FTX Alleges Former Company Lawyer Was "Fixer" Who Paid “Exorbitant Hush Money” to Whistleblowers

Securities Broker Faces Insider-Trading Probe Tied to Morgan Stanley Deals

In a subpoena issued last month, prosecutors sought records related to Spartan Capital Securities broker Jordan Meadow and his communications with five people, including a former Morgan Stanley employee, about potential M&A deals. The subpoena, reviewed by The Wall Street Journal, said the Manhattan U.S. attorney’s office was investigating possible insider trading, securities fraud and other offenses.

Prosecutors are investigating whether Meadow accessed a former Morgan Stanley executive assistant’s email account to gain confidential information about those deals, one of the people familiar with the matter said. Morgan Stanley hasn’t been accused of wrongdoing.

Ex-FTX lawyer Dan Friedberg was SBF’s ‘fixer,’ paid ‘hush money’ to whistleblowers: lawsuit

In the lawsuit filed Tuesday in Delaware bankruptcy court, FTX’s current caretakers alleged that Friedberg – a lawyer with ties to the notorious UltimateBet online poker cheating scandal – helped Bankman-Fried in the “wholesale raiding of customer exchange deposits.”

Friedberg was allegedly involved in “whitewashing complaints by whistleblowers” about misuse of those funds – at one point paying “exorbitant hush money” to an unnamed former FTX employee who raised alarms, the suit alleged.

“With regard to multiple whistleblower complaints alleging corporate malfeasance, Friedberg served as Bankman-Fried’s fixer,” the complaint said. “He not only settled the complaints for inflated amounts, in some instances he arranged for the FTX Group to retain the whistleblowers’ attorneys post-settlement, thereby buying or otherwise ensuring their silence.”

42 Dropped Cases, 48 Lifted Bars, One Big ‘Disaster’: SEC Roundup

The SEC recently dropped 42 enforcement actions — including many against small investment advisors — as a result of the SEC’s failure to separate the enforcement and judicial functions in its administrative proceedings.

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Concannon and Wolfe explain the significance of the SEC’s breach and how the agency has not fixed the underlying problem: the fact that the “judge” and the “prosecutor” in SEC administrative proceedings sit under the same roof when deciding enforcement matters against IAs, BDs and others.

“In total, we’re now looking at over 100 cases in which the SEC enforcement staff, the prosecutors … had access to the judges’ memos,” Wolfe explains.

“This is a disaster for the SEC,” according to Wolfe.

FTX Begins Talks on Reboot Amid Regulatory Crackdown on Crypto Exchanges

FTX is moving ahead with plans to restart its flagship international cryptocurrency exchange, an effort that will face major challenges as regulators ratchet up their oversight of the industry and the company works its way through bankruptcy proceedings.

The company “has begun the process of soliciting interested parties to the reboot of the FTX.com exchange,” said Chief Executive John J. Ray III, who took over in November when the exchange filed for bankruptcy.

Wall Street Regulators’ New Target: Emojis

Emojis are used to make text messages more vivid and personal, but Wall Street regulators say business-related messages with emojis may pose a problem for financial institutions if the correspondence isn’t captured and monitored properly.

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Texts tend to be shorter than emails and include more acronyms, so maintaining a surveillance system that interprets messages and identifies red flags could be more complicated, said Michael Solomon, who leads Finra’s national examination program, at a panel at the Finra Annual Conference in May.

“Emojis are something that didn’t exist in emails before,” said Solomon. “You can foresee situations in text messaging where an emoji might be a 4530 customer complaint.”

COIN Says SEC Has No Jurisdiction Over Cryptos on Its Platform in Response to Lawsuit

U.S. crypto exchange Coinbase claimed that digital assets listed on its platform fall outside the U.S. Securities and Exchange Commission’s (SEC) purview in its first legal response to the regulator’s lawsuit.

The SEC sued Coinbase at the beginning of June, alleging that a dozen of the cryptocurrencies offered through its wallet or trading platforms were unregistered securities. In its answer, filed early Thursday, Coinbase claimed that these cryptos are not investment contracts and therefore are not securities.

Nevada Prohibits “Defense Inside the Limits” Liability Insurance Provisions

In an interesting development, the Nevada legislature has passed, and the Nevada governor has approved, a Bill that prohibits insurers from issuing policies containing a provision that reduces the limit of liability by the costs of defense. I suspect that many in the liability insurance industry are unaware of this legislation prohibiting defense- inside-the-limits liability insurance. I also suspect that, for reasons discussed below, the new legislation will generate disruption in the professional liability and management liability insurance market in Nevada when it goes into effect on October 1, 2023.

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All I know is that Nevada insureds are about to experience a real-world experiment in the dynamics of the liability insurance marketplace. If what happened in Quebec is any guide, I suspect the Nevada insureds are really going to hate what comes next.

Gurbir S. Grewal — Remarks at Financial Times Cyber Resilience Summit

… In addition to enforcing existing rules and requirements, as everyone in this room well knows, the Commission has also proposed and is considering rules enhancing cybersecurity-related policies and procedures at broker-dealers, exchanges, and other market participants.

I’m sure there are probably as many opinions as there are people in this room about those efforts given the number of comments received in connection with those proposals.

But as Enforcement Director, it would be inappropriate for me to weigh in on that debate. Our panelists, on the other hand, are well-positioned to do so, and I, like each of you, look forward to hearing their thoughts.

Instead, what I’d like to do this morning is share with you some – five to be exact – of the principles that guide the work we are doing across the Enforcement Division to ensure that registrants take their cybersecurity and disclosure obligations seriously.

Crypto Insider Trading Is Common in DeFi, Solidus Study Finds

Insider trading is rife in a popular corner of the cryptocurrency market.

So says Solidus Labs, a New York-based company that specializes in ways to monitor suspicious crypto transactions. Its founders include Asaf Meir and Praveen Kumar, two former employees of Goldman Sachs Group Inc.’s trading-technology operations.

In a study that focused on data going back to January 2021, the firm says it found suspected insider trading involving 56% of ERC-20 tokens around the time they were first listed on three top centralized crypto exchanges. ERC-20s are the most popular type of Ethereum-related tokens.