SEC Charges Former Co-CEOs of Bitwise with Misleading Investors, Falsifying Documents

SEC Charges Former Co-CEOs of Tech Start-Up Bitwise Industries for Falsifying Documents While Raising $70 Million From Investors

The Securities and Exchange Commission today announced charges against Jake Soberal and Irma Olguin, Jr., the former co-CEOs of Fresno, California-based private technology services startup Bitwise Industries Inc., for misleading investors about the company’s finances. Soberal and Olguin have agreed to resolve the charges against them.

The SEC’s complaint alleges that Soberal and Olguin made material misrepresentations and falsified documents concerning Bitwise’s cash position and historical financial performance while raising approximately $70 million from investors in 2022. According to the complaint, Soberal and Olguin created and provided investors with falsified bank records and a fake audit report that showed, respectively, inflated cash balances and higher revenues than Bitwise actually generated. Soberal and Olguin’s alleged misrepresentations and falsified materials painted Bitwise as a healthy, growing business with favorable financial performance. In reality, and as Soberal and Olguin allegedly knew, Bitwise faced constant cash shortages and was often on the brink of failure because it was unable to generate sufficient funds from its operations. As alleged, Soberal and Olguin’s scheme came to light in May 2023 when Bitwise failed to make payroll and abruptly furloughed—and then terminated—all of its hundreds of personnel.

“Head Of Legal And Compliance” For Multibillion-Dollar Cryptocurrency Pyramid Scheme “OneCoin” Pleads Guilty

Damian Williams, the United States Attorney for the Southern District of New York, announced that IRINA DILKINSKA pled guilty today in Manhattan federal court to wire fraud and money laundering charges in connection with her participation in the massive OneCoin fraud scheme. OneCoin, which began operations in 2014 and was based in Sofia, Bulgaria, marketed and sold a fraudulent cryptocurrency by the same name through a global multi-level-marketing (“MLM”) network. As a result of misrepresentations made about OneCoin, victims invested over $4 billion worldwide in the fraudulent cryptocurrency. Today, U.S. District Judge Edgardo Ramos accepted DILKINSKA’s guilty plea.

Auditors Decry Plan to Broaden Liability for ‘Innocent Mistakes’

A lone error in judgment could kill auditors’ careers under a proposal that would lower the bar for certain disciplinary actions, audit firms and other stakeholders warned the US accounting oversight board.

The proposed rule changes would have a chilling effect on the profession, curbing collaboration among audit leaders and team members while crimping interest in a field that has struggled to attract newcomers, auditors and business groups said in letters to the Public Company Accounting Oversight Board.

More than two dozen letters responded to a September proposal that would lower the liability threshold from reckless to negligent….

World’s Biggest Bank ICBC Forced to Trade Via USB Stick After Russia-Linked Hack

Industrial & Commercial Bank of China Ltd.’s US unit had been hit by a cyberattack, rendering it unable to clear swathes of US Treasury trades after entities responsible for settling the transactions swiftly disconnected from the stricken systems. That forced ICBC to send the required settlement details to those parties by a messenger carrying a thumb drive as the state-owned lender raced to limit the damage.

The workaround — described by market participants — followed the attack by suspected perpetrator Lockbit, a prolific criminal gang with ties to Russia that has also been linked to hits on Boeing Co., ION Trading UK and the UK’s Royal Mail. The strike caused immediate disruption as market-makers, brokerages and banks were forced to reroute trades, with many uncertain when access would resume.

The incident spotlights a danger that bank leaders concede keeps them up at night — the prospect of a cyber attack that could someday cripple a key piece of the financial system’s wiring, setting off a cascade of disruptions. Even brief episodes prompt bank leaders and their government overseers to call for more vigilance.

“This is a true shock to large banks around the world,” said Marcus Murray, the founder of Swedish cybersecurity firm Truesec. “The ICBC hack will make large banks around the globe race to improve their defenses, starting today.”

