DOJ Selects Forensic Risk Alliance for Lucrative Binance Monitorship

Binance Monitorship Granted to FRA Instead of Sullivan & Cromwell

The Justice Department has picked consulting firm Forensic Risk Alliance to act as outside monitor for Binance Holdings Ltd., which pleaded guilty to violating US money-laundering regulations and trade sanctions.

FRA was chosen over elite Wall Street law firm Sullivan & Cromwell, the initial favorite for the role, and several other top contenders, according to people who asked not to be named because the matter is confidential.

The Justice Department declined to comment. Spokespeople for Sullivan & Cromwell and FRA didn’t immediately respond to requests for comment.

SEC Charges Restaurant Group FAT Brands Inc., its Chairman and Former CEO, and its Two Former CFOs with Defrauding Investors

The Securities and Exchange Commission announced today that it filed fraud charges against FAT Brands Inc. (“FAT”), its founder, former CEO, and current Chairman, Andrew Wiederhorn (“Wiederhorn”), and its former CFOs, Ron Roe (“Roe”) and Rebecca Hershinger (“Hershinger”) concerning FAT’s disclosures about related person transactions with Wiederhorn and his family.

According to the SEC’s complaint, FAT owns restaurant brands, including Fatburger, Johnny Rockets, and Twin Peaks. The complaint alleges that, from October 2017 through March 2021, Wiederhorn used almost $27 million of FAT’s cash on his personal expenses, including private jets, first-class airfare, luxury vacations, his rent and mortgage payments, shopping, and jewelry. Wiederhorn, with Roe’s assistance, allegedly engaged in deceptive acts and made false and misleading statements to make it appear that the millions of dollars of FAT’s money he was spending on himself and on his family each year were company loans to FAT’s affiliate, Fog Cutter Capital Group, Inc. (“FCCG”), another company Wiederhorn controlled, for its business expenses….

SEC Charges Pennsylvania Resident with Insider Trading in Dick’s Sporting Goods

The Securities and Exchange Commission today charged Gibsonia, PA resident Frank T. Poerio, Jr. with insider trading for misappropriating material, nonpublic information concerning Dick’s Sporting Goods Inc. and trading on that information, realizing illegal profits of more than $800,000.

According to the SEC’s complaint, between November 2019 and May 2021, Poerio knew a Dick’s employee who had access to multiple internal sources of material nonpublic information about the company’s financial results. The SEC alleges that Poerio frequently asked the employee for updates on the company’s performance, and at times the employee responded with statements to the effect that the company was “doing very well,” coupled with requests that Poerio not trade in Dick’s securities. The SEC alleges that Poerio understood that these statements were based on the employee’s access to nonpublic financial information and previews of the company’s upcoming quarterly revenue figures. Poerio used this information to trade in Dick’s securities, in breach of his duty of trust and confidence to the employee.

Nasdaq Board Diversity Rules Face Test Before Full Fifth Circuit

The full US Court of Appeals for the Fifth Circuit is set to hear oral arguments Tuesday in a conservative challenge to the stock exchange’s rules, after a panel of three Democratic-appointed judges upheld them last year. The New Orleans-based court, where Republican-picked judges have the majority, agreed to review the decision at the challengers’ request.

The Nasdaq rules at issue require thousands of publicly listed companies to report on their boards’ diversity and to include diverse directors or explain why they don’t. They needed approval from the Securities and Exchange Commission to take effect. The agency signed off on them in 2021 and is now defending the rules alongside the stock exchange.

Sam Bankman-Fried says rice is ‘one of the currencies’ behind bars

Sam Bankman-Fried has swapped crypto for a new kind of currency behind bars: bags of rice.

The disgraced FTX founder has been jailed at Brooklyn’s Metropolitan Detention Center as he waits to be transferred to a federal prison to serve a 25-year sentence.

Bankman-Fried was convicted for wire fraud, money laundering and conspiracy last year.

The 32-year-old fallen crypto king said that rice “has become one of the currencies of the realm inside MDC,” during his first jailhouse interview, given to Puck News.

SEC Rebuts Coinbase’s Attempt to Get Appeals Court to Answer Key Crypto Question

Coinbase, the largest U.S. crypto exchange, filed for permission to ask the Second Circuit Court of Appeals if the Howey Test, a longstanding Supreme Court assessment for securities, should apply to digital assets. Coinbase hopes it doesn’t.

Coinbase hasn’t successfully argued this is needed, the U.S. Securities and Exchange Commission said Friday.

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In its filing, the SEC argued that Coinbase was trying to create a “new legal test” for how crypto might fit into existing securities precedent that a district court judge had already rejected.

Insider Trading and Off-Channel Communications in the Age of Remote and Hybrid Work Environments

From the beginning of the pandemic, the SEC warned about potential risks to market integrity posed by the transition to remote work. For example, in March 2020, the SEC issued a statement urging companies to be mindful of market integrity and confidentiality obligations. Given the unprecedented times, the SEC warned that remote work posed increased risks for insider trading and may lead a greater number of people to have access to MNPI than in normal times. They further cautioned that the MNPI “may hold an even greater value than under normal circumstances.” In the years since, the SEC’s concerns have materialized in a string of enforcement actions against individuals who gained access to MNPI as a result of the pandemic and misappropriated that information in pursuit of profit.

Who is afraid of the SEC? Not Robinhood investors

Last June, when the US Securities and Exchange Commission unveiled lawsuits against crypto exchanges Binance and Coinbase, the market reaction was swift and brutal. Investors pulled nearly $800mn in assets from Binance in a day while Coinbase lost more than a fifth of its market value in the week after the news was made public.

Fast forward 11 months and the SEC’s crackdown on the crypto industry continues apace. Robinhood is its latest target. The retail brokerage said in a filing last week that the SEC had sent its crypto unit a so-called Wells notice. That is essentially a warning that it was preparing to take legal action. Companies that receive Wells notices are allowed to respond and argue why they did not break the law.

Yet this time around, investors have shrugged off the news. Shares in Robinhood barely budged on the day. The absence of a market spasm is telling.