SEC, DOJ Charge Former "Visiting Attorney" at Gibson Dunn with Insider Trading

SEC Charges Former Attorney at U.S.-Based Global Law Firm with Insider Trading

The Securities and Exchange Commission today announced insider trading charges against Romero Cabral da Costa Neto for trading based on material, nonpublic information concerning a client of the global law firm where he worked as a visiting attorney from Brazil.

According to the SEC’s complaint, in 2023, during Costa’s one-year term of employment as a visiting attorney at the law firm, he accessed confidential information about the law firm’s work on the biopharmaceutical company Swedish Orphan Biovitrum AB’s acquisition of CTI BioPharma Corp. (CTIC). The complaint alleges that, on May 9, 2023, the day before the deal was publicly announced, Costa purchased more than 10,000 shares of CTIC. He then allegedly sold those shares in violation of securities laws and the firm’s policies, including its policy against insider trading, on the day of the announcement, realizing a profit of more than $42,000. In addition to CTIC, Costa traded in the securities of several other issuers represented by the law firm, close in time to material announcements by those companies.

U.S. Charges Two Alleged Founders of Crypto Platform Tornado Cash With Money Laundering

U.S. prosecutors charged two individuals allegedly behind decentralized cryptocurrency mixer Tornado Cash, saying they conspired to launder illicit funds and to violate U.S. sanctions.

The indictment, filed by the U.S. Attorney’s Office in the Southern District of New York and unsealed Wednesday, charged Roman Storm and Roman Semenov in connection with the alleged creation, operation and promotion of Tornado Cash, a platform that enables users to exchange cryptocurrencies with relative anonymity.

SEC Enhances the Regulation of Private Fund Advisers

To enhance transparency, the final rules will require private fund advisers registered with the Commission to provide investors with quarterly statements detailing certain information regarding fund fees, expenses, and performance. In addition, the final rules will require a private fund adviser registered with the Commission to obtain and distribute to investors an annual financial statement audit of each private fund it advises and, in connection with an adviser-led secondary transaction, a fairness opinion or valuation opinion.

To better protect investors, the final rules will prohibit all private fund advisers from providing investors with preferential treatment regarding redemptions and information if such treatment would have a material, negative effect on other investors. In all other cases of preferential treatment, the Commission adopted a disclosure-based exception to the proposed prohibition, including a requirement to provide certain specified disclosure regarding preferential terms to all current and prospective investors.

FTX Founder Sam Bankman-Fried Intends to Blame Fenwick & West Lawyers in His Defense

Sam Bankman-Fried intends to argue he was acting in “good faith” in loaning funds to FTX and Alameda executives, in setting Signal messages to auto-delete and in setting up a set of North American entities because he was following the advice of lawyers, including law firm Fenwick & West.

The FTX founder’s defense team published a letter Wednesday detailing his planned “advice of counsel” strategy, saying he would produce evidence that both in-house and Fenwick attorneys “were involved in reviewing and approving decisions related to these matters.”

“Evidence of the defendant’s reliance on counsel is relevant to the question of intent and is not limited to situations where the defense can establish that the defendant formally sought out the advice of counsel, received legal advice, and followed the advice given,” the letter said.

Will SBF’s ‘Blame-the-Lawyers’ Strategy Work?

Joseph Klayman, U.S. head of fintech, blockchain and digital assets at Linklaters, said the strategy’s success or otherwise would come down to whether SBF consistently followed the advice he was given. “In my view, it would be premature to take a view concerning the likelihood of success,” she told CoinDesk in an email response.

“With this type of defense, I would expect that this would involve a highly facts-and-circumstances-specific inquiry, including with respect to the substance and form of the advice allegedly given and whether any such alleged legal advice was followed without variation and in good faith.

Tully agrees with Klayman. “If the lawyers did look over everything and gave him this advice, [SBF’s] fine. However, if there’s anything in the communications that says otherwise, he’s sunk,” he said.

Charles Hoskinson: U.S SEC Is Not Coming After Cardano

Charles Hoskinson, the founder of Cardano (ADA), expressed confidence that the United States Securities and Exchange Commission (SEC) would not come after ADA, stating that the agency’s actions are politically motivated and unrelated to securities laws.

During a recent YouTube interview, Hoskinson emphasized that there has been no enforcement action taken against Cardano’s native token, ADA, thus far. He pointed out that even though ADA was mentioned as a security in a lawsuit against a crypto exchange, it does not imply that the SEC will target the project.

Sam Bankman-Fried’s FTX Bankruptcy Burning Through $1.5M in Legal Costs Every Day

The dismantling of FTX is piling up as much as $1.5 million a day in bills as lawyers and other professionals pick through the ashes of the global exchange.

The increasing cost was a point of contention at a bankruptcy hearing on Wednesday, with the creditors’ committee decrying the current rate of spending.

“They’ve now moved to a pace of almost $50 million a month in fees, with literally hundreds of lawyers, financial advisors and bankers working on them practically full time,” said Kris Hansen, a lawyer from Paul Hastings representing the creditors’ committee. “Every dollar spent in the case is essentially a dollar that creditors don’t receive.”

SEC Charges Former New Jersey Corrections Officer with Crypto Fraud Scheme Targeting Law Enforcement Personnel

The Securities and Exchange Commission today charged former New Jersey State Correctional Police Officer John A. DeSalvo with fraudulently raising funds through the unregistered offering of the Blazar Token, a crypto asset security he created but that collapsed in May 2022. The SEC also charged DeSalvo with misappropriating investor funds, much of which he sent to his personal crypto asset wallets and used to pay for a bathroom renovation.

According to the SEC’s complaint, from the Blazar Token’s launch in November 2021 to its eventual collapse, DeSalvo raised at least $620,000 from approximately 220 investors. As the complaint alleges, DeSalvo claimed that the Blazar Token would replace existing state pension systems and falsely told investors that Blazar Token was registered with the SEC; that he had arranged for Blazar Token to be purchased by automatic payroll deduction; and that investors were guaranteed to receive extraordinary returns. Ultimately, DeSalvo misappropriated and misused investor funds. According to the complaint, DeSalvo targeted law enforcement and first responders with his fraudulent schemes.

AI hype is gripping corporate America

America’s public companies are embracing artificial intelligence fever.

More than 1,000 companies mentioned the technology in their quarterly reports this summer, up from just 36 a decade ago, according to a Washington Post analysis.

5 Companies Fined for Masking Accounting Errors in Late Filings

Five companies have settled SEC charges that they didn’t inform investors of pending financial statement corrections as part of late filing notices.

The companies agreed to pay penalties ranging from $35,000 to $60,000 for not disclosing to investors substantial shifts to the companies’ financial results as required when they informed the market they couldn’t meet filing deadlines, according to separate orders the SEC released on Tuesday.

All five warned investors that previous results contained accounting errors soon after issuing the late filing notices, which spanned 2021 and 2022, according to the SEC.