SEC Chair Gensler: Amending "No Deny" Policy Would Alter Impact of Enforcement Settlements

Statement on the Denial of a Rulemaking Petition Regarding the Commission’s No-Admit/No-Deny Policy

As the Commission under then-Chair Bill Casey said at the time of the adoption: “a refusal to admit the allegations is equivalent to a denial, unless the defendant or respondent states that he neither admits nor denies the allegations.”

Entering into a settlement is a consequential choice for both the SEC and the defendant. The Commission, in agreeing to settle a case, is relinquishing the opportunity to present the case in court. The defendant, on the other hand, relinquishes the right to defend the case in court, in the press, and in the eyes of the public. Both parties are agreeing to a set of terms based upon this 1972 policy.

More than 50 years on, I think this policy has served the public and the Commission well. I believe that amending this policy in the manner proposed by the Petitioner would alter the impact of enforcement settlements if defendants could deny any wrongdoing in the court of public opinion and dismiss sanctions as the cost of doing business without the Commission being able to revive its ability to have its day in court.

FTX Hack Mystery Possibly Solved: U.S. Charges Trio With Theft, Including Infamous Attack on Crypto Exchange

The U.S. federal government on Wednesday charged three people with a yearslong phone hacking conspiracy that culminated in the infamous theft of $400 million from FTX as Sam Bankman-Fried’s crypto exchange was collapsing.

In an 18-page indictment filed in D.C. court, prosecutors accused Robert Powell, Carter Rohn and Emily Hernandez with conspiracy to commit wire fraud and identity theft in their operation of a SIM swapping ring that targeted fifty victims between March 2021 and April 2023.

Genesis reaches $21 mln SEC settlement in bankruptcy wind-down

Crypto lender Genesis Global has settled a U.S. Securities and Exchange Commission lawsuit over its defunct Gemini Earn lending program, agreeing to a $21 million fine that will be paid only if Genesis is able to fully repay customers in its bankruptcy.

The deal will help Genesis avoid the costs and risks of defending itself from an SEC lawsuit that had accused the company of illegally selling securities. The settlement will allow Genesis to focus on repaying customers and other creditors, according to documents filed in U.S. Bankruptcy Court in Manhattan on Wednesday evening.

STATEMENT OF ADMINISTRATION POLICY on S.J. Res. 50

The Administration strongly opposes passage of S.J. Res. 50, a joint resolution to disapprove of the SEC rule relating to informing investors about cybersecurity incidents and establishing uniform standards for corporate disclosures for oversight and governance of cyber risks.

Ransomware attacks are up 45 percent year over year. The lack of transparency by public companies about cyber incidents impacting their operations and data is fueling increasing cyberattacks across all sectors and all industries. Greater transparency about cyber incidents, as required in the SEC’s rule, will incentivize corporate executives to invest in cybersecurity and cyber risk management.

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If the President were presented with S.J. Res. 50, he would veto it.

The Same Old Song: Securities Enforcement Cases Against Executives

Following the financial crisis of 2008, the federal government faced harsh criticism for not bringing enough cases against individuals. Since then, government lawyers have consistently crooned the same tune. It doesn’t change much from year to year: A Department of Justice (DOJ) or Securities and Exchange Commission (SEC) leader says individual accountability is extremely important, makes some policy tweaks, and confirms the government will continue to focus on holding bad guys and gals accountable.

This is all fine and good. At a high enough level of abstraction, everyone wants truly bad actors to face the music. As we say to our kids, “Your actions have consequences.” But how do we decide who deserves career-crippling public sanctions or even a one-way ticket to the clink? And how do we decide that, even though mistakes were made, no one person should take the fall?

In this post, I’ll give you a few tips on some of the things that make government attorneys want to bring securities enforcement actions against individuals….

Don’t Get Too Excited, but the SEC Approved Bitcoin ETPs

Equally important is the question of whether the approval of spot bitcoin ETPs is a harbinger of opportunities for other crypto assets that least resemble securities—for example, could an ETP holding spot or ETH futures be next?—or whether the SEC will try to hold the line here. Chairman Gensler noted that the SEC is “merit neutral” and doesn’t take a view on particular assets underlying an ETP, but he also cautioned that this very narrow approval should not be seen as willingness to approve listing standards for other crypto asset securities. It seems likely that the SEC will continue to be challenged in this by market participants that believe their products comply with the requirements of the federal securities laws and that wish to participate in the regulated market. How the SEC handles these opportunities will dictate whether the SEC under Gensler facilitates capital formation through a more robust trading market regulated by the SEC or allows the current market uncertainty to persist.

Larry David on Super Bowl Ad for Sam Bankman-Fried’s FTX: ‘Like an Idiot, I Did It’

Comedian Larry David was self-effacing when asked this week about his infamous Super Bowl commercial for Sam Bankman-Fried’s cryptocurrency exchange FTX, which collapsed months after the ad.

“I asked people, friends of mine who were well-versed in this stuff, ‘Should I do this ad?'” he told the Associated Press in an interview this week. “They said, ‘Yeah, this is totally on the up and up,’ … So, like an idiot, I did it.”

More Tornetta

A couple of other points on this week’s Delaware Chancery Court decision in Tornetta v. Musk, invalidating Elon Musk’s big pay package.

First: “The lawyers who represented victorious Tesla shareholders may be in line for a record-breaking payout worth hundreds of millions, or even billions, of dollars,” reports Sujeet Indap at the Financial Times. It is logically possible for a Delaware judge to conclude that (1) Elon Musk’s successful efforts, as CEO of Tesla, to take Tesla’s market value from $59 billion to $650 billion, were not worth $55.8 billion to Tesla shareholders, but (2) some lawyers’ successful efforts to make Musk give back the $55.8 billion are worth billions of dollars to Tesla shareholders. And she does in fact get to decide. But I think that if you put it to a vote of Tesla shareholders — “would you rather give Musk $55.8 billion of Tesla stock for running Tesla, or these lawyers $1 billion of Tesla stock5 for suing Tesla?” — you’d get a pretty large majority for Musk? I’m not Musk’s biggest cheerleader or anything, but I feel like he has probably done a lot more for Tesla than these lawyers have.