SEC Charges Linus Financial with Offer and Sale of Unregistered Crypto Assets

Linus Financial Agrees to Settle SEC Charges of Unregistered Offer and Sale of Securities

The Securities and Exchange Commission today announced settled charges against Linus Financial, Inc. for failing to register the offers and sales of its retail crypto lending product, the Linus Interest Accounts. The SEC determined not to impose civil penalties against Linus Financial because of the Nashville-based company’s cooperation and prompt remedial actions.

According to the SEC’s order, in or around March 2020, Linus Financial began to offer and sell Linus Interest Accounts in the United States. These accounts allowed U.S. investors to tender U.S. dollars to Linus Financial in exchange for Linus Financial’s promise to pay interest. Linus Financial converted investors’ cash into crypto assets, pooled the crypto assets, and controlled how the pooled assets were used to generate income for Linus Financial itself and for investors’ interest payments. The order finds that the Linus Interest Accounts were offered and sold as securities, and that the offers and sales did not qualify for an exemption from SEC registration. Therefore, Linus Financial was required to register its offers and sales of the Linus Interest Accounts.

Fourth Top FTX Executive Pleads Guilty Ahead of Sam Bankman-Fried Trial

Ryan Salame, a former top executive at the cryptocurrency exchange FTX, pleaded guilty on Thursday to criminal charges linked to the sweeping fraud case against FTX’s founder, Sam Bankman-Fried, a move that raises the pressure on Mr. Bankman-Fried ahead of his trial next month.

In a federal courtroom in downtown Manhattan, Mr. Salame pleaded guilty to a campaign finance law violation and a charge of operating an unlicensed money transmitting business.

Mr. Salame said he had made millions in political contributions at the direction of Mr. Bankman-Fried. The contributions were labeled loans from FTX’s sister company, the crypto hedge fund Alameda Research.

Russian Businessman Sentenced to Nine Years in Prison in $93 Million Hack-to-Trade Conspiracy

A Russian businessman was sentenced today in federal court in Boston for his involvement in an elaborate hack-to-trade scheme that netted approximately $93 million through securities trades based on confidential corporate information stolen from U.S. computer networks.

Vladislav Klyushin, a/k/a “Vladislav Kliushin,” 42, of Moscow, Russia, was sentenced by U.S. District Court Judge Patti B. Saris to nine years in prison. Klyushin was also ordered to forfeit $34,065,419 and pay restitution in an amount that will be determined at a later date. In February 2023, Klyushin was convicted by a federal jury of securities fraud, wire fraud, gaining unauthorized access to computers, and conspiracy to commit those crimes. Klyushin was arrested in Sion, Switzerland in March 2021 and extradited to the United States in December 2021.

Klyushin was charged along with two Russian co-conspirators: Ivan Ermakov and Nikolai Rumiantcev. Two others, Mikhail Vladimirovich Irzak and Igor Sergeevich Sladkov, were charged in a separate indictment. All four co-conspirators remain at large….

‘Dumb Money’ Lampoons Wall Street Titans With a Knowing Eye

“Dumb Money” is the kind of midbudget, formula-busting, thinking-person’s movie that isn’t supposed to get made anymore, much less receive a wide, studio-backed release in theaters.

It tells the bizarre true story of small investors — a nurse, college students, a YouTube personality known as Roaring Kitty — who created a Wall Street frenzy over the troubled video game retailer GameStop during the pandemic. Determined to teach professional investors a lesson, and hopefully get rich in the process, they pushed GameStop shares to a stratospheric level in early 2021, for a time putting the squeeze on sophisticated hedge funds that had bet that GameStop shares would fall.

The $30 million film, directed by Craig Gillespie (“Cruella”), contains withering depictions of real-life Wall Street figures like Kenneth C. Griffin, the Citadel titan; Steven A. Cohen, the hedge fund manager and New York Mets owner; and Gabe Plotkin, whose hedge fund lost billions in the squeeze. In one colorful scene, Mr. Cohen, played by Vincent D’Onofrio, sits in a mansion snarfing a club sandwich and snorting with laughter on the phone with Mr. Plotkin, played by Seth Rogen.

Plaintiff Law Firm’s Client Solicitation Practices to Face Scrutiny

In the motion, defense counsel argued that the plaintiff’s firm had issued press releases encouraging company shareholders to join the suit and even drafted a complaint before finding a plaintiff. In their motion, the defendants argue that “This lawsuit is the product of a concerted advertising campaign launched by [the plaintiff’s counsel] a mere three weeks ago. The advertising campaign violates multiple bar rules and is a clear violation of the rules protecting the company from illegal advertising.” The motion adds that the plaintiff’s firm “formulated a lawsuit and a specific desire to sue the Defendants and went fishing for clients to make that happen.”

The motion alleges further that the law firm’s press releases were widely disseminated advertisements, and that the advertisements were not approved by the Florida Bar prior to their publication. The motion argues further that the law firm “went so far as to prepare a form complaint before it ever had a client.” The law firm “then posted the plaintiff-less complaint – which is nearly identical to that now on file – on its website in a plain effort to solicit its desired claimant.” The law firm “got what it wanted. But in doing so it also violated the Florida Bar Rules and this Court’s holdings on improper solicitations.”

SEC’s Gary Gensler Should Be Focus of More Hearings on Treatment of Crypto: U.S. Senator

Sen. Bill Hagerty (R-Tenn.) previewed the lawmaker ire in store for U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler as Congress returns from its summer break, with Hagerty accusing the regulator of stomping on crypto innovation during a speech on Thursday.

He and other senators on the Senate Banking Committee will get their chance to question Gensler directly next week when he appears for a routine hearing on SEC oversight on Sept. 12. But that’s not enough for Hagerty, who told a Cato Institute audience that the Democrat-controlled panel should be scheduling more hearings to specifically examine what Gensler and SEC are doing to the U.S. crypto sector.

Boss of Failed Crypto Exchange Gets 11,000-Year Sentence

Faruk Fatih Ozer, who ran crypto exchange Thodex until it imploded in 2021, was sentenced to 11,196 years in prison by a Turkish court for crimes including fraud.

Delivering its verdict late Thursday, the court in Istanbul sentenced Ozer and his two siblings to similar-length jail terms, finding them guilty of aggravated fraud, leading a criminal organization and money laundering.

New York Judge Previews Crypto Thinking in Uniswap’s ‘Huge’ Win

A court ruling declining to hold Uniswap liable for alleged scams on its platform is a shield for decentralized crypto exchanges, and offers a preview for Coinbase Global Inc.’s closely watched fight with securities regulators.

Uniswap was sued by crypto users seeking to hold the exchange responsible after they lost money buying what they called “scam tokens” on the platform. It was one of the first efforts to apply US securities laws to a decentralized exchange, attorneys said.

Dismissing the suit last week, Judge Katherine Polk Failla in the US District Court for the Southern District of New York said the exchange wasn’t liable under existing law for users’ alleged losses.

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More broadly, the ruling provides a sense of Failla’s thinking about the interaction between crypto and securities laws. Her views are important: the judge is overseeing the Securities and Exchange Commission’s suit against Coinbase, a case that could reshape the industry.

KPMG cuts pay for US partners on gardening leave as talent war rages

Partners in the US arm of global accountancy firm KPMG have been told their gardening leave pay will be cut by 50% if they leave for a rival firm.

The move is the latest effort to stymie a poaching war among the Big Four firms. KPMG’s decision stands out among its other three rivals – EY, Deloitte and PwC – and would likely force firms nabbing talent to scramble for more cash to top up payments of staff they’re luring away.