Lawmakers Probe “Mutual Backscratching Dynamic” Between SVB and VCs.

Sen. Warren, Rep. Ocasio-Cortez Ask Circle, BlockFi Why They Banked at Silicon Valley BankSen. Elizabeth Warren (D-Mass.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.) want to know why crypto companies, including bankrupt crypto lender BlockFi and stablecoin issuer Circle, banked at now-collapsed Silicon Valley Bank.

The lawmakers sent letters to BlockFi and Circle on Sunday with a list of questions and concerns. Twelve other non-crypto firms received similar letters.

The two Democratic lawmakers are looking for more information on what they call the “mutual backscratching dynamic” between SVB and venture capitalists, in which the bank treated VCs and other high-rolling depositors to extensive lines of credit and luxurious “white glove” services like “industry ski trips, conferences and fancy dinners.”

The proverbial champagne service, the lawmakers argue, “could help explain why some customers placed massive, uninsured deposits at SVB” – which ultimately forced federal regulators to spend $20 billion to staunch the flow of withdrawals when the bank collapsed after a $42 billion single-day run last month.

SEC Is Adding Attorneys to Crypto Enforcement Unit

The U.S. Securities and Exchange Commission is hiring general attorneys for its crypto enforcement division in New York, Washington, D.C., and San Francisco, according to a job posting.

The call for attorneys to join the regulator’s Crypto Asset and Cyber Unit, or CACU, comes after the agency said in March that it was “planning to add additional staff” to the unit, which was initially meant to be a 20-person operation but has since doubled in size.

Theranos fraudster Elizabeth Holmes must begin prison stint during appeal

“Contrary to her suggestion that accuracy and reliability were central issues to her convictions, Ms. Holmes’ misrepresentations to Theranos investors involved more than just whether Theranos technology ‘work[ed] as promised.’” Davila wrote.

Davila’s ruling capped a lengthy dispute between the feds and Holmes’ legal team, which had argued she should remain free because her appeal would raise “substantial issues” about her conviction that could result in a new trial.

Last year, Holmes was sentenced to more than 11 years in prison for lying to Theranos’ investors about the efficacy of her once-booming startup’s blood-testing technology and finances. The mother of two is slated to report to prison on April 27.

Coinbase Awarded Nearly $470,000 in First Crypto Insider Trading Case

A crypto trader accused of using illicit tips from his brother, who worked at exchange operator Coinbase Global, was ordered to pay $469,525 in restitution as part of a plea agreement approved by a Manhattan federal court.

Nikhil Wahi must pay that amount to Coinbase, which was “the victim of the offenses,” U.S. District Judge Loretta Preska wrote in an order made public Monday. The amount awarded to Coinbase represents the amount the company spent on legal fees and other costs to comply with the Justice Department’s investigation, according to court records.

Mr. Wahi was earlier sentenced to 10 months in prison and ordered to forfeit $892,500 in illegal trading gains.

Former Executives of Outcome Health Convicted in $1B Corporate Fraud Scheme

Outcome installed television screens and tablets in doctors’ offices around the United States and then sold advertising space on those devices to clients, most of whom were pharmaceutical companies. According to evidence presented at trial, Shah, Agarwal, and Purdy sold advertising inventory the company did not have to Outcome’s clients, then under-delivered on its advertising campaigns. Despite these under-deliveries, the company still invoiced its clients as if it had delivered in full.

