Lawyers (and "BigLaw BabyLawyers") Rack Up Massive Hours on Binance, Coinbase, FTX Matters

Lawyers Cash In on Binance, Coinbase ‘Ultimate Fight’ With SEC

Fees from the lawsuits the SEC filed last week could stretch from $50 million to $100 million, said Farshad Ghodoosi, an assistant professor of business law at David Nazarian College of Business and Economics at California State University, Northridge.

Binance, its chief executive Changpeng Zhao, and Coinbase have assembled all-star defense teams of former top SEC lawyers who now work at high-powered firms including Sullivan & Cromwell, Wachtell, Lipton, Rosen & Katz, Gibson Dunn, Milbank, Latham & Watkins and WilmerHale.

“They’re hiring the best of the best because it is really the future of centralized exchanges that is on the line in the United States,” said Ghodoosi, who has written about the extent of litigation facing crypto companies. “This is their ultimate fight.”

Emoji Enforcement: Surely you can’t be serious.

During this year’s annual FINRA conference, a panel of officials announced that in connection with retaining and supervising electronic messages, firms might have to begin reviewing emojis to determine whether they constitute reportable customer complaints.

FINRA’s proclamation appears to be problematic for firms. First, FINRA didn’t announce whether technology exists to find, let alone, translate emojis. Second, emojis are constantly being added. Finally, the meaning of emojis depends on context and the “space-time continuum,” including the generation bracket of the sender and recipient. For example, the thumbs up emoji 👍used to mean, “good job,” but for Gen Z-ers, it’s more of an insult about something you botched, rather than a positive sign, and sometimes it means, “sure, whatever” in response to something you’ve said. Without industry consultation about these issues, it’s easy to predict what will happen next: 😡.

SEC – Binance Hearing Transcript/Highlights/Predictions

Yesterday afternoon, Senior U.S. District Judge Amy Berman Jackson told a courtroom packed with more than 60 attorneys that she would prefer if the SEC and Binance worked out an agreement on their own instead of having her rule on the SEC’s motion for a temporary restraining order, which originally sought to freeze all of Binance’s U.S. assets.

Here is my analysis, some predictions and a link to the transcript….

Gary Gensler’s Catch-22 Vision of ‘Regulated’ Crypto Brokers

Novelist Joseph Heller coined the now-common term in his novel of the same name. In Heller’s screwball antiwar tragedy, “Catch 22” was a circular bureaucratic rule, designed by the U.S. government to prevent draftees from leaving the World War II-era military. According to the (fictional) rule, you could only get out of the Army if you could prove you were crazy – but if you wanted to get out of the Army, you were clearly all too sane.

Gary Gensler’s SEC seems to have relied on similar logic when imagining its preferred crypto market structure: You’re free to launch a regulated crypto exchange, as long as it doesn’t actually enable the purchase or sale of crypto.

This point was driven home by the (audibly frustrated) Representative Mike Flood (R-NE), who asked Kaplan a pair of simple questions: Does Prometheum allow users to buy and sell ether (ETH)? What about bitcoin (BTC)?

Kaplan’s answer to each question was a curt, faintly embarrassed no.

Ex-US congressman seeks no prison time at July sentencing for insider trading conviction

Buyer’s attorneys told the judge who will sentence their client that Buyer has suffered substantially as a result of the prosecution and conviction.

The case has “irreparably damaged his reputation, tarnished his achievements and lifetime of service, and continue to bring shame and humiliation to him and his family,” the lawyers said.

They said he lost all of his consulting clients after he was indicted and his two businesses “crumbled,” erasing average yearly gross income of about $2.2 million that existed from 2018 to 2021. Now, they produce no income, the lawyers said.

As a result of the conviction, he will lose his Virginia and Indiana bar licenses, and he can never again consult for and advise Fortune 500 companies or any others where he could have access to insider information, they said.

“The cost of litigation has also been substantial, causing Mr. Buyer and his wife to sell most of their assets, including their home, condo, and two cars,” the lawyers said. His wife will have to go back to work at age 65, they added.

SEC’s Hirsch faces the music: ‘What the hell are you doing?’

Despite acknowledging critiques of “regulation by enforcement,” Hirsch pushed back on the categorization.

The commission has had rules on the books dating back to the 1940s. While the SEC has put forward a “sincere effort” to provide guidance where it can, “we’re not your lawyers,” Hirsch said.

“You have to hire attorneys, and we are an agency of attorneys, accountants and other professionals,” he said. “Then we have to try to have a dialogue that’s productive, but we can’t tell you what the law is.”

Coinbase has said the company has had more than 30 meetings with the SEC, claiming the regulator had declined to identify which assets on its platform might be securities.

Hirsch said: “To the extent that you don’t get the answer you’re looking for and those discussions don’t prove to get you what you want — which is presumably a clean bill of health — that may say more about the conduct you’re engaged in than about the other side’s willingness to engage in the conversation.”

Former SEC chair Jay Clayton feels ‘vast majority’ of crypto tokens are securities

Former SEC Chairman Jay Clayton has reiterated his position that many cryptocurrencies could be defined as securities, even as the crypto industry continues to combat the U.S. Securities and Exchange Commission over the regulator’s prohibitive stance toward the industry.

“I’ve said this for a long time: I think the market has evolved, but many, if not the vast majority, of the tokens that were sold for cash would fall within the definition of a security in America,” Clayton, now a senior policy advisor and counsel at Sullivan & Cromwell LLP, said at the R3 CordaDay conference on Wednesday.

The definition of a security is “intentionally broad and flexible,” Clayton noted. But, he added that there’s a chance that something once labeled a security, “might not always be a security.”

So what could cause that shift? Present utility versus future utility, Clayton said.

In Sam Bankman-Fried Case, U.S. Withdraws New Charges

Federal prosecutors investigating the collapse of the FTX cryptocurrency exchange said late Wednesday that, at least for now, they would withdraw several of the charges facing the company’s founder, Sam Bankman-Fried.

In a court filing, the prosecutors said they would proceed to a trial in October without pursuing five of the 13 charges against Mr. Bankman-Fried — a set of accusations that the government added to the crypto mogul’s indictment in the months after he was extradited from the Bahamas in December. Among those charges was a bank fraud count, as well as an allegation that Mr. Bankman-Fried bribed a foreign government.

ESG Rule Changes by EU, SEC and Others Set to Shake Up Sustainable Investing

Over the past decade, ESG investment funds have become a wildly popular corner of finance. Money poured in even though there was little oversight to determine which funds could fairly claim that they focused on environmental factors, social issues or questions of corporate governance. Now there’s a vigorous shakeout. Around the world, regulators are writing — and revising — rules to govern these strategies. In Europe, that led some of the world’s biggest fund managers to strip the coveted top ESG tag from about €200 billion ($215 billion), or more than a third, of client funds from July 2022 through March this year. In the US, where the term is embroiled in partisan politics, the pool of assets carrying the ESG tag has, by one measure, shrunk by more than half over the past two years as definitions shifted. And questions around terminology remain unsettled, feeding accusations that ESG amounts to nothing more than “greenwashing.”