Tiny Non-Profit Seeks to Rein in SEC Enforcement

A New Plan to Fight Back Against SEC Overreach – From Agency Alumni

The four argued that the SEC was violating defendants’ First Amendment rights by essentially imposing gag orders that bar them from discussing the facts of cases. Though it was ultimately part of a losing effort (the high court declined to take the case a couple of months later), the critics’ decision to join forces captivated the securities bar. Some see it as akin to one of those James Bond villain meetings, or perhaps the teaming up of the Penguin, Riddler, Catwoman and the Joker – with a mission of going after the regulator.

How did it happen? Not by coincidence.

The story behind the Supreme Court brief begins with an organization called the Investor Choice Advocates Network, which was recently formed by alumni of the SEC’s enforcement unit who now work in private law practice….

‘Cyclops Blink’ Shows Why the SEC’s Proposed Cybersecurity Disclosure Rule Could Undermine the Nation’s Cybersecurity – Lawfare

On March 9, the Securities and Exchange Commission (SEC) proposed a new rule intended to enhance and standardize disclosure requirements for cybersecurity risks. Among other things, the rule requires all publicly traded companies to report all “material” cybersecurity incidents within four business days of determining the event’s materiality. But shockingly, this notice requirement does not include an exception for active investigations by law enforcement, coordination with intelligence and national security agencies, or compliance with court orders that may restrict the timing of permissible cybersecurity disclosures—nor does it provide an exception where premature disclosure of an incident could cause significant damage to other vulnerable businesses or government entities. In theory, this could mean that a company would be required to disclose a breach before the vulnerability could even be patched.

The SEC has not thought through this proposed rule carefully enough….

Arthur Andersen’s Legacy, 20 Years After Its Demise, Is Complicated

Two decades after Arthur Andersen LLP’s downfall, the firm that audited Enron Corp.’s financial statements remains a punchline for many, though some prefer to remember it as an influential institution deserving of respect.

The accounting firm stopped auditing public companies on Aug. 31, 2002, and wound down its operations. Its demise turned the Big Five into the Big Four: Deloitte Touche Tohmatsu Ltd., Ernst & Young LLP, KPMG LLP and PricewaterhouseCoopers LLP.

For many of the thousands of auditors who worked at Arthur Andersen, in particular, its collapse remains a painful reminder of how fragile livelihoods—and even a company’s existence—can be.

SEC Charges Hedge Fund Portfolio Manager with Fraud

According to the SEC’s Complaint, from at least November 2016 through February 2018, Lee A. Bressler served as portfolio manager for the Carbon Master Fund, L.P. The SEC alleges that Bressler represented to investors that the fund followed a conservative investment strategy emphasizing capital preservation and low risk. The SEC further alleges, however, that while making these misrepresentations, Bressler engaged in unauthorized high-risk trading in two undisclosed accounts that were margined against the fund’s assets. As alleged, this trading not only violated the fund’s stated investment mandate but also exposed the fund’s assets to extreme risk of loss, which came to fruition in February 2018. According to the SEC, Bressler’s unauthorized trading caused the complete loss of investor capital in the fund.Source: Lee A. Bressler (Release No. LR-25488; Aug. 30, 2022)

Coinbase, FTX, Binance get inquiries from Congress on crypto scams

In its first foray into the crypto sector, the House Committee on Oversight and Reform is dialing up the pressure on federal agencies and crypto exchanges to protect Americans from fraudsters.

In a series of letters sent Tuesday morning, the committee asked four agencies, including the Department of the Treasury, the Federal Trade Commission, the Commodity Futures Trading Commission, and the Securities and Exchange Commission, as well as five digital asset exchanges — Coinbase , FTX, Binance.US, Kraken, and KuCoin — for information and documents about what they are doing, if anything, to safeguard consumers against scams and combat cryptocurrency-related fraud.

Criminal Crypto Use Is Growing on the Dark Web, but That’s Just Half the Story

Chainalysis, for example, releases an annual Crypto Crime Report that outlines the use of cryptocurrency across several types of crimes like ransomware, scams, violations of broad countrywide sanctions and terrorism financing. We dove into the 2021 report, which was published in February, to figure out how much truth there was in the notion that crypto is only being used by criminals. And while these are critically important types of crime to pay attention to, we are going to zoom in specifically on dark web marketplaces.

Here’s what the numbers have to say.

Can Privacy-Focused Bitcoin Projects Avoid OFAC Sanctions?

But OFAC’s action against Tornado Cash raises the stakes. Rather than sanctioning an individual or an organization tied to terrorism or drug trafficking, the agency has made it a crime for otherwise law-abiding users to use privacy-enhancing software to cover their tracks on the Ethereum blockchain.

What if OFAC similarly sanctioned one of Bitcoin’s decentralized mixing protocols? Miners operating in the U.S. or jurisdictions where Washington holds sway might have a stronger incentive to block transactions sent to or from these mixers, the way Marathon briefly censored transactions involving sanctioned entities.

This is a problem Bitcoin developers have been working on for over a decade. Not only are they improving obfuscation techniques, but they are working on ways to make it harder to distinguish between a “regular” bitcoin transaction and one that has interacted with a mixer after the fact.