Shah, Agarwal, and Purdy lied or caused others to lie to conceal the under-deliveries from clients and make it appear as if the company was delivering advertising content to the number of screens in the clients’ contracts. Purdy and others at Outcome also inflated metrics that purported to show how frequently patients engaged with Outcome’s tablets installed in doctors’ offices. According to the trial evidence, the scheme targeting Outcome’s clients began in 2011, lasted until 2017, and resulted in at least $45 million of overbilled advertising services. Shah, Agarwal, and Purdy were also convicted of defrauding Outcome’s lenders and investors. The under-delivery to Outcome’s advertising clients resulted in a material overstatement of Outcome’s revenue for the years 2015 and 2016. The company’s outside auditor signed off on the 2015 and 2016 revenue numbers because Purdy caused others to fabricate data to conceal the under-deliveries from the auditor. Shah, Agarwal, and Purdy then used the inflated revenue figures in Outcome’s 2015 and 2016 audited financial statements to raise $110 million in debt financing in April 2016, $375 million in debt financing in December 2016, and $487.5 million in equity financing in early 2017.

Murdochs, Fox Board Face Investor Lawsuit Over Election Lies

A Fox Corp. investor sued Rupert and Lachlan Murdoch on Tuesday, blaming them for letting Fox News spread lies about the 2020 election that led to defamation cases seeking up to $4 billion.

The lawsuit in Delaware’s Chancery Court accuses the Murdochs and three other board members of “knowingly” letting the conservative news network’s hosts spread former President Donald Trump’s false claim that the election was stolen from him.

“The board’s decision to chase viewers by promoting the false stolen election claims has exposed the company to public ridicule and negatively impacted the credibility of Fox News….”

Ex-Deutsche Bank Investment Banker Charged With Crypto FraudA former Deutsche Bank investment banker was charged with engaging in a Ponzi-like cryptocurrency fraud in which he falsely promised investors “guaranteed” returns and used some of their money to pay off others.

Rashawn Russell, 27, was arrested on Monday and accused by US prosecutors of defrauding multiple investors by telling them their funds would be used for crypto investments, when he was really using the money for personal expenses like gambling or to keep the alleged scheme going.

SEC Announces $55.9 Million Settlement in First Action Brought by its Climate and ESG Task Force

The Vale action was the first brought by the SEC’s 22-person Climate and ESG Task Force, which continues to bring additional enforcement actions for ESG-related disclosure issues. The SEC’s current focus on ESG-related disclosures likely will lead to more ESG-related enforcement actions.

The Vale action illustrates the types of ESG-related disclosure cases the SEC may bring under the existing disclosure framework. The SEC’s actions demonstrate a view that ESG-related disclosures are material and that misrepresentations or omissions related to such disclosures broadly will be closely scrutinized and considered actionable. Public companies may garner even more scrutiny when they are affected by adverse events that have any connection to their ESG-related disclosures. In addition, the Vale action demonstrates that the SEC’s scrutiny is likely to extend beyond periodic filings and into other ESG-related disclosures, such as those in sustainability reports or other climate-related analyses. This is equally true for foreign issuers that access U.S. capital markets for equity or debt investments.

IAC Views on Crypto AssetsWe believe that virtually all, if not all, crypto tokens are securities and that they, as well as the platforms and custodians dealing with them, are subject to regulation under the federal securities laws to protect investors. Accordingly, the offering of crypto asset securities and the platforms trading them should comply with the registration, disclosure, anti-fraud provisions and other investor protector provisions of the federal securities laws. We think it is very unfortunate and disturbing that there are legislative proposals to carve crypto assets out of the federal securities laws and undermine investor protection.

The SEC should continue to be aggressive in bringing enforcement actions against companies that are violating the federal securities laws in the crypto space, including, issuers, custodians and those acting as unregistered platforms that offer trading in crypto asset investments. We note that the SEC has a Crypto Assets and Cyber Unit in its Division of Enforcement to investigate securities law violations related to crypto asset offerings, crypto asset exchanges, and crypto asset lending products. In 2022 alone, the SEC brought 30 enforcement actions against crypto-asset market participants. However, the SEC’s Enforcement Division shrank 5% from fiscal year 2016 to fiscal year 2021. This raises questions as to whether the SEC has the resources to keep up with the significant growth and scale of crypto security assets and the rapid pace of change in the crypto markets, along with its other oversight responsibilities in the securities market.