Poll: Fix Crypto or Let it Burn?

Crypto Is Worth Fixing. Regulators Should Get Moving

Standing idly by and letting crypto collapse is no way to maximize the benefits from this nascent technology. Instead, legislators and regulators should do their jobs: Ensure customer assets are protected and that markets have integrity; require stablecoins — tokens with values pegged to fiat currencies — to be fully backed by safe assets denominated in those currencies, such as short-term sovereign debt and central bank reserves; work with the industry to establish best practices, and enforce those standards both domestically and internationally.

So far, regulators have chosen errors of omission over commission, opting for inaction rather than risking mistakes. The result is many billions of dollars of losses, and an erosion of trust in both the industry and regulation. They need to be much more proactive.

Hawley introduces PELOSI Act banning lawmakers from trading stocks

Sen. Josh Hawley (R-Mo.) has introduced a bill that would ban members of Congress from trading and owning stocks, using the name of his legislation to take a jab at Rep. Nancy Pelosi (D-Calif.).

Hawley on Tuesday introduced the Pelosi Act — or the Preventing Elected Leaders from Owning Securities and Investments Act — renewing a legislative push to curtail stock trading by lawmakers that has failed over the last few years.

“Members of Congress and their spouses shouldn’t be using their position to get rich on the stock market,” Hawley tweeted in announcing his bill.

Elon Musk Never Jokes

What. What. Look, again, my assumption was always that the SEC has a videotape of Musk saying it was a weed joke. Perhaps I am wrong. But what if I’m right! If you are a plaintiffs’ lawyer in this case, you had better be calling the SEC for that videotape. If you are the SEC — and the SEC has taken a lot of abuse from Musk in recent years and wouldn’t mind sticking it to him a bit — you had better be calling the plaintiffs’ lawyers and offering it to them. Frankly if you are the SEC you ought to clip that videotape and email it to me to publish in this newsletter! Honestly what is this newsletter for if not to litigate whether Elon Musk’s habit of buying, or pretending to buy, companies for prices that involve the number “420” is a weed joke?

Insider Trading – 2022 In ReviewInsider trading is an area where the SEC’s efforts to use data analytics have really paid off. Over a decade ago the SEC’s Division of Enforcement formed the Analysis and Detection Center within the Division’s Market Abuse Unit’s to use data analysis software to detect suspicious trading patterns. To highlight the group’s work, on July 25, 2022, the SEC brought three insider trading cases that had been originated through the Center’s data analytics work (link here). In addition to the three cases highlighted in the release, dozens of other cases involving insider trading rings, disparate and seemingly unconnected traders, and traders repeatedly trading in front of market moving information have been uncovered by the group’s work over the years. No one knows how much insider trading is really occurring, but the government’s ability to find seemingly hidden suspicious trading should worry anyone trying to get away with it.

SEC Issues $28 Million Award to Joint Whistleblowers

The Securities and Exchange Commission today announced an award of more than $28 million to joint whistleblowers who provided critical information and assistance in an SEC enforcement action.

The joint whistleblowers’ detailed information prompted the opening of the SEC staff’s investigation and significantly contributed to the success of the action. They provided substantial analysis and ongoing assistance, which resulted in the return of millions of dollars to harmed investors.

Recent Trends in Securities Class Action Litigation: 2022 Full-Year Review

NERA recently published “Recent Trends in Securities Class Action Litigation: 2022 Full-Year Review,” which shows new federal securities class action suits filed in 2022 has declined for the fourth consecutive year.

The 2022 edition of the annual report utilizes NERA’s proprietary database of securities class actions, which spans more than three decades. Senior Consultants Janeen McIntosh, Svetlana Starykh, and Edward Flores, the report’s authors, consider litigation trends related to the number of filings, the economic sectors involved, the number of settled and dismissed cases, settlement values, and plaintiffs’ attorneys’ fees and expenses.

Highlights from the 2022 report include:

–205 new federal securities class action suits were filed in 2022, compared to 210 in 2021 and 431 in 2018.

–25 crypto federal class action suits were filed, more than double the number of similar suits filed in 2021….

SEC Charges Investment Club Manager for Misappropriating Investor Funds

The Securities and Exchange Commission filed fraud charges against Austin D. Ellison-Meade, alleging that he fraudulently raised millions of dollars from investors in an investment club he managed called Baycap.io. According to the SEC complaint, Meade falsely claimed that Baycap.io’s trading strategy was based on a proprietary algorithm Meade developed that could accurately predict stocks that were poised for growth.

The SEC’s complaint alleges that from at least 2019 through 2021, Meade raised at least $2.8 million for Baycap.io from approximately 31 individual investors based on representations that he would use the funds to engage in algorithmic securities trading and that the funds would be readily available upon request. The SEC complaint further alleges that Meade never used investor funds to trade securities, but rather misappropriated money from Baycap.io to pay for personal expenses like luxury automobiles and make Ponzi-like payments.