The Impact of Whistleblower Programs on In-House Compliance

Government Whistleblower Programs Undermine Compliance Culture

Are these whistleblower rewards programs a good thing? From the perspective of enforcement agencies, the draw is clear: more tips, more cases, more enforcement, and more fines.

From the perspective of an individual whistleblower, the benefit of these programs is unquestionable. They’re a financial bonanza. A potential reward of millions, and even tens of millions, of dollars is a powerful incentive. But for in-house compliance personnel, these government rewards programs are more of a blockade than a boon.

Shadow Trading Is Bad Sometimes

But … why? Medivation was not actually harmed by Panuwat’s trading in Incyte’s stock. Perhaps, as a matter of, like, fairness, or being friendly with the SEC, companies really should have policies saying “you can’t shadow trade in our competitors’ stocks.” But perhaps as a matter of employee relations (and keeping the employees out of trouble), companies should instead have policies saying “go ahead and shadow trade in our competitors’ stocks, that is explicitly allowed by our policies, have fun.” Why would a company want to have a policy that could send its employees to jail for doing something that doesn’t hurt the company?

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Yes, in general, it is odd to have criminal law that companies get to make for themselves. But that’s how insider trading law works!

Former Investment Banker and Registered Broker Sentenced to 41 Months’ Imprisonment for Cryptocurrency Investment Fraud Scheme

Earlier today, in federal court in Brooklyn, Rashawn Russell, a former investment banker, who was formerly a registered broker with the Financial Industry Regulatory Authority, was sentenced by United States District Judge Hector Gonzalez to 41 months in prison for a cryptocurrency fraud scheme that resulted in approximately $1.5 million in investor losses and for a separate access device fraud scheme. Russell was also ordered to pay more than $1.5 million in restitution to victims of his fraud scheme. Russell pleaded guilty in September 2023 to wire fraud and access device fraud.

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From November 2020 to August 2022, Russell engaged in a scheme to induce multiple victims to invest with him based on false promises that he would use their funds for cryptocurrency investments and that they would earn large—and sometimes guaranteed—returns. Russell misappropriated much of the victims’ assets and used them for his personal benefit, to gamble, and to repay other investors. Russell also repeatedly failed to repay the victims’ principal investments and failed to provide them with promised rates of return. After some victims requested to be repaid their investments, Russell falsely represented that he had wired them money.

US appeals court accepts broad definition of securities ‘dealer’ in microcap fund case

For the second time this year, the 11th U.S. Circuit Court of Appeals has accepted the U.S. Securities and Exchange Commission’s expansive view of who must register as a securities dealer, handing a setback to industry groups that had urged the appeals court to clarify the distinction between dealers and investment funds that trade securities on their own behalf.

The appeals court concluded in SEC v. Justin Keener, opens new tab that Keener’s Florida-based company, JMJ Financial, was operating as an unregistered securities dealer when it purchased convertible debt from microcap issuers, converted the debt into common stock and then sold a high volume of shares into public markets.

Terraform, Do Kwon Agree in Principle to Settle New York Fraud Case With SEC; LUNA Token Surges

Terraform Labs and co-founder Do Kwon have reached a “settlement in principle” with the U.S. Securities and Exchange Commission (SEC) over a civil case alleging fraud, according to a court filing Thursday.

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A listing for the District Court for the Southern District of New York refers to a May 29 telephone conference, “without transcription or recording.” Counsels for all the parties were present. The scheduled oral arguments were “cancelled because the parties have informed the Court that they reached a settlement in principle.” The parties must file documentation in support of the settlement in front of Judge Jed S. Rakoff by June 12.

Crypto Can’t Be Regulated by Current US Regulators

It really doesn’t matter which agency regulates tokens, because all of them are premised on the same thing: the regulated item is static. A stock is a stock from the day it’s created until the day it is voided or the company is dissolved. Fiat is currency from the day it is minted until the day it is destroyed.

But not tokens. Tokens are dynamic – they can have multiple different functions to different holders, or even to the same holder, simultaneously. And there is no regulatory system in the world that can account for that.

Elon Musk Agrees to Testify in SEC’s Twitter-Buyout Probe

Elon Musk has agreed to testify in the US Securities and Exchange Commission’s probe of his 2022 acquisition of the social-media platform once known as Twitter.

The billionaire will sit for a five-hour deposition after dropping his plan to appeal a court orderthat he comply with a government subpoena, according to a filing Thursday in San Francisco federal court. The regulator is seeking information about Musk’s purchases of Twitter stock and statements about his investments before he spent $44 billion to buy the social-media platform.