We Never Said, “Let’s Do Crime"

Balwani’s Atty Tells Jury Romance With Holmes Not A Crime

Former Theranos executive Ramesh “Sunny” Balwani’s attorney told a California federal jury during closing arguments in his criminal fraud trial Wednesday that Balwani’s romantic relationship with ex-CEO Elizabeth Holmes doesn’t prove he committed a crime, noting their text messages never say, “Let’s do crime, let’s cheat people, let’s deceive people.”

Congress should put an end to in-house courts at the SEC

Congress should give serious consideration to abolishing SEC administrative proceedings. They are not necessary to an effective securities enforcement program, and they fail to meet the standards of impartiality and fairness we expect from federal institutions.

Contrary to some observers’ fears, this would not be the end of the administrative state. It would strengthen confidence in the operations of agencies that have enforcement powers. It would say that those agencies may no longer judge their own cases and that a charge of misconduct must be supported with evidence and legal argument persuasive enough to convince an impartial and objective decisionmaker.

The crypto crime wave is real and it’s gotten worse.

The growth in crypto fraud has turned exponential in recent years. The reported losses from crypto scams in 2021 were 60 times larger than in 2018, the Federal Trade Commission reported earlier this month, with crypto now accounting for 1 out of every 4 dollars lost to fraud in the reports monitored by the agency. Over 46,000 people lost more than $1 billion in crypto to scams since 2021, but the real sum of losses is likely vastly larger because most frauds are not reported, the agency said.

Adults younger than 50, often the ones hoping to ride the surge in crypto assets, were the biggest marks: “Since 2021, $575 million of all crypto fraud losses reported to the FTC were about bogus investment opportunities, far more than any other fraud type,” the agency reported.

Financial losses specifically from NFT crimes just through May this year were already more than 600% higher than for all of 2021, with the space seeing twice as many hacks and bigger and bigger heists, according to analysis from digital privacy firm Top10VPN.

In the Shadow of Lucia: The Uncertain Future of SEC Administrative Proceedings

Will the combination of Cochran and Jarkesy lead the SEC to enter into more settlements in pending investigations or administrative proceedings?

If the SEC faces a large percentage of respondents in administrative proceedings asking for injunctions from federal district courts, this could create a logistical nuisance, if not a nightmare, for the Commission. Despite the request for 125 additional Enforcement Division personnel, the SEC still has limited resources and will need to pick and choose its battles. Will the Commission and its staff decide that it would be beneficial to show the public that it can still bring settled administrative proceedings with civil money penalties despite the constitutional questions that remain open—and, if so, will this lead to more settlements? This would appear to be contrary to a recent Law360 article reporting that there have been conflicts within the SEC staff based on “Chair Gary Gensler’s approach to enforcement and his drive for more litigation and settlement penalties.” The article also states that, “in contrast to prior SEC leadership, . . . Gensler’s top brass has pushed back more often on settlement proposals, which has produced tensions between the front office and the litigators trying to move cases across the finish line.” Time will tell whether the recent successes of constitutional challenges will affect the Commission’s willingness to agree to more settlements in administrative proceedings.

SPAC Stock Prices Reflect the End of an Era

The fad also attracted a range of Wall Street titans, athletes, and celebrities looking to get a piece of the pie by starting their own SPACs. But tumbling stock prices—especially those of more speculative, early-stage companies—have wiped out billions of dollars in value for shareholders who held SPACs after their acquisition deals. Some companies that went public via a merger with a SPAC have fallen so far that they’ve been bought by private companies or competitors at far lower prices. At the same time, a lot of blank-check companies that have yet to do a deal are coming up on big deadlines. If they don’t find a deal soon, they’ll have to return the money they raised to their shareholders.

SEC chair urges ‘one rule book’ for crypto to avoid gaps in oversight

Gensler said he was working on a “memorandum of understanding” with the CFTC, which he headed from 2009 to 2013. The SEC has jurisdiction over platforms listing tokens that are deemed securities.

If a token that represents a commodity is listed on a platform overseen by the SEC, the securities regulator would “send that information over to the CFTC”, Gensler said. The CFTC declined to comment.

“I’m talking about one rule book on the exchange that protects all trading regardless of the pair — [be it] a security token versus security token, security token versus commodity token, commodity token versus commodity token” to protect investors against fraud, front-running, manipulation as well as providing transparency over order books, Gensler said.