S.E.C. Investigating Near-Implosion of A.I. Hedge Fund

Situational Awareness, a once hot A.I.-focused hedge fund led by a 24-year-old, became the talk of Wall Street when it nearly imploded late last month.

Now it is attracting attention from securities regulators, too.

The Securities and Exchange Commission recently sent subpoenas to banks that handled the hedge fund’s calamitous trading and that fed it borrowed money to supersize its bets, according to three people briefed on the outreach who were not permitted to discuss it publicly.

The subpoenas asked for details on the timing of Situational Awareness’s trades and for its communications with lenders about the money it was borrowing, also known as “leverage,” two of those people said. The subpoenas additionally warned the banks to preserve any information regarding the San Francisco hedge fund.

by NYT

Las Vegas businessman convicted in $24 million 'AI supercomputer' crypto Ponzi scheme

Las Vegas businessman Brent Kovar has been found guilty of running a crypto Ponzi scheme, defrauding at least 400 investors out of $24 million, the U.S. Attorney's Office for the District of Nevada announced Monday.

Kovar was found guilty of 11 counts of wire fraud, two counts of mail fraud and two counts of money laundering following a nine-day trial. Sentencing is scheduled for Nov. 30, when Kovar faces a statutory maximum penalty of up to 280 years in prison.

by CoinDesk

New Coinbase General Counsel Charts AI-Engineered Legal Path

Coinbase Global Inc.’s new general counsel Molly Abraham is re-engineering the legal group she now leads to maximize the impact of artificial intelligence.

Abraham, who began her career two decades ago as a product development engineer at Procter & Gamble Co. — she earned a patent for a toilet training product while at the Pampers maker — is hiring a forward-deployed founding engineer for Coinbase’s law department.

The role, and another similar position with the company’s compliance team, are designed to “supercharge” innovation and automation for Coinbase lawyers that navigate a thicket of legal, policy, and regulatory challenges for the world’s second-largest cryptocurrency exchange. Eventually, Abraham envisions AI agents handling contract review, equity grants, and other functions for Coinbase, which leans on its legal group to bring new products to market.

by Bloomberg Law

SEC’s Potential Surveillance Tool Takeover Poses Budget Problems

Wall Street’s watchdog would require more money from Congress to flex a market-tracking database it’s considering taking over that’s caused clamor inside the financial industry and out.

The US Securities and Exchange Commission may decide it wants to foot the bill for the Consolidated Audit Trail, which could eat at a good chunk of the funds it currently spends elsewhere, securities attorneys say. The agency could further prune operations of the so-called CAT, potentially lowering costs and assuaging complaints from broker-dealers, private trade groups, and advocacy organizations about the multi-million-dollar database’s costs and intrusiveness. [...]

Taking from those current fees is likely just a conversation starter, said Cleary Gottlieb Steen & Hamilton LLP’s Tom Bednar, a former SEC enforcement trial lawyer.

“If they actually did that and did not then get additional federal appropriation to supplement what that does to their budget, that could be a radical change in what the SEC can do,” Bednar said. “If their funding stays exactly the same and they absorb CAT, that’s going to take a significant portion of the SEC’s budget. Or CAT’s going to have to get a lot cheaper really fast.”

by Bloomberg Law

“Biblical Levels of Insider Trading”: New Prediction Market Monetizes Anything in Livestreams

A new prediction market has entered the fold, seemingly determined to give the rampant insider trading that its competitors have become known for a run for its money.

Called “CRSHMARKET,” the platform purportedly allows users to bet on potentially any event that happens in a livestream. Gamers playing on Twitch and weird “IRL streamers” that film themselves being a public nuisance on Kick are now effectively fodder for gamblers.

“What if any livestream could become a prediction market?” the company asked in a post on X that recently went viral, which included a brief video ad. “Will her Uber arrive in under 2 minutes? Will he get her phone number? Will he score the next goal?”

These are “markets that have never existed before,” the company added, “until now.”

by Futurism