SEC's Grewal Details "Five Principles of Effective Cooperation"

“The Five Principles of Effective Cooperation in SEC Investigations,” Remarks at Securities Enforcement Forum West 2024

Today, I’d like to answer those questions by first making clear the very real benefits of cooperating with Commission investigations, and then sharing with you five principles of effective cooperation — principles that you can use to not only guide conversations with clients making the decision to cooperate, but also as a roadmap in making the case for cooperation credit when advocating to Enforcement staff.

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Now, turning to the “Five Principles of Effective Cooperation” The behaviors that can earn cooperation credit from the Commission are no secret. They’re laid out in the Commission’s Seaboard Report and in its Policy Statement Concerning Cooperation by Individuals. They include: self-policing, self-reporting, remediation and, broadly, cooperation. I’d like to share my views on each of them, as well as a fifth: collaboration, which, I think, is the throughline that runs across many of the recent matters where the Commission has rewarded cooperation.

U.S. Lawmaker at Center of Crypto Negotiation Predicts Digital Assets Law by Next Year

Rep. Patrick McHenry (R-N.C.) vowed the crypto industry won’t have long to wait to get U.S. regulations, now that the U.S. House of Representatives has shown the way.

“We will have crypto law within the next year, and I can say that with certainty,” McHenry, the chairman of the House Financial Services Committee told an audience Wednesday at CoinDesk’s Consensus 2024. “Crypto policy is inevitable, and crypto law is inevitable.”

Companies Rethink Insider Trading Policies After Novel SEC Win

The Wall Street regulator’s victory, likely to eventually reach a federal appeals court, is forcing companies to take a second look at their own insider trading policies. Some have expanded those policies to explicitly address shadow trading, according to a Bloomberg Law search. Others are considering narrowing their prohibitions, hoping to limit employees’ exposure.

“Companies across the board are taking the Panuwat verdict seriously,” said Edward Imperatore, a Morrison & Foerster LLP partner and former federal prosecutor.

The case also raises questions about how much influence companies’ policies have on insider trading law, which can result in civil and criminal penalties. Congress has never defined insider trading, leaving regulators and courts to sketch out its contours.

SEC Charges Advisory Firm Mass Ave Global and Co-Founder and CEO Winston Feng with False Statements and Undisclosed Conflicts

The Securities and Exchange Commission today instituted settled proceedings against formerly registered investment adviser Mass Ave Global Inc. (MassAve) and its co-founder and CEO Winston M. Feng for making false and misleading statements to investors in MassAve’s flagship opportunity fund. To settle the SEC’s charges, MassAve agreed to pay a civil penalty of $350,000, and Feng agreed to pay a civil penalty of $250,000. In addition, Feng, who is also the chief investment officer and portfolio manager at MassAve, is suspended for 12 months from industry-related work.

According to the SEC’s orders, from 2020 to 2022, New York City-based MassAve, an investment adviser that made Asia-focused investments and that held more than $1 billion in regulatory assets under management, made a series of materially false and misleading statements about its flagship opportunity fund’s holdings and exposures. The orders found that some of the false statements were the result of modifications Feng made to underlying portfolio data, which MassAve then included in investor communications, such as its monthly tear sheets, summary portfolio snapshots, and top 10 position lists. In addition, according to the SEC’s orders, from late 2022 to early 2023, MassAve did not report to its investors a conflict of interest arising from MassAve’s other co-founder operating a separate hedge fund in China. The SEC’s order against MassAve also found failures in the firm’s compliance policies and procedures.

Tesla’s $56 Billion Pay Package for Elon Musk Opposed by Calpers CEO

Calpers, the largest state public pension fund in the US, tentatively plans to vote against a proposed $56 billion pay package for Tesla Inc. Chief Executive Officer Elon Musk, a sign of opposition from a major investor.

“As of today, minus the conversation that has yet to happen with Tesla, we would not be voting in favor of that proposal,” Marcie Frost, CEO of the California Public Employees’ Retirement System, said Wednesday in an interview with CNBC. “We do not believe that the compensation is commensurate with the performance of the company.”

Disbarred Attorney Pleads Guilty to Promoting $9.5M Cryptocurrency Ponzi Scheme

A disbarred California attorney pleaded guilty yesterday to conspiring to operate a cryptocurrency Ponzi scheme that defrauded victims of more than $9.5 million.

According to court documents, David Kagel, 85, formerly of Beverly Hills, conspired to fraudulently induce victims to participate in a cryptocurrency Ponzi scheme. Kagel and his co-conspirators promoted investment programs that falsely guaranteed high-yield profits and promised to use artificial intelligence trading bots to trade victims’ investments in cryptocurrency markets. The Ponzi scheme promoter falsely told victims that Kagel, as the promoter’s attorney, held Bitcoin then equivalent to approximately $11 million in escrow that guaranteed victims’ investments against loss for any reason. To create a false sense of security and trust, Kagel provided letters to victims on his firm’s letterhead to fraudulently confirm the promoter’s false statements. Kagel admitted that he and his co-conspirators used victims’ funds for their own personal benefit.

U.S. Treasury Isn’t Trying to Ban Crypto Mixers, Top Official Says

FinCEN’s proposal – along with an increasing number of enforcement actions by the U.S. Department of Justice against mixing services including Tornado Cash and Samourai Wallet – have been seen by many in the industry as evidence of a coming attempt to ban crypto mixing in the U.S. entirely, which the Treasury is firmly denying.

“At the end of the day, this [proposal] is not a ban on mixers,” Nelson said. “This is a proposed rule designed to drive transparency.”

Nelson said he’s sympathetic to crypto users’ desires for financial privacy, but suggested that the industry and Treasury should work together to find ways to enhance privacy without enabling terrorist financing.