FTX Bankruptcy Lawyers and Advisers Rack Up $38M in Fees in January

FTX Bankruptcy Special Counsel, Advisers Bill $38M for January

According to court filings, Sullivan & Cromwell billed $16.8 million for January while Quinn Emanuel Urquhart & Sullivan billed $1.4 million, and Landis Rath & Cobb billed $663,995.

Collectively the three firms have over 180 lawyers assigned to the case and over 50 non-lawyer staff such as paralegals.

Court filings show that Sullivan & Cromwell lawyers and staff billed a total of 14,569 hours for January. The largest project Sullivan & Cromwell worked on was discovery, followed by asset disposition and asset analysis and recovery.

Risk of Widespread Bitcoin Investing at Heart of Grayscale-SEC Legal Fight

Grayscale wants to convert its $14 billion Bitcoin Trust, the largest investment vehicle tied to the No. 1 cryptocurrency, into an exchange-traded fund. But the Securities and Exchange Commission rejected the plan in June, saying cryptocurrency markets are too ripe for fraud and manipulation. Grayscale sued, asking a federal appeals court to overturn a decision the company called arbitrary.

The legal battle before a three-judge panel in Washington has big implications for the crypto industry because it could clear the way for similar ETFs, fueling a major expansion of the market by making it easier for everyday investors to bet on the success or failure of digital assets.

SEC Accuses Utah-Based Green United of Running $18M Crypto Mining ScamThe U.S. Securities and Exchange Commission (SEC) has filed suit against Green United, alleging the Utah-based company violated federal securities laws by selling $18 million worth of phony crypto mining equipment.

According to the SEC’s complaint, Green United and two individuals – the company’s founder, 46-year-old Utah resident Wright Thurston, and its main promoter, 43-year-old Utah resident Kristoffer Krohn – offered investments in $3,000 “Green Boxes,” specialized crypto mining machines that purported to mine GREEN tokens on the Green Blockchain.

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However, according to the SEC, Green United’s mining machines never mined GREEN, because GREEN was not a mineable crypto asset and the so-called Green Blockchain didn’t exist. Instead, Thurston allegedly created GREEN tokens himself on the Ethereum blockchain and distributed them to investors’ wallets “several months” after he and Krohn started selling the machines to investors in April 2018.

SEC Charges Rio Tinto plc with Bribery Controls Failures

The Securities and Exchange Commission today announced charges against global mining and metals company, Rio Tinto plc, for violations of the Foreign Corrupt Practices Act (FCPA) arising out of a bribery scheme involving a consultant in Guinea. The company has agreed to pay a $15 million civil penalty to settle the SEC’s charges.

The SEC’s order finds that, in July 2011, Rio Tinto hired a French investment banker and close friend of a former senior Guinean government official as a consultant to help the company retain its mining rights in the Simandou mountain region in Guinea. The consultant began working on behalf of Rio Tinto without a written agreement defining the scope of his services or deliverables. Eventually the mining rights were retained, and the consultant was paid $10.5 million for his services, which Rio Tinto never verified. The SEC’s investigation uncovered that the consultant, acting as Rio Tinto’s agent, offered and attempted to make an improper payment of at least $822,000 to a Guinean government official in connection with the consultant’s efforts to help Rio Tinto retain its mining rights. Furthermore, none of the payments to the consultant was accurately reflected in Rio Tinto’s books and records, and the company failed to have sufficient internal accounting controls in place to detect or prevent the misconduct. The mine has not been developed by Rio Tinto.

TetherThis is, in principle, a very simple and attractive business, but Tether has found it hilariously difficult as an operational matter. In principle the way you do this business is you have people wire you the dollars, and you send them their USDT (on the blockchain), and you keep the dollars in a bank account or money-market fund or Treasury bills or whatever earning like 4%, and if people want their dollars back you wire them the dollars, and meanwhile you’re earning like $200 million a month on the float and life is good.

But in practice what seems to happen is that people go to their banks and are like “I would like to wire Tether $1 million to buy stablecoins” and the banks say “no.” And then Tether goes to banks and says “we would like to deposit the $67 billion backing our stablecoins” and the banks say “no.” And then people go to Tether and say “I would like you to wire me back $1 million for my stablecoins” and everyone’s banks say “no.” I am exaggerating, but the basic fact of Tether’s life seems to be that a lot of the financial intermediaries — banks, brokers, auditors — who would normally be thrilled to work with a $67 billion pot of money, for some reason, aren’t. So Tether has to do this very simple banking business in a very complicated way.

PokerStars Owner Enters $4 Million Settlement With U.S. Over Russia Payments

The owner of PokerStars and other popular gambling brands will pay $4 million to settle U.S. allegations that the handling of payments to Russia-based consultants violated foreign bribery law.

Flutter Entertainment PLC, the Dublin-based owner of FanDuel, Paddy Power and other brands, entered into a settlement with the U.S. Securities and Exchange Commission over alleged violations by PokerStars’ previous owner, the Stars Group. Flutter bought that Toronto-based company in 2020.

The SEC, which announced the settlement Monday, said the Stars Group paid about $8.9 million to Russia-based consultants as it pushed for the legalization of poker in that country. The alleged payments were made between 2015 and 2020.

U.S. Banking Watchdog: You Can’t Trust Crypto Firms Until They Get Federal Oversight

It may be difficult to trust a crypto company that isn’t federally supervised, a key bank regulator said Monday.

As it stands, there’s no way for people to know which crypto firms they can rely on, said Michael Hsu, the acting head of the U.S. Office of the Comptroller of the Currency (OCC).

“We won’t be able to know which players are trustworthy and which aren’t until a credible third party, like a consolidated home country supervisor, can meaningfully oversee them,” Hsu said in remarks prepared for delivery at an Institute of International Bankers event in Washington, D.C. “Currently, no crypto platforms are subject to consolidated supervision. Not one.”

Your Company Has Been Sued for Securities Fraud—Now What?

According to the Stanford Law School/Cornerstone Research Securities Class Action Clearinghouse, each year since 2001, with just one exception (2006), investors have filed more than 150 securities fraud class actions in the federal courts. More than 400 cases were filed each year between 2017 and 2019, and just shy of 200 were filed in 2022. During that same time period, the median settlement of a securities fraud class action has ranged from $5.8 million to $12.1 million in 2018.

Thus, while the likelihood of any particular public company being sued in securities-related litigation may be statistically low, the risk is not de minimis, and potential damages (or settlement amounts) are high. Given these risks, the volatility of financial markets, and most companies’ desire to minimize the negative publicity associated with securities litigation, companies would be well served by having a list of action items in case they are sued.

This White Paper identifies a nonexclusive list of some preliminary actions and highlights important issues that companies and counsel should consider at the outset of most securities cases.