Former Congressman Stephen Buyer Convicted of Insider Trading

Ex-US congressman convicted of insider trading before T-Mobile merger

Former U.S. Congressman Stephen Buyer was convicted by a New York jury on Friday of trading on inside information he learned in 2018 as a consultant to T-Mobile US Inc (TMUS.O) ahead of its $23 billion merger with Sprint.

Buyer was a Republican from Indiana in the U.S. House of Representatives between 1993 and 2011 before working as a corporate consultant.

Prosecutors said at a trial that began on March 1 that Buyer bought Sprint stock after learning from a T-Mobile executive that the telecommunications companies were in merger talks in 2018 and engaged in another insider trading scheme in 2019.

Former Theranos exec Sunny Balwani loses bid to remain out of prison during appeals

A federal judge has rejected former Theranos executive Ramesh “Sunny” Balwani’s bid to remain free while he appeals his conviction for crimes he committed during a blood-testing scam he orchestrated with his former boss and lover, Elizabeth Holmes.

The 17-page ruling issued late Thursday pushes Balwani, 57, a step closer to having to begin a nearly 13-year prison sentence he received after a jury convicted him of 12 counts of fraud and conspiracy last year.

Balwani is scheduled to report to prison on March 15 unless he can win a reprieve from a federal appeals court in a motion his lawyers say they plan to file.

Signature Bank’s Collapse Fueled by Crypto Bets and Run on Deposits

There are signs that “serious fraud and mismanagement” occurred at crypto The bank also said its digital asset-related client deposits stood at $16.52 billion. Signature was one of the few financial institutions that had opened its doors to taking deposits of crypto assets, a business it entered into in 2018.

That ended up being a fateful decision because the bottom fell out of crypto assets after the collapse of FTX and an ensuing criminal investigation. Another cryptocurrency-focused bank, Silvergate Bank, was forced to voluntarily close last week.

“This story has more to do with crypto, huge error in judgment by veteran bankers,” said Christopher Whalen of Whalen Global Advisors, which specializes in analyzing and consulting on financial institutions. “Result was the same in a deposit run.”

SEC Asks High Court to Address Agency Judges’ ConstitutionalityThe Fifth Circuit ruled incorrectly in finding the SEC’s use of executive-branch judges unconstitutional, the agency said in a petition asking the US Supreme Court for review.

At issue is a challenge by investment adviser George Jarkesy to the Securities and Exchange Commission’s determination that he couldn’t participate in certain securities activities and had to pay civil penalties. A divided panel of the US Court of Appeals for the Fifth Circuit sided with Jarkesy in May 2022, and the full court declined to rehear the case.

Insider Trading: Can There Be a Tippee Without a Tipper?

It is generally understood that it is unlawful to trade on nonpublic, market-moving information, or tips from someone with inside information—but what if the tip was not unlawful in the first place? When someone receives a tip of confidential information from a source who has not engaged in insider trading, can the recipient of that information, the “tippee,” be guilty of insider trading? Since tippee liability is generally derivative of the claims against the tipper, one might think that the answer should be no. However, a recent jury verdict in the Northern District of Illinois came to a different conclusion.

On January 19, 2023, following a multi-day trial, a jury found an alleged tipper not guilty while simultaneously finding the alleged tippee guilty of insider trading. Adding further confusion to the issue, the jury acquitted the tippee of conspiracy to commit insider trading. In other words, the jury squarely found that the tippee committed the crime of insider trading while the tipper did not. While this result seems inconsistent with basic principles of insider trading law, as discussed below, it finds support in controlling US Court of Appeals for the Seventh Circuit authority.

SEC Enforcement: Year in Review

During Chair Gary Gensler’s and Director of Enforcement Gurbir Grewal’s second year of leadership, several key enforcement priorities came into focus that will impact businesses across sectors. In this year in review, we highlight important takeaways for business leaders and in-house counsel from the Division’s activities in 2022, and what these activities mean for the Division’s priorities for the year ahead.

Highlights:

–Aggressive Positions Leading to Increased Penalties and Other Prophylactic Remedies….

–Untested Positions Regarding Cryptocurrency….

–Increase in Climate and ESG Disclosures….

–Trends in Insider Trading, Cybersecurity, SPACs and Other Critical Areas….

U.S. crypto exchanges could face possible class-action lawsuit

Long time securities lawyer Tom Grady, known as one of the nation’s leading investment fraud attorneys, is preparing for potential litigation against the nation’s biggest crypto exchanges Coinbase, Robinhood, Kraken and others, according to a press release reviewed by FOX Business.

In the release, Grady said he launched an investigation into the exchanges’ operations and their potential violations of state and federal securities laws by transacting digital coins, the vast majority of which are regarded by the SEC as unregistered securities and thus operate in violation of federal law. Grady says the exchanges may have misled investors by not providing them with improper disclosures about the risk in trading and owning unregistered crypto.

“We believe Coinbase, Robinhood, and other exchanges have violated the law, and investors who lost money purchasing cryptocurrencies on their platforms may be entitled to recover those losses,” Grady stated in the press release.

Startup Bank Had a Startup Bank Run

And so if you were the Bank of Startups, just like if you were the Bank of Crypto, it turned out that you had made a huge concentrated bet on interest rates. Your customers were flush with cash, so they gave you all that cash, but they didn’t need loans so you invested all that cash in longer-dated fixed-income securities, which lost value when rates went up. But also, when rates went up, your customers all got smoked, because it turned out that they were creatures of low interest rates, and in a higher-interest-rate environment they didn’t have money anymore. So they withdrew their deposits, so you had to sell those securities at a loss to pay them back. Now you have lost money and look financially shaky, so customers get spooked and withdraw more money, so you sell more securities, so you book more losses, oops oops oops.