When Will SEC Enforcement Go After the Crypto Exchanges?

Plus forensic investigators begin tracking the billions missing from FTX.

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Bruce Carton
December 08, 2022

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Richard Burger, former prosecutor with the Financial Services Authority, has joined Wilmer Cutler Pickering Hale and Dorr as a partner in London.

Jerrob Duffy, former Chief of the Litigation Unit in the DOJ's Criminal Division’s Fraud Section, has joined Squire Patton Boggs as partner in its Washington, D.C. office.

Emily Pierce, former Assistant Director in the SEC's Office of International Affairs, has joined Persefoni as Associate General Counsel and VP of Global Regulatory Climate Disclosure.

Dec. 14 Webcast

On December 14, Securities Docket will host a free webcast focused on CFIUS (Committee on Foreign Investment in the United States). This program will look at trends that have emerged in 2022, identifying anticipated changes and focuses in regulatory reviews from both CFIUS and Non-U.S. FDI Regimes. It will offer insight and proactive suggestions on how companies should approach investments in 2023 to mitigate risk and comply with regulation oversight. You can register and get full details below.

December 14 Webcast: CFIUS and Non-US FDI Regimes – A 2022 Lookback and 2023 Outlook

https://www.securitiesdocket.com/2022/12/05/december-14-webcast-cfius-and-non-us-fdi-regimes-a-2022-lookback-and-2023-outlook/

Clips ✂️

SEC Faces Calls to Boost Crypto-Exchange Enforcement After FTX Collapse

The SEC has said many cryptocurrencies qualify as securities that should have been sold under rules for stocks and bonds. SEC Chair Gary Gensler has said exchanges are breaking the law by selling those unregistered securities and not following rules that the Nasdaq Stock Market and the New York Stock Exchange observe.

Some lawyers say that despite such assertions, the SEC’s enforcement efforts haven’t gone far enough as the market has gone mainstream and everyday investors are entrusting their savings to crypto companies. Mr. Gensler “is risking significant criticism if he doesn’t get things moving,” said John Reed Stark, a former SEC enforcement attorney.

“It was a gap in their strategy to not go after these entities,” Mr. Stark said.

by WSJ

FTX Hires Forensic Team to Probe Money Trail

FTX’s new management has hired a team of forensic investigators from advisory firm AlixPartners to help track the billions of dollars that have gone missing from the failed cryptocurrency exchange, people familiar with the matter said.

The AlixPartners team is led by Matt Jacques, a former chief accountant for the Securities and Exchange Commission’s enforcement division, people familiar with the matter said. Mr. Jacques didn’t respond to a request for comment.

by WSJ

FTX Founder Sam Bankman-Fried Faces Market Manipulation Inquiry

Federal prosecutors are investigating whether FTX’s founder, Sam Bankman-Fried, manipulated the market for two cryptocurrencies this past spring, leading to their collapse and creating a domino effect that eventually caused the implosion of his own cryptocurrency exchange last month, according to two people with knowledge of the matter.

U.S. prosecutors in Manhattan are examining the possibility that Mr. Bankman-Fried steered the prices of two interlinked currencies, TerraUSD and Luna, to benefit the entities he controlled, including FTX and Alameda Research, a hedge fund he co-founded and owned, the people said.

by NYT

Gensler Says SEC Is Fine Going After Crypto With Its Current AuthorityU.S. Securities and Exchange Commission Chairman Gary Gensler isn’t waiting for new powers from Congress to enforce securities laws against crypto companies, though he said Wednesday it would be good to have more money and additional reach beyond U.S. borders.

Gensler, who declined to specifically talk about failed crypto exchange FTX and its former CEO, Sam Bankman-Fried, said in an interview on Yahoo Finance that the SEC has the basic disclosure and governance requirements in place to hold digital-assets firms accountable. The SEC chief also didn’t directly address questions about whether his agency would push out tailored crypto rules next year, but he insisted that it doesn’t need any.

“The rules are there,” he said. “The law firms know how to advise their clients to comply.”

by Coindesk

👉 In the same interview, Chair Gensler pointed out that U.S. law requires companies to properly segregate funds. “The New York Stock Exchange doesn’t also have a hedge fund on the side, and trade against their customers,” he said.

Theranos Ex-President Sunny Balwani Sentenced to Almost 13 Years in Prison

Theranos Inc.’s former No. 2 executive, Ramesh “Sunny” Balwani, was sentenced to 155 months, just under 13 years, in prison for his involvement in an elaborate fraud scheme at the blood-testing company, marking the capstone of a yearslong saga that is a blemish in Silicon Valley history.

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Theranos founder Elizabeth Holmes, Mr. Balwani’s former business partner and ex-girlfriend, was sentenced last month to 11¼ years for four counts of criminal fraud tied to her now defunct blood-testing startup.

by WSJ

Senate Committee to Subpoena FTX’s Sam Bankman-Fried If He Does Not Testify Voluntarily

The Senate Banking Committee wants Sam Bankman-Fried to appear before it next week in person to discuss the collapse of FTX, and will subpoena him if he does not appear voluntarily, a letter from its leaders said Wednesday.

Senators Sherrod Brown (D-Ohio) and Pat Toomey (R-Pa.), respectively the chair and ranking member of the committee, wrote a public letter to Bankman-Fried, who resigned from the exchange the same day it filed for bankruptcy last month. The committee is holding a hearing on Wednesday, Dec. 14, a day after the House Financial Services Committee holds its own hearing on the exchange.

by CoinDesk

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