Third Circuit Orders Independent Probe of FTX with Estimated Fees of Over $100 Million

Bankman-Fried’s FTX to get bankruptcy examiner to probe collapse – US appeals court

A federal appeals court on Friday ordered the appointment of an independent bankruptcy examiner to investigate the Nov. 2022 collapse of FTX, the cryptocurrency exchange once led by the convicted Sam Bankman-Fried.

Reversing a lower ruling, the 3rd U.S. Circuit Court of Appeals in Philadelphia agreed with a government watchdog that appointing an examiner was mandatory under the U.S. Bankruptcy Code because of the large size of FTX’s case, including the alleged misappropriation of $10 billion of customer assets.

Spot Bitcoin ETFs Spurned as Vanguard Pulls All Crypto Products

Amid the euphoria unleashed by the long-awaited debut of the first fully fledged Bitcoin exchange-traded funds in the US, Vanguard sparked uproar last week with its pointed decision to refuse to offer the new ETFs on its gigantic trading platform.

#BoycottVanguard started trending on X, accumulating thousands of posts, with users pledging to pull their money from the asset management giant.

Vanguard’s response? To double down. The firm, which controls $8.6 trillion, has not only snubbed Bitcoin-spot products, it’s yanked futures-backed Bitcoin funds from its platform, too. That means it now offers no crypto products whatsoever, unlike its peers.

CEO of Crypto Investment Platform Charged in Multi-Million Dollar International Fraud Scheme

This morning, Horst Jicha, a German national, will be arraigned at the federal courthouse in Brooklyn on an indictment charging him with securities fraud and conspiracies to commit securities fraud, wire fraud, and money laundering for his role in a cryptocurrency scheme called USI Tech. Jicha was arrested, and the charges against him were unsealed when he entered the United States on December 23, 2023 attempting to vacation in Miami, Florida.

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As alleged in the indictment, USI Tech was an online platform that began in Europe and purported to make cryptocurrency investments easy and accessible to the average retail investor. In reality, it was a multilevel marketing scheme that relied on investors recruiting other investors below them to buy various purported cryptocurrency investments. Jicha was one of USI Tech’s founders and its Chief Executive Officer. In 2017, Jicha brought USI Tech to the United States and aggressively marketed it to U.S. retailers on social media and through in-person presentations in which he falsely guaranteed high returns on investments and made false claims about the legality of the platform’s investment offerings.

In early 2018, after USI Tech faced regulatory scrutiny in the United States, it ceased all U.S. operations overnight, leaving investors with no ability to access their money and resulting in millions of dollars in losses. Much of the missing money – Ether and Bitcoin valued at approximately $150 million as of the date of his arrest – was sent to cryptocurrency deposit addresses controlled by Jicha after USI Tech ceased operations. Jicha had not returned to the United States for over five years, until the date of his arrest.

ADM Places CFO on Leave, Cuts Earnings Forecast Amid Probe

Archer-Daniels-Midland Co. placed its chief financial officer on leave and cut its earnings outlook pending an investigation into the agricultural trading giant’s accounting practices.

CFO Vikram Luthar has been put on administrative leave, effective immediately, and Ismael Roig will serve as interim CFO, the company said in a statement on Sunday.

The shares were down as much as 16% in premarket trading on Monday. If the decline holds, the stock will be set for its biggest drop since April 2005, wiping out almost $6 billion of market value.

The probe, which is in response to a voluntary document request by the Securities and Exchange Commission, surrounds certain practices and procedures with respect to the company’s nutrition reporting segment, ADM said. It is cooperating with the SEC.

NCLA Amicus Brief Asks Supreme Court to End SEC Gags on Targets of Settled Enforcement Cases

Today, the New Civil Liberties Alliance filed an amicus curiae brief in Elon Musk v. Securities and Exchange Commission urging the Supreme Court to grant Musk’s cert petition and strike down SEC’s “Gag Rule” censoring every American with whom it settles a regulatory enforcement case. For over 50 years, SEC has forbidden all enforcement targets from even truthfully criticizing their cases in public.

SEC is limiting Mr. Musk’s future speech and ability to speak publicly without preclearance or criticize the agency as a condition of settlement. This is a quintessential instance of prior restraint, which the Supreme Court has called “the most serious and the least tolerable infringement on First Amendment rights.” But SEC has no power to regulate the future speech of those with whom it settles! Musk’s case is emblematic of a much larger problem: imposing this restriction on all Americans who settle enforcement cases with SEC under its Gag Rule forces them to abandon their constitutional rights, an action that is itself blatantly unconstitutional. Supreme Court precedent forbids the government from conditioning anyone’s ability to receive a benefit on surrendering their constitutional rights. NCLA is confident that the Court will recognize this fatal flaw—among others—in SEC’s gag orders.

The phone-transcript mystery in the Morgan Stanley block trading settlement

For the record: The statement of facts in the case includes multiple transcribed phone calls between Passi and hedge funds. But they weren’t obtained easily. The wording is intriguing:

“These calls were not recorded by Morgan Stanley, nor did they take place on a regularly-recorded line, unless otherwise noted. Rather, the Government obtained the calls described below, as well as other calls in which Morgan Stanley employees discussed block trades, in the course of its investigation.”

Between the lines: The behavior in question took place — by Passi’s own admission — between 2018 and 2021. But Passi’s damning transcribed phone calls took place at the very end of that date range, in May 2021 or later.

Be smart: The government doesn’t say exactly how it obtained the calls. But there are a few possibilities.

Bitcoin Funds Are Here. But You Probably Don’t Need Them.

The S.E.C. this month approved 11 new E.T.F.s that track the price of Bitcoin, and the decision has been heralded by promoters of Bitcoin — and of the new funds — as an important event, legitimizing Bitcoin as an asset class.

I don’t think so.

The S.E.C.’s action, in itself, doesn’t give Bitcoin any new stature. It merely adds Bitcoin funds to a long list of E.T.F.s that are perfectly legal and simple to buy, but that don’t belong in anybody’s core portfolio. I’d put the Inverse Cramer Tracker in this category, as well as E.T.F.s that track a single stock like Tesla, PayPal or Nvidia, or that use leverage to triple a bet on energy prices or quadruple one on the S&P 500. I could go on and on.

Simply being legal doesn’t make a strategy sensible for most investors….