SEC Pushes Decisions on Pending Bitcoin ETF Applications to October

BlackRock, Fidelity, Invesco Spot BTC ETF Application Decisions All Delayed by SEC

The U.S. Securities and Exchange Commission (SEC) has delayed until October making a decision on all of the spot bitcoin exchange-traded fund (ETF) applications filed by applicants including BlackRock, WisdomTree, Invesco Galaxy, Wise Origin, VanEck, Bitwise and Valkyrie Digital Assets earlier this year, according to agency filings on Thursday.

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Today’s orders see the SEC holding off on any firm decision, instead extending existing comment periods and allowing for greater public feedback on the applications. The new deadlines for Wise Origin, Galaxy and WisdomTree are October 17, and it’s two days later for Valkyrie. Bitwise now has an October 16 deadline.

DOJ, SEC Investigate Tesla Over Secret Glass House Project

Manhattan federal prosecutors are investigating Tesla’s use of company funds on a secret project that had been described internally as a house for Chief Executive Elon Musk, people familiar with the matter said.

The U.S. Attorney’s Office for the Southern District of New York has sought information about personal benefits paid to Musk, how much Tesla spent on the project—which called for a spacious glass structure to be built in the Austin, Texas, area—and what it was for, the people said.

Bankman-Fried, prosecutors spar over anticipated blame-the-lawyers defense

It’s hard to know, based on the existing public record, whether testimony or documents from FTX’s counsel will help Bankman-Fried. His lawyers argue that the FTX lawyers’ evidence will help them show that Bankman-Fried acted in good faith, under the auspices of experienced attorneys who were involved in virtually all of the matters at issue in the government’s case.

But prosecutors have repeatedly countered that Bankman-Fried hasn’t even shown he received advice directly from FTX lawyers, let alone that he solicited and followed that advice in good faith. If Bankman-Fried deceived the company’s counsel, the government argued, their advice is irrelevant to his defense.

Right now, we have no idea what Fenwick & West or FTX in-house lawyers would say if they were called to testify. We may get a bit more insight before the trial, depending on Kaplan’s disclosure order. Or the judge may decide that Bankman-Fried’s advice-of-counsel assertions are too speculative even to justify exploring the issue in front of the jury.

It’s easy to blame your lawyers in the abstract. Less so when you have to prove it.

Two sides of the same coin: analyzing the recent Ripple and Terraform decisions

On July 13, 2023, Judge Analisa Torres issued a summary judgment decision in SEC v. Ripple Labs, Inc., No. 20 Civ. 10832, ECF No. 874 (S.D.N.Y. July 13, 2023), holding in part that Ripple’s sales of XRP through trading platforms did not constitute securities transactions while its direct sales to institutional investors did. In contrast, on July 31, 2023, Judge Jed Rakoff rejected Judge Torres’ distinction based on how the digital assets were sold in SEC v. Terraform Labs Pte. Ltd., No. 23 Civ. 01346, ECF No. 51 (S.D.N.Y. July 31, 2023), denying defendants’ motion to dismiss the Securities and Exchange Commission’s claims that they violated federal securities laws in part by selling various digital assets through trading platforms.

Although Judge Torres and Judge Rakoff disagreed on whether sales through trading platforms may constitute securities transactions, the facts and procedural postures of the two cases differ in meaningful ways that may explain the outcomes and shed light on how future courts may view this legal issue.

SEC Charges Recidivist and Others in Real Estate Offering Fraud

The Securities and Exchange Commission today filed a complaint against Brady Speers, Chatree “Ben” Thiranon, and GHAP, LLC d/b/a Blue Star Texas (“Blue Star”) for running a fraudulent house-flipping scheme that raised almost $8 million from 40 investors through the unregistered sale of promissory notes. Speers, Thiranon, and Blue Star represented that they would use investor funds to buy, renovate, and sell residential properties. The SEC’s complaint alleges, however, that the defendants misused more than $2.9 million of investor funds to pay personal expenses and to make Ponzi-like payments.

According to the SEC’s complaint, Speers, Thiranon, and Blue Star, a company they owned and controlled, raised funds by misrepresenting and omitting material information. The SEC’s complaint alleges that Blue Star told investors that their funds were secured by property interests in the real estate assets underlying the investments, when in reality Blue Star only secured investor interests in isolated instances and sometimes never even held title to the properties at issue. The SEC also alleges that Blue Star rolled over investor funds to other projects without required authorization. Additionally, the complaint alleges that Blue Star touted Speers’s business experience and background without also disclosing that the SEC charged him with violations of the antifraud provisions of the federal securities laws in 2015 and that he filed for personal bankruptcy on two separate occasions.

NFT Hype Fades in Crypto Market as Sales Volume Plunges

Nonfungible tokens, most popularly associated with the digital artwork and other collectibles recorded on crypto blockchains, have lost most of their value after once capturing the imagination of crypto enthusiasts as the next big thing….

Monthly trading volume for NFTs plummeted 81% between January 2022 and July 2023, data from DappRadar shows. Over the same period, monthly NFT sales figures have dropped 61%, per DappRadar. And floor prices for blue-chip NFTs like Bored Ape Yacht Club and CryptoPunks are at more than two-year lows, according to industry data tracker NFT Price Floor.

“When you look at the charts, everything is down,” said Lorenzo Melendez, president at NFT project Pudgy Penguins — named for its digital art featuring cartoonish, cutesy versions of the flightless birds. “You are seeing just a lot of capitulation, ‘We don’t know what to do or where to go’.”

The SEC Strikes Out Again on Crypto With Grayscale

Congress exempted private funds from the Investment Company Act so they wouldn’t be subject to the same level of regulation as public funds that are available to less sophisticated retail investors. But Mr. Gensler claims the SEC can regulate private fund advisers under the Investment Advisers Act, which makes it “unlawful for any investment adviser . . . to engage in any act, practice, or course of business which is fraudulent, deceptive, or manipulative” as defined by the commission.

Yet the SEC doesn’t demonstrate fraud or harm to private fund investors. Under Mr. Gensler’s argument, there’s no limit to the SEC’s power. The Supreme Court this autumn will revisit its Chevron doctrine that defers to regulatory discretion. Mr. Gensler is giving Justices another reason that judges shouldn’t defer to regulatory interpretations that ignore the law.