Lawsuit by Citadel and Allies Tries to Paint Consolidated Audit Trail as "Dystopian Nightmare"

Citadel Securities Leads Suit to Gut SEC Trading Surveillance

In December 2022, the SEC gave its first indication of how it would use CAT data for enforcement, quietly crediting the database with uncovering one of the biggest front-running schemes ever. Nuveen trader Lawrence Billimek was charged with tipping off Oregon retiree Alan Williams about stocks the asset-management giant was planning to buy, netting them $47 million in illegal profits.

Legal experts say the pair’s insider trading probably wouldn’t have been caught without the CAT.

Major insider-trading cases have often focused on single-market events like merger announcements. In the Nuveen case, the SEC used the CAT to track some 1,697 intraday equity trades made by Williams, finding he had a 97% “win rate” over a five-year period. The chances of that occurring randomly were less than one in a trillion, the SEC said.

Terraform Labs Calls $5.3 Billion SEC Fraud-Fine Bid Unjustified

The US Securities and Exchange Commission claimed in its lawsuit against Terraform and Kwon, the inventor of the failed TerraUSD stablecoin, that the firm’s collapse in 2022 wiped out $40 billion in investor assets and shook the cryptocurrency world.

But in a filing Wednesday, Terraform lawyers argued the firm’s “offers and sales of tokens occurred almost entirely outside the US,” and that the SEC provided no evidence to suggest Terraform and Kwon’s “limited activities in the US directly caused any losses, much less the billions the SEC seeks in disgorgement.”

CZ’s Trial Proves it Pays to Cooperate

The sentence is more than CZ’s lawyers had asked for (they were bargaining for house arrest at most), but less than both the official sentencing guidelines (around one year) and what U.S. Department of Justice prosecutors sought (36 months). We don’t know exactly why CZ received the sentence he did. But it’s notable that, instead of fighting extradition, CZ willingly came to the U.S. to stand trial. The outcome is the latest signal that if caught doing a crime, cooperate, cooperate, cooperate.

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It’s worth noting CZ wasn’t alone in complying with the U.S. government, but Binance itself also bent the knee. Once an entity that bragged about not having a home base, Binance has agreed to admit an “independent compliance monitor” to oversee the transactions that happen on the platform for the next three years. That could be invaluable data for government agencies looking to track down criminals leveraging blockchains.

As CZ Gets His Sentence, Michael Lewis Should Rewatch ‘Star Wars’

When movie rights for the book were shopped around Hollywood, the pitch letter said, as reported in 2022, that Lewis “likens [SBF and Binance’s Changpeng “CZ” Zhao] to the Luke Skywalker and Darth Vader of crypto” – and it wasn’t hard to deduce that SBF was, in the “Big Short” author’s view, the good guy and CZ the bad guy.

Well, so much for that.

SBF got a quarter century in prison. CZ was just sentenced to four months, and the judge, when explaining why he wasn’t harsher on the former Binance CEO, said, “Everything I see about you and your characteristics are of a mitigating nature.” Also: “There’s no evidence that the defendant was ever informed” of illegal activity at Binance, the judge said.

Contrast that with what a judge told SBF when deciding the length of his prison stay: “The scale of his crimes is measured not just by the amount of money that was stolen, but by the extraordinary harm caused to victims, who in some cases had their life savings wiped out overnight.” Also, SBF never offered “a word of remorse for commission of terrible crimes.”

U.S. Financial Markets Regulator Names First Chief Artificial Intelligence Officer

The Commodity Futures Trading Commission has named its first chief artificial intelligence officer, responding to the Biden administration’s push to govern the use of AI across the federal government.

The derivatives markets regulator has named Ted Kaouk, who currently serves as its chief data officer and director of its data division, to the role. Kaouk will help develop the agency’s strategy to oversee and enforce the financial markets.