First-Ever NFT Insider Trading Case Ends in Conviction

Ex-OpenSea manager convicted in NFT insider trading case

A former product manager at OpenSea, the world’s largest marketplace for non-fungible tokens (NFTs), was convicted on Wednesday of fraud and money laundering for using inside knowledge of which assets would be featured on its home page to trade NFTs.

Nathaniel Chastain was accused of buying NFTs he had decided to feature on the OpenSea website and selling them shortly afterward to make more than $50,000 in illegal profit, in what federal prosecutors in Manhattan described as the first insider trading case involving digital assets.

SEC Adopts Amendments to Enhance Private Fund Reporting

The Securities and Exchange Commission today adopted amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds. The amendments are designed to enhance the ability of the Financial Stability Oversight Council (FSOC) to assess systemic risk and to bolster the Commission’s oversight of private fund advisers and its investor protection efforts.

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The amendments will require large hedge fund advisers and all private equity fund advisers to file current reports upon the occurrence of certain reporting events that could indicate significant stress at a fund or investor harm. Reporting events for large hedge fund advisers include certain extraordinary investment losses, significant margin and default events, terminations or material restrictions of prime broker relationships, operations events, and events associated with withdrawals and redemptions. Large hedge fund advisers must file these reports as soon as practicable, but not later than 72 hours from the occurrence of the relevant event. Reporting events for private equity fund advisers include the removal of a general partner, certain fund termination events, and the occurrence of an adviser-led secondary transaction. Private equity fund advisers must file these reports on a quarterly basis within 60 days of the fiscal quarter end.

U.S. SEC Changes Its Mind on Officially Labeling Digital Assets in Hedge Fund Regulation

The U.S. Securities and Exchange Commission (SEC) took one small step backwards in regulating the crypto sector on Wednesday, when it erased what would have been its first formal definition of “digital asset” from its latest hedge fund rule.

While the SEC had initially included the definition in its 2022 proposal to overhaul mandatory disclosures for hedge funds, the securities regulator yanked it in the final rule approved by the commissioners. The agency included a footnote to explain itself:

“The commission and staff are continuing to consider this term and are not adopting ‘digital assets’ as part of this rule at this time,” the note declared.

Is ChatGPT Securities Fraud?

At this point the lawsuits seem a bit far-fetched: “You should have warned us months ago that artificial intelligence would hurt your business” is unfair given how quickly ChatGPT has exploded from nowhere to become a cultural and business phenomenon. But now everyone is on notice! If you are not warning your shareholders now about how AI could hurt your business, and then it does hurt your business, you’re gonna get sued.

Republicans demand answers from regulators on possible Chinese exposure of Americans’ financial data

Two Republican members of Congress are demanding answers from top financial regulators concerning the possibility Americans’ financial data may have been, or is at risk of being, exposed to members of the Chinese Communist Party (CCP) through two widely-used stock trading platforms operating within the U.S.

In a Wednesday letter to the heads of the U.S. Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA), Sen. Tommy Tuberville, R-Ala., and Rep. Jim Banks, R-Ind., called on the two agencies to ensure Chinese-linked companies Webull Financial, LLC and Moomoo, Inc. are complying with American laws and regulations when it comes to protecting American consumers’ data.

SEC Signals Enforcement Ramp-Up Coming for Conflicted Brokers

Stockbrokers who don’t act in the best interests of investors should expect securities regulators to start taking a tougher stance, as Wall Street’s top cop signals it’s ready to ramp up enforcement.

Regulation Best Interest, or Reg BI, raised the standard for brokers when it took effect several years ago, directing them to act in the “best interest” of their clients. The rule was part of a decade-long fight over protections for retail investors, including those saving money for college or retirement.

The Securities and Exchange Commission has taken a light touch since the rule took effect, bringing just one lawsuit over alleged violations of Reg BI. But a series of recent alerts from SEC staff suggest the grace period may soon be coming to a close.

“The next phase is enforcement,” Jay Gould of Baker Botts LLP said, adding that the “guidance is out there. You need to know about it, you need to act on it.”

Stryker discloses new FCPA investigation after two prior enforcement actions

Medical device-make Stryker Corporation — which resolved FCPA cases in 2013 and 2018 — said Tuesday in an SEC filing that it is “currently investigating whether certain business activities in a foreign country violated provisions of the Foreign Corrupt Practices Act.”

Stryker, based in Kalamazoo, Michigan, said it has “engaged outside counsel to conduct” the new investigation.

Coinbase Faces Off Against SEC Over Gary Gensler’s Crypto Crackdown

The materials Coinbase circulated to investors, however, flagged a major risk: The Securities and Exchange Commission could decide that some tokens traded on Coinbase’s platform are securities just like stocks or bonds — bringing all the regulations that come with it.

Two years later, that’s what appears to be happening as the SEC moves to rein in a market rocked by scandals and bankruptcies. And with it is brewing a legal battle over an enforcement push that threatens to reshape Coinbase and the rest of an industry rooted in gray areas of the law.

I Owe Coinbase CEO Brian Armstrong an Apology

I’m suddenly being reminded, not of Coinbase’s missteps, but of the good times. The boring times. The times when Coinbase did absolutely nothing.

The times when, for instance, CEO Brian Armstrong didn’t secretly send my money to an affiliated hedge fund. Or the time he didn’t gamble my funds away on his own exchange, then go to India and die in possession of the only keys to what was left over. Or the time he didn’t lie about Coinbase’s finances. Or the time his entire system didn’t collapse and he didn’t flee to Serbia.

In short, whatever the missteps as Coinbase found its way, Brian Armstrong never stole from me. That should be a very low bar, but apparently not. I was busy demanding Coinbase become an exemplary company when it seems I should have settled for being able to trust it with a tiny sliver of my assets.