Law firm Allen & Overy hit by ‘data incident’

Allen & Overy has suffered a “data incident”, the London-founded law firm said on Thursday, after social media posts suggested it had been hacked by the Lockbit cybercrime gang.

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In June, Britain and France’s cyber watchdog agencies warned that hackers are increasingly targeting law firms in an attempt to steal data that could tip the balance in legal cases.

France Crypto Bets Exceed Investments in Stocks or ETFs

A new survey on the investing mindset of the French people shows that nearly one in four own some kind of investment, and half of those who do first dipped their toes during the pandemic. It turns out that the cryptocurrency craze injected some YOLO energy here as well: More French people own crypto (9%) than stocks (7%) or ETFs (2%).

A deeper dive into the post-Covid newcomers reveals they’re mostly men, far more into crypto and NFTs than traditional investors, and get their advice more from social media or friends than professionals. A significant majority are into gambling and sports betting, which have become increasingly digital and widespread in recent years.

Sam Bankman-Fried Has Fallen. Long Live Crypto?

Only time will tell if this transformation to a more mature, mainstream post-FTX era for crypto is wishful thinking or not. There are signs it won’t occur without friction. PayPal Holdings Inc.’s plan to develop a stablecoin was swiftly met with an SEC subpoena. Coinbase Global Inc. is mired in an almost-existential fight with the SEC, which sued the largest US exchange in June for allegedly failing to register with the agency as a broker, an exchange or a clearing firm.

Any hopes that lawmakers in the US will pass bills to provide much-needed legal clarity to the crypto industry are slim, given the dysfunction on display in Congress. Even if that happens, there isn’t a long list of examples of governments preventing financial asset bubbles or the painful busts that inevitably follow. For better or worse, that’s a job typically done by the market itself—and on its own timeline, including the $2 trillion crypto wipeout last year that destroyed Bankman-Fried’s FTX empire.

FBI Director Wray criticizes selection of new headquarters site, citing ‘potential conflict’

In his unusually pointed letter to staffers, Wray said the FBI has “concerns about fairness and transparency in the process and GSA’s failure to adhere to its own site selection plan,” adding that a senior GSA executive overruled a board decision and picked land that is owned by the executive’s previous employer, the Washington Metropolitan Area Transit Authority.

A three-member panel had initially determined that Springfield, Virginia, was the best location. The decision of a political appointee overseeing the process to reject career officials’ “unanimous” recommendation, Wray wrote, wasn’t “‘inherently inappropriate,’ but it is ‘exceedingly rare.’”

“In particular, the FBI observed that, at times, outside information was inserted into the process in a manner which appeared to disproportionately favor Greenbelt, and the justifications for the departures from the panel were varied and inconsistent,” Wray said.

Crypto Exchange FTX’s FTT Token Almost Doubles on Gensler Comments

FTT, the native token of defunct cryptocurrency exchange FTX, has surged by 90% following comments from U.S. Securities and Exchange Commission (SEC) chairman Gary Gensler, who warned that if anybody wants to get involved in crypto, they must “do it within the law” following a series of bids to reboot FTX.

Top 5 SEC Developments

We summarize below some of the most important SEC enforcement developments from the past month, with links to primary resources. This month we examine:

–A string of settled charges for alleged violations of the Whistleblower Protection Rule;

–Charges against an electronic trading firm and its broker-dealer subsidiary for allegedly making false and misleading disclosures regarding protecting customer trading data and preventing trader access to material non-public information (“MNPI”);

–Settled charges against a registered investment adviser for alleged misstatements regarding the integration of environmental, social, and governance (“ESG”) factors into its investment process;

–Two revenue recognition enforcement actions against public companies and certain senior executives for accounting fraud and misleading disclosure violations; and

–Enforcement sweeps focused on alleged violations of the Marketing Rule and failures by both corporate insiders and the public companies where they worked to timely report holdings and transactions of public company stock.