Rep. Sherman: Crypto Would be Banned But For "Money and Power Behind It"

Congress’ leading crypto skeptic is a Southern California congressman

A growing movement in Congress wants to bring more regulation to the nearly $2-trillion crypto industry, which is currently overseen by a patchwork of state laws and federal agencies. Sherman, however, doesn’t just want to regulate cryptocurrencies, he wants them outlawed.

“I don’t think we’re going to get [to a ban] anytime soon,” Sherman told The Times, noting that the crypto industry is a powerful player when it comes to campaign donations. “Money for lobbying and money for campaign contributions works, or people wouldn’t do it; and that’s why we haven’t banned crypto. We didn’t ban it at the beginning because we didn’t realize it was important, and we didn’t ban it now because there’s too much money and power behind it.”

ESG must be split in two

The flaw is that ESG has carried two meanings from birth. Regulators have never bothered disentangling them, so the whole industry speaks and behaves at cross purposes. One meaning is how portfolio managers, analysts and data companies have understood ESG investing for years. That is: “taking environmental, social and governance issues into account when trying to assess the potential risk-adjusted returns of an asset.” Most funds are ESG on this basis. Weather, corporate culture or poor governance always influence valuations to some degree.

But this approach is very different to investing in “ethical” or “green” or “sustainable” assets. And this second meaning is how most people think of ESG — trying to do the right thing with their money. They prefer a company that doesn’t burn coal, eschews nepotism and has diverse senior executives.

Two completely different meanings then. One considers E, S and G as inputs into an investment process, the other as outputs — or goals — to maximise. This conflict leads to myriad misunderstandings.

SEC Charges Former Rail Freight Trader with Accounting Fraud

The Securities and Exchange Commission today charged David Pope, a rail freight trader formerly employed by agricultural cooperative CHS Inc., for manipulating the values and quantities of certain of the company’s rail freight contracts. In December 2018, CHS restated its publicly filed financial statements from 2014 through 2018 to correct errors caused by Pope.

As alleged by the SEC, Pope reported false values for shuttle loader train contracts to CHS’s accountants in an effort to smooth out the rail freight trading desk’s financial results. According to the SEC’s complaint, he also reported fictitious shuttle contracts to the company’s accountants for the same purpose. The SEC further alleged that Pope provided altered emails concerning CHS’s shuttle contracts to the company’s external auditor to conceal his misconduct.

Crypto Regulation Is Not So Complex, Crypto Skeptics Say

Speakers at Monday’s “Crypto Policy Symposium,” a gathering of cryptoskeptics, or “nocoiners,” dismissed the common calls for “regulatory clarity” from crypto proponents as a “distraction.” Regulations around crypto are perfectly clear, they said—and that’s why crypto enthusiasts don’t like them.

“An Oscar should go to whomever first coined ‘regulatory clarity,’” said Santa Clara University associate law professor Stephen Diamond.

In a panel entitled, “Are Regulators and Regulations fit to meet the Crypto Challenge?” Diamond said: “There is regulatory clarity—it’s fairly straightforward and it’s been in place for a long time. Hopefully there won’t be any dramatic shift to redefine this very stable understanding of financial markets.”

UCLA’s Elon Musk Law School Class

So when I saw that UCLA Law professor Stephen M. Bainbridge was offering a course next year called “Law of Elon Musk,” I reached out to get his thoughts on Musk’s past brushes with courtroom drama and what this may reveal about what’s in store as the Twitter trial nears. We spoke just days before a whistleblower complaint from Twitter’s former head of security, Peiter “Mudge” Zatko, became public. Since then, Musk has begun to change tactics, using Zatko’s complaint as a basis for new arguments. Whether the judge will let him do so, or whether that change will be effective, still remains to be seen.

Lombard Odier Says ‘Shocking’ Cyber Risks Trigger ESG Rethink

Lombard Odier Investment Managers said the “shocking” results of an analysis into cybersecurity risks lurking in portfolio companies has led it to apply ESG processes far more broadly to protect its funds from losses.

The Swiss asset manager is now on a campaign “to push these companies to get their basic cyber hygiene in order,” said Jeroen van Oerle, portfolio manager of Lombard Odier’s Global FinTech fund. The firm wants to treat “cybersecurity risks the same way as we look at climate-related risks, or water usage risks, or corporate governance risks,” he said.

Is the SEC Moving Beyond Disclosure?

The SEC’s proposed rules would prevent investors and advisors from entering into certain arrangements when creating a private investment fund—a subset of funds that exist outside of most current SEC regulation under the Investment Company Act of 1940. For example, the rules would ban certain fee arrangements, agreements to limit liability for advisor services, and loans from private fund clients.

Grundfest notes that the investors likely to be affected by this rule would be sophisticated investors who know what to expect when negotiating an investment advisory agreement, even though one of the goals of SEC regulation is to protect unsophisticated investors. So these investors—who put money into venture capital firms, private equity funds, and hedge funds—would receive greater protections than unsophisticated investors, which Grundfest argues would create “internal contradictions” between the levels of protections for different kinds of investors.