"It Sucks Right Now"

After a Crazy Week in Crypto, Investors Wonder What’s Next

“It sucks right now,” said Jeff Dorman, chief investment officer at Arca, a digital-asset investment firm. “Companies are laying people off, activity is down, crypto is back to being the laughingstock of Wall Street.”

Rare Jury Verdict in Securities Fraud Lawsuit

Regular readers of this blog know that class action securities fraud lawsuits almost never go to trial. But “almost never” is not the same as “never.” Every now and then, there is an unusual case that does go to trial. This past week, a federal court jury reached a verdict in one of those rare and unusual cases. On June 14, 2022, a federal jury in the Southern District of New York held after trial that Michael Reger, co-founder of Dakota Plains Holdings, Inc. was liable for securities fraud and control person fraud, but not for insider trading. Reger was the sole remaining defendant in the case after the other defendants last month reached a settlement. A copy of the jury’s June 14, 2022 verdict form can be found here.

SEC Statement on Senate Confirmation of Jaime Lizárraga and Mark Uyeda

We congratulate Jaime Lizárraga and Mark Uyeda on their successful Senate confirmations to serve as Commissioners. On behalf of the entire agency, we would like to welcome them both back to the Securities and Exchange Commission. We look forward to their many contributions to the agency and our work on behalf of the American public.

FBI says fraud on LinkedIn a ‘significant threat’ to platform and consumers

The scheme works like this: A fraudster posing as a professional creates a fake profile and reaches out to a LinkedIn user. The scammer starts with small talk over LinkedIn messaging, and eventually offers to help the victim make money through a crypto investment. Victims interviewed by CNBC say since LinkedIn is a trusted platform for business networking, they tend to believe the investments are legitimate.

Typically, the fraudster directs the user to a legitimate investment platform for crypto, but after gaining their trust over several months, tells them to move the investment to a site controlled by the fraudster. The funds are then drained from the account.

What’s “Controversial” About ESG? A Theory of Compelled Commercial Speech under the First Amendment

The SEC’s proposed climate disclosure rules create an opportunity to reflect on the limits that the First Amendment places upon securities regulation. As regular readers of this blog know, the SEC has proposed rules to make companies disclose their “climate risks” along with their greenhouse gas (“GHG”) emissions and certain climate-related financial metrics. Unlike existing rules, which require disclosure of climate-related matters when they have a material effect on business operations, the proposed rules largely dispense with the concept of materiality and, where they do not disregard it altogether, significantly alter its meaning. These rules thus raise the question of whether there is any limit on the SEC’s ability to impose them and, in particular, whether there is any First Amendment constraint on the SEC’s authority to mandate disclosures.

My paper, What’s “Controversial” About ESG? A Theory of Compelled Commercial Speech under the First Amendment, analyzes these questions. It argues that there is indeed a First Amendment limit to SEC action and that the proposed climate rules exceed those limits.

Crypto Hedge Fund Three Arrows Capital Considers Asset Sales, Bailout

Cryptocurrency-focused hedge fund Three Arrows Capital Ltd. has hired legal and financial advisers to help work out a solution for its investors and lenders, after suffering heavy losses from a broad market selloff in digital assets, the firm’s founders said on Friday.

“We have always been believers in crypto and we still are,” Kyle Davies, Three Arrows’s co-founder, said in an interview. “We are committed to working things out and finding an equitable solution for all our constituent.”