"Grewal v. Grewal"

Grewal V. Grewal: What Coinbase’s GC Should Expect from the SEC’s Enforcement Director

Paul Grewal, chief legal officer of Coinbase, and Gurbir Grewal, Director of the SEC’s Enforcement Division, each have a lot on their plate.

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For the second time, Paul and Gurbir’s two worlds have collided. The first time Paul and Gurbir came to figurative blows was when the SEC sent Coinbase a “Wells Notice,” stating that the SEC planned to charge Coinbase for securities violations relating to Coinbase’s planned offering of a crypto-lending program called Lend (more on that skirmish later).

The second time relates to a recent Bloomberg report that the SEC is investigating whether Coinbase improperly let U.S. investors trade digital assets that should have been registered as securities. That report came on the heels of the announcement of a criminal prosecution by the U.S. Department of Justice (DOJ) together with an SEC enforcement action against former Coinbase product manager Ishan Wahi, his brother and his friend.

Treasury sanctions crypto program that helped North Koreans launder funds

The Treasury Department issued sanctions Monday against a cryptocurrency service that has allowed North Korean hackers and others to launder billions of dollars’ worth of digital tokens stolen in virtual heists.

The service, Tornado Cash, is what is known as a mixer, and it pools digital assets to obscure their ownership. Since its launch in 2019, the program has laundered more than $7 billion in digital assets, according to the Treasury Department. By adding the service’s website and 45 associated crypto wallets to the sanctions list, the administration makes it illegal for any American to transact with them.

Nasdaq’s rule on board diversity is a good first step, not a gold standard

Nasdaq’s Board Diversity Rule goes into effect this month. Corporations listed on the U.S. exchange will be required to disclose the ethnic and gender makeup of their boards.

Companies will have one year from the time of submission to provide an explanation as to why they do not have at least two diverse board members currently serving on their board.

It is very likely organizations will be able to meet this new standard of just two diverse board members that identify as women and/or come from another underrepresented group.

The enforcement of the SEC-approved rule is a step in the right direction. However, the SEC does not provide a plan to encourage companies listed on Nasdaq to increase diverse board members beyond two individuals annually. There is room for improvement as revisions and addendums are added to this new rule.

Zeroing In On The Problem With “ESG”

I have long wanted to publish a post entitled “We Need to Stop Talking About ‘ESG’ (Seriously. We Need to Stop.)” I have never had the guts to do it because I would be taking on the entire ESG industrial complex. However, Posner’s article, and the many sources she cites go a long way toward making this point.

It comes as no surprise to me that various attempts to rate or grade ESG are inconsistent. The fact is that there is no consensus on what “ESG” is. Indeed, we could all spend a very long and unproductive amount of time just discussing what the “S” in the ESG might be. Is it just Diversity, Equity and Inclusion? Is it #MeToo? Is it child labor laws or human trafficking laws? Is it, as in the case of the recent lawsuit filed against Unilever (and discussed here), an effort by a subsidiary of an international conglomerate to take a stand on issues that the subsidiary thinks involves what the subsidiary calls “Occupied Palestinian Territory?”

Crypto and the US Government Are Headed for a Decisive Showdown

“The regulatory landscape in the US is nebulous at best,” says Brandon Neal, the chief operating officer of Euler, a decentralized finance project. “It not only creates a lot of confusion in the industry and the public, but I think it potentially stifles innovation.”

To many securities law experts, however, there’s nothing nebulous about it. “You don’t run afoul of the SEC’s disclosure laws if you register and disclose,” says Roger Barton, managing partner of Barton LLP. “I believe the securities laws are clear enough. I don’t know that the SEC needs to create specific rules relative to crypto.”

It sounds intuitive that new technology requires new rules and regulations. But many securities lawyers believe the general approach exemplified by the Howey test is part of why US securities regulation has worked pretty well over the years. “The downside to providing clarity—and this is the reason we don’t define ‘fraud’ in the law either—is that as soon as you write down what the parameters are, you’ve given a road map for getting around it,” says Hilary Allen. “So the test needs to be flexible. The downside to that is there’s going to be some uncertainty in how it’s applied.”