SEC: Internal Binance Messages Show Binance Knew of Wash Trading

Some Binance. US Crypto Trading Was a Mirage, the SEC Alleges

Internal Binance messages released by the SEC show Binance. US officials were aware the platform risked allowing wash trading from the beginning. A senior employee told the then-CEO of Binance. US, Catherine Coley, that the engine that matches trades could allow a user to trade with themselves.

“If some US compliance or regulation says we must prevent this, we will. Otherwise we will not,” the employee wrote to Coley in August 2019. A lawyer for Coley didn’t reply to requests for comment.

More than a year later, another Binance. US executive told Coley that “[a]pparently we have nothing in place to prevent wash trading? Just tested myself, sold market order into my own bid.”

Another Binance. US employee responded, “Yikes.”

SEC Signals Appeal to Crypto Ripple Ruling in Terra Response

The ruling in the Ripple case concluded that sales of Ripple’s XRP token directly to institutional investors violated the SEC’s rules, but offerings to retail investors on exchanges didn’t, delivering what was widely seen as a victory to the crypto industry.

The SEC, in a fresh filing in its lawsuit against crypto company Terraform Labs and its co-founder Do Kwon, said the second piece “creates an artificial distinction between the expectations of sophisticated institutional and retail investors.” It “improperly transforms” a decades-old test for determining when assets are securities, known as the Howey Test, into a subjective standard. The agency asked the court to reject that part of the decision and signaled that it was considering an appeal in the Ripple case.

SEC Chair Gensler Testifies on Appropriations

Gensler spoke in support of the President’s FY 2024 request of $2.436 billion for SEC operations. He noted that FY 2023 funding would bring the agency’s staffing back above where it was seven years ago, and the agency is continuing to work to fill 400 new positions. Gensler notes that the SEC is expected to be approximately 3 percent larger this year than it was in FY 2016. With respect to the Division of Corporation Finance, Gensler notes that staffing levels remain approximately 17% below FY 2016 levels, while the number of public companies has increased by 18% to 7,836. The testimony notes that the SEC is on track to move its DC headquarters, with $39.6 million requested for the moving and build out costs.

It’s the ‘Golden Age’ for Lawyers Seeking Corporate Board Seats

Public companies are increasingly looking for lawyers to become corporate directors, bringing legal expertise to the boardroom and prestige to attorneys who can navigate potential conflicts.

The “golden age” for lawyers seeking board seats is largely a product of the “rise of regulatory forces,” said Paul Williams, a former chief legal officer at Cardinal Health Inc. Risk analysis and communications skills can be useful in that regard, said Williams, a director at two public companies and a partner emeritus at legal recruiting firm Major, Lindsey & Africa.

Number of Securities Class Action Filings Increased in First Half of 2023

The number of securities class action filings increased in the first half of 2023, according to a report released today by Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse.

The report, Securities Class Action Filings—2023 Midyear Assessment, found that plaintiffs filed 114 securities class actions in federal and state courts in the first half of 2023, a 23% increase from the second half of 2022 and in line with the semiannual average between 1997 and 2022. Six securities class actions related to the recent turbulence in the banking sector were filed (five in the first half of 2023 and one in the second half of 2022). There were 11 cryptocurrency-related filings in 2023. Of these, over half included allegations related to cryptocurrency exchanges.

“We continue to see a high level of cryptocurrency-related securities class action filings,” said Alexander “Sasha” Aganin, the report’s coauthor and a Cornerstone Research senior vice president. “If this pace continues through the rest of the year, it is likely that the total number of cryptocurrency filings will near the record high seen in 2022.”

Business Is Caught in a Diversity Trap

Big corporations are caught in a pincer. Earlier this month, 13 Republican state Attorneys General sent a letter to Fortune 100 companies, warning that their diversity, equity and inclusion (DEI) hiring practices might be illegal. Now 21 Democratic AGs are telling the same CEOs that such policies are above board and should be expanded.

“We write to reassure you that corporate efforts to recruit diverse workforces and create inclusive work environments are legal and reduce corporate risk for claims of discrimination,” the Democratic AGs advise in their letter, dated Wednesday. “In fact, businesses should double-down on diversity-focused programs because there is still much more work to be done.”

Poker-Playing Trader Loses London Bid To Halt US Insider Trading Charges

A trader accused of insider dealing lost a court bid to prevent his extradition to face US criminal charges after London judges rejected his appeal.

Joseph El Khouri, who holds dual Lebanese-British citizenship, is accused of making almost $2 million trading on inside information. US prosecutors allege that the trader and avid poker player gave lavish gifts to middlemen, including expensive hotel stays in New York, and a yacht charter in Greece, in exchange for tips as part of an international insider trading conspiracy.

Attorneys general challenge SEC’s stock buyback rule

Utah Attorney General Sean D. Reyes led 14 other states in filing an Amicus Brief on July 18 in support of the U.S. Chamber of Commerce, which is challenging the Securities and Exchange Commission’s new rules on stock buyback reporting.

The coalition of attorneys general pointed out in the brief, “…stock buybacks are an important, economically beneficial way companies return value to shareholders and reallocate capital. Corporate governance traditionally is a matter of state, not federal regulation, and Amici States oppose inefficient, burdensome regulations on stock buybacks.”