SEC Charges Destiny Robotics with False Statements About "AI Robot At-Home Assistant"

Start-Up AI and Robotics Company and CEO Settle SEC Charges

The Securities and Exchange Commission today charged Destiny Robotics Corp., an artificial intelligence (“AI”) and robotics start-up company formerly based in Miami, Florida, and Megi Kavtaradze, its founder and CEO, (collectively “Defendants”) with making false and misleading statements regarding the company’s operations and products, including a robot that would be manufactured and sold as a home companion.

The SEC’s complaint alleges that from February 2022 through March 2023, the Defendants obtained approximately $141,000 from investors by claiming to be developing the world’s first humanoid AI robot at-home assistant and companion for delivery by 2023. In truth, the Defendants were allegedly developing a robot that would have been much less sophisticated and capable than what was described to investors and had no realistic possibility of delivering the robot described to consumers by 2023. The complaint also alleges that the Defendants falsely described Kavtaradze’s qualifications and failed to disclose Kavtaradze’s personal relationship with the lead investor, while touting his endorsement of the company. Additionally, as alleged, the Defendants failed to disclose to investors that Kavtaradze used some investor funds for personal expenses.

SEC Charges North Carolina Resident with Insider Trading in Massachusetts-Based Biopharmaceutical Company

The Securities and Exchange Commission filed insider trading charges today against North Carolina resident Matthew Groom, who allegedly avoided losses of about $13,000 by trading in advance of the May 3, 2022 announcement by the Cambridge, Massachusetts-based biopharmaceutical company Spero Therapeutics, Inc. that it was suspending commercialization efforts for its lead product candidate, Tebipenem Hbr, and downsizing the company. Groom has offered to settle the SEC’s action. Among other things, he has agreed to pay a total of approximately $28,000 in disgorgement of ill-gotten gains, prejudgment interest, and civil penalties.

According to the SEC’s complaint, Groom, who worked as an information technology consultant to Spero Therapeutics and was subject to a confidentiality agreement with the company, obtained material nonpublic information about Spero’s planning for a possible workforce reduction. Groom allegedly learned this information during a call with his main point of contact at the company on the morning of March 30, 2022. According to the complaint, 21 minutes after the call was scheduled to end, Groom placed an order to sell all his Spero Therapeutics shares. The SEC alleges that Groom avoided losses of $12,936.86 when Spero Therapeutics’ share price dropped 64% after negative study results about Tebipenem Hbr were made public on May 3, 2022.

Milbank Eyes Next Generation of Regulatory Practice Leaders

The firm has also hired more veteran lawyers from the government, including Gurbir Grewal, 51, who was most recently the SEC enforcement chief and a former New Jersey attorney general. He is arriving at Milbank as a partner in its New York office.

Earlier this month, Olivia Choe, chief litigation counsel at the SEC, joined Milbank as a partner in Washington, D.C.

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In an interview, Grewal said he decided to leave the government because, after decades in public service and a long stint at the SEC, it was appropriate for him to move on and allow his deputy to take over in the interest of succession. His landing spot was very much driven by Milbank’s build and deep bench, he said.

“I wanted to go somewhere where I could leverage my experience as a prosecutor, with SEC regulatory work and investigations and litigation,” he said. “I wanted to go to a firm that had the depth of experience in litigation, white-collar and regulatory areas. And I wanted to go to a firm committed to the practice long-term.” He said Milbank “checked all the boxes.”

Musk, dogecoin investors go yet another round with post-dismissal sanctions motions

A Manhattan federal judge may have thought he’d heard the last of a securities class action by dogecoin investors who accused Elon Musk and Tesla of rigging the price of the cryptocurrency when he tossed investors’ fourth amended complaint in late August.

Oh how wrong he was.

Lawyers for Musk and the dogecoin investors’ class, who have traded vicious barbs throughout the litigation, have now filed cross-motions for post-dismissal sanctions.

Musk and Tesla contend that after filing a series of frivolous “whack-a-mole” complaints, dogecoin plaintiffs’ lawyer Evan Spencer tried to extract a settlement by obliquely offering to drop investors’ appeal in exchange for $5 million.

Spencer, in turn, insists that his complaints were all filed in good faith and were backed by “numerous scientific studies.” He moreover asserts that Musk’s outside lawyers from Quinn Emanuel Urquhart & Sullivan must be sanctioned and disqualified for improperly disclosing his confidential settlement order and trying to shut down his appeal.

With Potential Whistleblowers Around Every Corner, Companies Under Pressure to Sharpen Compliance

Regulators have put a finer point recently on what they’re looking for in risk and compliance. For example, the Department of Justice is looking at whether a company’s compliance program is well-designed, such as its policies and procedures and its training and investigation structures, Brown said.

The DOJ is also looking at whether the program is being applied “earnestly and in good faith,” and whether it actually works in practice. That could include whether it is continuously being improved and tested or whether a company investigates misconduct and remediates it.

Likewise, the U.S. Securities and Exchange Commission has its own priorities in risk assessment effectiveness. Besides an emphasis on effective controls responsive to identifying risks and clear and timely disclosure to investors, the SEC likes to see a “holistic” approach to identifying risks.

That means asking whether a company is applying what it learns across the organization and whether it makes the mistake of classifying more systemic issues as isolated incidents.

Crypto.com Sues the SEC in Texas ­– Arguments and Implications for the Cryptocurrency Industry

The outcome of this litigation has the potential to reshape the digital asset industry by either confirming or curtailing the SEC’s regulatory authority. A decision in favor of Crypto.com would signal that the SEC lacks jurisdiction over secondary-market sales of network tokens without new formal rulemaking or clear legislative authority. Conversely, if the SEC prevails, platforms like Crypto.com may be required to meet the same registration and compliance obligations as traditional securities platforms, which would impose significant costs and regulatory burdens on these companies. A variety of crypto market participants have argued that their crypto projects are not structured in such a way as to even be able to register with the SEC under current registration requirements, and that complying with SEC registration obligations would be so restrictive as to put them out of business.

Even if Crypto.com is successful in this case, there are a variety of cases pending in other courts and districts around the country that include many of the same arguments and issues. That makes it likely that SEC jurisdiction and the legitimacy of its enforcement approach may not be resolved with any uniformity for some time….