SEC Dismisses Claims Against Ripple CEO, Co-Founder

US SEC drops claims against two Ripple Labs executives

The U.S. Securities and Exchange Commission dropped claims against two Ripple Labs executives in its lawsuit alleging the blockchain company violated U.S. securities law, according to a court filing in New York on Thursday.

The agency said in court papers it is dropping claims that Ripple Chief Executive Brad Garlinghouse and co-founder Chris Larsen aided and abetted sales of the cryptocurrency XRP which a judge has found amounted to unregistered sales of securities.

Crypto Influencers and ‘Degenerates’ Flock to Sam Bankman-Fried’s Trial

Mr. Bankman-Fried’s trial — on fraud charges stemming from the collapse of his FTX crypto exchange — has brought two disparate worlds into a strange collision, unleashing a hyper-online horde of crypto obsessives (or “degenerates,” as some of them call themselves) into the staid and formal environs of federal court.

As the trial has unfolded, reporters have competed for seats with crypto influencers and online personalities — at least one of whom managed to smuggle a vape pen into the courthouse. Outside the building this week, a lawyer who specializes in working with crypto investors handed out a business card emblazoned with the title “DeFi Defense Lawyer,” a reference to an experimental type of crypto known as decentralized finance. And on the witness stand, FTX executives have had to explain jargon like “FUD,” an acronym for “fear, uncertainty and doubt” that crypto advocates use to dismiss criticism.

SBF sought ‘justifications’ for missing funds, ex-FTX lawyer testifies

Cryptocurrency exchange FTX’s former top lawyer testified on Thursday that its founder Sam Bankman-Fried asked him to come up with “legal justifications” for why it was missing $7 billion in customer funds four days before the company declared bankruptcy.

Can Sun, FTX’s former general counsel, testified at Bankman-Fried’s fraud trial that the company on Nov. 7, 2022, asked investment fund Apollo for emergency capital to cover a wave of customer withdrawals.

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“He asked me to come up with legal justifications,” Sun testified. “It basically confirmed my suspicion that had been rising all day that FTX did not have the funds to satisfy customer withdrawals, and that they had been misappropriated by Alameda.”

Sun said he told Bankman-Fried later that day that he could not identify any legal justifications. FTX declared bankruptcy on Nov. 11, 2022, leaving customers with billions of dollars of losses.

SEC’s Life Sciences Actions Utilize Novel Tools and Theories

The U.S. Securities and Exchange Commission and U.S. Department of Justice have touted a renewed focus on traditional forms of securities fraud, including insider trading, accounting fraud and disclosure fraud involving public companies.

Government scrutiny and enforcement efforts have increasingly mounted against the life sciences and health care industry. Recent months have seen a wave of enforcement actions against publicly traded life sciences and health care companies and their executives involving allegations of insider trading or accounting fraud.

These actions underscore the need for public companies to implement internal controls for both accounting and trading activity to mitigate risk.

Bitcoin Is Not Great for Murder

The third classic problem is that, if you are using Bitcoin to pay for goods and services, there is a good chance that you are paying for something illegal, and Bitcoin payments are traceable. So if you send someone $16,000 worth of Bitcoin to buy a $16,000 thing, (1) some of your money will go missing in transit, (2) the Bitcoins you send won’t be worth $16,000 and you’ll have to send some more, and (3) the $16,000 thing was a murder and now you are in prison.

James Wan knows these problems well….

Ninth Circuit Revives in Part Facebook Privacy-Related Securities Suit

I have long thought that privacy-related issues represent one of the important emerging areas of D&O liability exposure. One case that I thought represented an example of this emerging risk was the securities class action lawsuit brought against Facebook related to the Cambridge Analytica user data privacy scandal. However, when the court granted the motion to dismiss in the case, the relevance of the Cambridge Analytica case to the discussion of privacy-related issues seemed diminished. But the appellate court has now reversed in part the lower court’s dismissal, restoring the relevance of the case to the privacy-related discussion and highlighting the importance of privacy concerns as an area of emerging D&O liability risk. The Ninth Circuit’s October 18, 2023, opinion in the case can be found here.

GBTC Spot Bitcoin ETF Case Awaits Final Ruling

According to procedure in such cases, the D.C. Circuit Court of Appeals had seven days to close the books on this matter after the SEC chose last week not to appeal the court’s ruling that the agency must scrap its rejection of Grayscale’s ETF application. That deadline is arriving on Friday, and there are a couple of possibilities for what the court does next: It can just terminate the case without comment, or it could issue some further direction to the SEC on what comes next.

That’s the sticking point in this eagerly watched legal dispute. Consequential uncertainties remain over what happens now with Grayscale’s application. The SEC could technically seek to reject it again for different reasons, or the regulator could give in and approve this and other ETF applications, such as those from financial giants BlackRock and Fidelity.