’s common stock as of Dec. 31, 2021, and certified that it did not have a control purpose. The order states that HG Vora then built up its position to 9.9 percent of Ryder’s stock and formed a control purpose no later than April 26, 2022. The federal securities laws therefore required it to report its control purpose and its current ownership position by May 6, 2022, but it did not report this information until May 13. On that same day, HG Vora sent a letter to Ryder proposing to buy all Ryder shares for $86 a share, a sizeable premium over the trading price. Before the letter to Ryder and its filing, and after forming a control purpose, HG Vora purchased swap agreements that gave it economic exposure to the equivalent of 450,000 more shares of Ryder common stock. After HG Vora’s public announcement of its bid on May 13, 2022, Ryder’s stock price increased significantly.

Lawyers Who Killed Musk’s Pay Plan Seek $6 Billion in Stock

Lawyers for a Tesla Inc. investor who persuaded a judge to throw out Elon Musk’s $55.8 billion pay package are making an unusual request to have their legal fees paid in the form of about $6 billion of stock in the electric-car maker.

Attorneys for the Tesla investor who challenged Musk’s executive-compensation award – the largest ever given to a corporate titan – filed the request Friday in Delaware state court.

There Are 340,000 Fewer Accountants, and Companies Are Paying the Price

Mistakes continued to pile up this earnings season in the wake of Lyft Inc.’s market-roiling typo: Planet Fitness Inc., Mister Car Wash Inc. and Rivian Automotive Inc. all had to correct their quarterly earnings statements. These types of errors shake investor confidence and, in extreme cases, can result in heavy fines from the U.S. Securities and Exchange Commission (SEC).

While it’s unclear what exactly led to the mistakes in each of these cases, one major risk factor has reached crisis levels: a shortage of certified public accountants.

The Catch-22 of U.S. Crypto Regulation

In 2024 America, the SEC’s “come in and register” approach is a Catch-22 for crypto.

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The SEC, moreover, hasn’t allowed any currently registered exchange or broker-dealer to list, custody or trade crypto tokens. The SEC’s view is that any registered institution willing to work with crypto tokens “could not deal in, affect transactions in, maintain custody of, or operate an alternative trading system for traditional securities.”

Further, virtually no crypto tokens have been registered with the SEC so far. And that’s the Catch-22: issuers won’t register their crypto tokens before they can find registered exchanges and broker-dealers that can work with them, and registered exchanges and broker-dealers won’t start working with crypto tokens until they see enough tokens registered to make the business model economically viable.

Attorney General James Stops Ponzi Schemer Targeting Harvard Business School Alumni

New York Attorney General Letitia James has taken action to stop a fraudster who is tricking Harvard Business School (HBS) alumni and associates into investing in a fraudulent Ponzi scheme. Vladimir Artamonov, a HBS alumnus, solicited at least $2.9 million from at least 29 investors, many of whom he met through his connections to HBS. Today, Attorney General James secured a court order to stop Artamonov from harming investors through his fraudulent scheme and to stop him from withdrawing and transferring funds in his bank and brokerage accounts. This matter came to light when the Office of the Attorney General (OAG) was informed that one of Artamonov’s initial investors ended his own life after discovering that he lost $100,000 because of Artamonov’s fraud. Even after the tragedy, Artamonov continued to solicit new investors and lied to them regarding the fund’s strategy and performance….

Do Kwon documents reveal astounding stupidity of his arrest

Attempting to leave Podgorica, the capital of Montenegro, on a private jet in March of 2023, Kwon and Chang were stopped at a border crossing when they presented fake Costa Rican passports. The pair were attempting to fly to Dubai, the known home of Changpeng Zhao (colloquially known as CZ), founder and former CEO of Binance.

After having their luggage confiscated and searched, further problematic documents were discovered, including invalidated South Korean and Belgian passports which included totally different personal information for the two. Indeed, according to these passports, Kwon was called ‘Frederic Nguyen’ and Chang was called ‘Thomas Wang.’

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As a defense, the duo stated that Montenegrin authorities should immediately get in touch with Costa Rican immigration to prove that their passports were real. However, when the Montenegrin authorities did just that, they were told in no uncertain terms that the passports were forged.

Hedge Funds Set for FTX Win

FTX is already one of history’s great corporate disasters. Now, for a clutch of specialist funds, it’s shaping up to be a terrific trade too.

A cadre of investment firms have been buying up the rights to FTX customer claims since the crypto firm fell into bankruptcy in late 2022. The basic bet has been that customers would recover more than the pennies-on-the-dollar that market makers were implying in the early days of the collapse.

They were right. In a recent hearing, an FTX lawyer told a US bankruptcy judge that the firm was on track to repay creditors in full, meaning claims that traded for as little as 10% of their nominal value in the aftermath of FTX’s collapse could now pay out at 100%. For those who bought early, the returns could be enormous.

Two-Fer: SPAC-Merged Company Hit With COVID-Related Securities Suit

As readers know, in recent years I have been tracking two securities class action litigation filing trends: the filing of SPAC-related lawsuits, and the filing of COVID-related lawsuits. In a noteworthy development, a securities suit filed last week embodies both of these filing trends. That is, a company that was formed through a SPAC merger has been hit with a securities suit based on COVID-related allegations. As discussed below, the new lawsuit has several interesting features. A copy of the February 28, 2024, complaint can be found here.