Truth Social Users Turn on the SEC

'Defund the SEC’ Becomes a Rallying Cry on Trump’s Social Media Site

The Securities and Exchange Commission is corrupt. The S.E.C. is politically motivated. Defund the S.E.C.

Some shareholders of Digital World Acquisition Corp. have had it with the commission, the nation’s top securities cop, and they are airing their views loudly. Last October, the blank check company agreed to merge with Trump Media and Technology Group, the parent company of Truth Social, the Twitter-like social media platform backed by former President Donald J. Trump. Within weeks, the S.E.C. announced an investigation. One year later, the deal still hasn’t closed.

People claiming to be angsty shareholders have taken to posting the social media equivalent of hate mail on Truth Social, attacking the S.E.C. and calling its investigation a political move. The hashtag #DWACtheSEC, a reference to Digital World’s stock symbol and a play for some on the word “whack,” is trending. There are calls to “defund the S.E.C.” Shareholders are preparing to petition the commission to end the “garbage” inquiry and approve the deal. There is even a call to pray for Digital World on a weekly video show on Rumble, a right-wing streaming media site that is a business partner of Trump Media.

Hidden Takeaways From the SEC Kardashian Case

Whatever the future for disgorgement and promotion bans, which certainly provide interesting fodder for debate securities law experts, that is beside the point.

With the Kardashian and other celebrity crypto-enforcement cases, the SEC has sent a strong signal regarding celebrities and crypto: Securities offerings are not like Rolex watches or Nike sneakers and do not lend themselves to glitzy brand ambassadorships and global social media campaigns.

Elon Musk Is Back to Square One With Twitter

It’s been 174 days since Elon Musk announced his offer to snag Twitter for $54.20 a share, and ha ha ha we’re officially back to square one. In the midst of trying to solve the Russia-Ukraine war, the Tesla founder managed to take some time out of his busy schedule to write a letter to Twitter, in which he revived his initial bid to purchase the social media company. Musk’s shallow and sometimes fictitious legal arguments were getting him nowhere in the courtroom, and his cringey text exchanges with “jack jack” and Joe Rogan only made things worse.

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Not only are we nearly half a year into what is perhaps one of the messiest business dealings in history, we’re 21 Matt Levine columns deep into it. What a journey it has been....

Barclays Lost Track of Its Notes

“Over the course of that day and the next, various BBPLC personnel attempted to calculate the cumulative amount of securities offered and sold from the 2019 Shelf in order to determine the amount of securities that remained available for sale. Over the course of these efforts, it became clear to all involved that there was no internal control in place to track in real time the amount of securities offered and sold against the amount of securities registered.”

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I don’t think I’ve ever read a worse paragraph than that middle paragraph. I don’t think that you could write horror fiction scarier than that. This year for Halloween I am going to go as It Becoming Clear to All Involved That There Was No Internal Control in Place to Track in Real Time the Amount of Securities Offered and Sold Against the Amount of Securities Registered. I think I would rather be eaten by a werewolf than have that become clear to me.

That block quote is from an SEC order against Barclays, because last week Barclays settled with the SEC again, this time for selling unregistered securities. It registered $20.8 billion of securities, and overshot that by roughly $16.37 billion. Just not particularly close at all. It is illegal to sell unregistered securities, and so Barclays paid the SEC a $200 million fine.

Cooley Keeps Up With Kim Kardashian in $1.26M SEC Settlement

When reality TV star and entrepreneur Kim Kardashian came under scrutiny from the U.S. Securities and Exchange Commission over her endorsement of a cryptocurrency product, she turned to Cooley.

Kardashian agreed to pay $1.26 million in penalties and disgorgement as the SEC accused her of violating the anti-touting provision of federal securities laws by not revealing she was paid $250,000 to discuss a crypto token on her Instagram page.

Patrick Gibbs, head of Cooley’s securities litigation and enforcement group, and Michael Rhodes, global chair of the firm’s cyber, data and privacy and internet practice groups, were on the team representing Kardashian in the case.

Beware of Messaging App Crackdown on Wall Street

From a practical perspective, the actions provide a clear indication of the record-keeping and supervisory expectations of the SEC and CFTC and offer insight into how firms can improve compliance efforts.

These enforcement actions against broker-dealers, swap dealers, and futures commission merchants, combined with $200 million in fines issued in December 2021, brings the total for record-keeping lapses to more than $2 billion.

Given that prior fines for record-keeping failures were in the seven-figure range, these penalties coupled with mandatory remedial actions, including the engagement of third-party compliance consultants, reflect a new regulatory reality.

US Senator Introduces Crypto Bill To Limit SEC’s Reach Over Exchanges

A Republican senator has introduced new legislation that would shield crypto exchange platforms from some SEC enforcement proceedings.

According to a recent news release, Tennessee Representative Bill Hagerty is proposing the Digital Certainty Act of 2022 to protect cryptocurrency exchanges from SEC overreach and give legislative clarity about the classification of virtual assets.

Haggerty asserts that legislative uncertainty impedes the growth of the crypto sector by making investment and job creation difficult for US-based crypto enterprises.

As stated in a press release by Haggerty, the current lack of regulatory clarity for digital assets presents entrepreneurs and businesses with a choice: navigate the significant regulatory ambiguity in the US, or move overseas to markets with clear digital asset regulations.