DOJ Pressure Has In-House Counsel "Bombarding" Attorneys with Questions About Messaging Apps.

DOJ Crackdown Prompts Compliance Scramble on WhatsApp, Signal

Corporate compliance chiefs and general counsel are bombarding outside attorneys with questions about how to design a policy to retain employee messaging on encrypted software, white-collar lawyers say.

The intensifying dilemma for companies is fueled by recently stepped up Justice Department pressure in white collar investigations to produce encrypted chats on apps like Signal and WhatsApp. The enforcement push follows a wave of civil settlements on Wall Street over bankers’ inaccessible messages.

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Clear solutions remain elusive. A DOJ policy announced March 3 directed prosecutors to levy steeper penalties against firms under investigation that are unable to preserve workers’ business-related messages.

KPMG Gave SVB, Signature Bank Clean Bill of Health Weeks Before Collapse

Silicon Valley Bank failed just 14 days after KPMG LLP gave the lender a clean bill of health. Signature Bank went down 11 days after the accounting firm signed off on its audit.

What KPMG knew about the two banks’ financial situation and what it missed will likely be the subject of regulatory scrutiny and lawsuits.

Signature Bank’s collapse could deal a blow to cryptocurrency industry

Few banks were as deeply embedded within the cryptocurrency firms as Signature Bank and Silvergate, and their downfall is a symbolic and practical blow to the embattled industry, legal experts said. The institutions offered an air of legitimacy to crypto companies and provided clients key services, such as around-the-clock transactions.

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“It’s very dark days at present for crypto,” said Yesha Yadav, who studies digital financial regulation and is an associate dean at Vanderbilt University Law School. “The big danger here is that the folks decide to go offshore … [where] regulators are having a much harder time monitoring.”

A Matt Levine Effect?… This is enough of a thing that people sometimes joke on Twitter about buying index options whenever I write “Money Stuff will be off tomorrow,” on the theory that the market gods always get up to something crazy whenever I try to take a day off.

Naturally someone did a backtest and turns out it’s a bad idea (not investing advice!). Here is “A Matt Levine Effect?” by Paul Connell, William Fallon and Nicholas Foretek, on SSRN and everything:

"This paper constructs a novel dataset to explore whether Matt Levine’s vacation drives market volatility as suggested by readers and Levine himself. It finds that contrary to expectations, Levine’s vacations have an (almost) statistically significant effect in the opposite direction: decreasing market volatility. This paper provides a series of potential explanations for this observed market reaction."

Ex-Goldman Banker Has Legal Fees Cut Off Ahead of Insider Trial

A former Goldman Sachs Group Inc. vice president who goes on trial for insider trading in June is scrambling to pay for his legal defense after he was cut off by the bank’s insurers.

Brijesh Goel, who has pleaded not guilty to providing inside information about Goldman deals to a squash buddy, sued AIG on Monday in New York state court over its decision to stop covering legal bills that have already totaled at least $5 million.

According to Goel’s suit, AIG advanced him $1 million for his defense under Goldman’s directors and officers liability policy but stopped covering his costs earlier this year. On March 1, an adjuster informed Goel’s lawyers that their client did not qualify as an “affiliate insured” under the policy, the suit claims.

Well, That Didn’t Take Long: SVB’s Holdco and Execs Hit with Securities Suit

In my post yesterday discussing the implications of Silicon Valley Bank’s failure, I discussed the likelihood that D&O claims could arise in the wake of the failure. It has not taken long for this possibility to materialize. In morning (west coast time) on Monday, March 13, 2023, a plaintiff shareholder filed a securities class action lawsuit against SVB’s parent holding company and two of its executives. As discussed below, this lawsuit is likely just the first of what undoubtedly will be many D&O lawsuits against the company and its executives.

Silvergate, Signature banks’ woes pose new obstacle for FTX customers

Two potentially deep pockets of recovery for former customers of the collapsed cryptocurrency exchange FTX just got a lot shallower.

After FTX fell apart, its customers filed at least four class actions accusing either Silvergate Bank or Signature Bank of helping FTX insiders plunder customer funds….

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It’s easy to see why plaintiffs’ lawyers for FTX customers targeted the banks. The exchange itself is in Chapter 11 bankruptcy, and FTX insiders are facing restitution claims in litigation brought by the U.S. government. And banks, as the saying goes, are where the money is…

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That’s almost certainly not going to happen in the FTX case, thanks to the failures of both Silvergate and Signature.