Crypto Industry Hopes "Major Questions Doctrine" Will Save It in Battles With SEC

Coinbase, crypto industry hope new Supreme Court doctrine is silver bullet

With the U.S. Securities and Exchange Commission in the midst of a stunning barrage of enforcement actions against crypto defendants, the industry has developed a sweeping, if long-shot, argument that the U.S. Supreme Court’s recently-formalized “major questions doctrine” dooms the agency’s campaign.

The argument first emerged last fall in the SEC’s closely-watched Manhattan federal court case accusing Ripple Labs Inc and two Ripple executives of selling unregistered securities. It blossomed early this year in the agency’s insider trading case in Seattle federal court against former Coinbase Inc employee Ishan Wahi. And it has now emerged in a Coinbase white paper in which the crypto exchange attempts to convince regulators not to bring an anticipated enforcement action.

U.S. Supreme Court to examine whistleblower claims against financial firms in UBS case

The U.S. Supreme Court on Monday agreed to examine how difficult it should be for financial whistleblowers to win retaliation lawsuits against their employers as the justices took up a long-running case involving Switzerland’s UBS Group AG.

The justices will hear an appeal by Trevor Murray, a former UBS bond strategist, of a lower court’s decision to throw out his 2021 lawsuit that accused the company of unlawfully firing him for refusing to publish misleading research reports and complaining about being pressured to do so.

The appeal involves a technical but important issue – whether whistleblowers who sue their employers for retaliation under the federal Sarbanes-Oxley Act must prove that companies acted with “retaliatory intent.”

Crypto Exchange Poloniex to Pay $7.6 Million to Settle Probe Into Sanctions Violations

Cryptocurrency exchange Poloniex LLC has agreed to pay about $7.59 million to settle allegations it allowed users in sanctioned regions to trade digital assets on its platform, the U.S. Treasury Department said.

The settlement agreement, which became public Monday, alleged that Poloniex processed digital assets transactions worth a total of more than $15.3 million for customers in sanctioned regions between 2014 and 2019, despite the platform having know-your-customer information and internet protocol address data that told them otherwise, according to the Treasury’s Office of Foreign Assets Control, which enforces U.S. economic sanctions.

Block, Robinhood, Coinbase Lawyers Among Fintech’s Top Paid

Robinhood’s chief legal, compliance, and corporate affairs officer Daniel Gallagher Jr., hired in 2020 after working for the US Securities and Exchange Commission, received nearly $15.1 million in total compensation last year, the company said in its proxy filing.

Coinbase’s chief legal officer and corporate secretary Paul Grewal received almost $7.5 million in total compensation during 2022, its proxy showed. Sivan Whiteley, most recently the top lawyer and and corporate secretary at Block, had a pay package valued at $8.3 million ahead of her departure this year.

Fed Watchdog Recommends More Staff Be Covered by Trading Rules

The Federal Reserve’s internal watchdog recommended that personal trading rules be extended to more staff after discovering that hundreds with access to confidential information are not covered.

Chair Jerome Powell agreed with the recommendations in a letter accompanying the report, which was released Monday.

The Fed in 2021 beefed up its rules governing the investment and trading of senior officials in the aftermath of an ethics scandal following unusual trading activity by two regional Fed presidents.

But many Fed employees, including dozens who attend policy-setting Federal Open Market Committee meetings, don’t fall under the restrictions because they are not considered senior officials. The watchdog said these attendees should be subject to stiffer rules as well.

Regulatory Estoppel Does Not Apply to SEC v. Coinbase

But let’s be clear: The SEC’s role when “approving” Coinbase’s registration statement was merely to ensure that Coinbase made the proper disclosures in their application.

To suggest that the SEC somehow endorsed or approved the various business lines of Coinbase (so Coinbase now has some sort of regulatory safe harbor for everything they do and the SEC is limited by some sort of doctrine of “regulatory estoppel” barring them from charging Coinbase) has no basis in law or in fact.

Merely because two years ago the SEC reviewed Coinbase’s registration statement (which Coinbase often refers to as its “business plan”) and approved Coinbase to go public is irrelevant. The same goes for any public company that has ever filed any registration statement with the SEC.