Tag: Enforcement Action

S.E.C. Charges Crypto Companies With Offering Unregistered Securities

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By Ephrat Livni. January 12, 2023. (New York Times).

The Securities and Exchange Commission on Thursday charged the cryptocurrency lender Genesis Global Capital and the cryptocurrency exchange Gemini Trust with offering unregistered securities through a program that promised investors high interest on deposits.

The S.E.C. said that Genesis, a subsidiary of Digital Currency Group, and Gemini, which is run by Tyler and Cameron Winklevoss, had raised billions of dollars of assets from hundreds of thousands of investors without registering the program, which was called Gemini Earn.

By doing so, Genesis and Gemini bypassed “disclosure requirements designed to protect investors,” Gary Gensler, the S.E.C. chair, said in a statement. He added that the charges should “make clear to the marketplace and the investing public that crypto lending platforms and other intermediaries need to comply with our time-tested securities laws.”

Read the full article here.

SEC Spin Doctors Trying To Hide Crypto Regulation Disaster

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By Roslyn Layton. January 8, 2022. (Forbes).

Over the last two U.S. administrations, the U.S. Securities and Exchange Commission (SEC) has promoted an all-encompassing policy of “regulation by enforcement” for U.S.-based digital asset markets like Coinbase and the enterprise blockchain industry that develops fintech solutions like Ethereum, Ripple, Stellar and Circle. Two successive chairmen – Jay Clayton and Gary Gensler – said that every digital asset except bitcoin is a security and should register at the SEC like a stock. The details end there, unless you end up on the wrong side of an SEC lawsuit. The SEC banks on a quick settlement from the parties it charges. Parties which dare to challenge the SEC need financial reserves, superstar lawyers, and years of patience for litigation to play out court. This “enforcement” produces little clarity for the market or protection of investors, which is the ostensible point of the regulatory exercise.

Read the full article here.

SEC Treating Ripple Like a Ponzi Schemer, Not Shaper of Future

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By JW Verret. October 27, 2022. (Real Clear Markets).

The Securities and Exchange Commission’s (SEC) case against Ripple, the largest case it has brought against a defendant working in the crypto industry to date, has been heating up this month with a series of summary motions and some big discovery losses for the SEC. The SEC alleges in that case that one test for a security required to register with the SEC, contained in the 1946 Supreme Court case SEC v Howey, applies to the XRP token that is used by Ripple.

The SEC should admit the secret it isn’t saying out loud to the court and everyone watching the case. The test used in SEC v. Howey is typically used by the SEC to sue hucksters, Ponzi schemers and other con men who sell fake securities. The Howey test is a way to stop them, not a means to facilitate registration with the SEC.

Read the full article here.

1 big thing: Regulation by enforcement

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By Brady Dale and Crystal Kim. July 25, 2022. (Axios).

The Department of Justice yesterday announced the arrests of three people in relation to insider trading on privileged information that belonged to Coinbase, the leading crypto exchange in the U.S. (No doubt, as a reader of this newsletter, you know this already.)

  • But also: The U.S. Securities and Exchange Commission brought a civil suit against the three for insider trading of unregistered securities.
  • There’s lots of subtext, Brady writes.

Driving the news: Nine cryptocurrencies were named as securities in the SEC’s case, out of 25 that Justice and the SEC said were traded using privileged information.

  • More on each in the next section of this newsletter.

Why it matters: What is or isn’t a security (as opposed to a commodity) has been the central question for cryptocurrency companies aiming to operate in compliance with U.S. law and regulation.

  • Securities have onerous rules around who can own and trade them such that they would be of little use in a startup’s product.
  • Blockchain startups would prefer a way to go to market that didn’t amount to saying “YOLO,” launching and waiting to see if they get sued.

Read the full article here.

Ripple vs SEC: Legal Expert Warns Adverse Ruling in Lawsuit Would Be Catastrophic for Crypto Industry.

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By Daily Hodl Staff. July 9, 2022. (The Daily Hodl)

A legal expert warns an unfavorable ruling in the U.S. Securities and Exchange Commission (SEC) lawsuit against Ripple would be bad for crypto.

Deaton Law Firm managing partner John E. Deaton says the outcome of the SEC lawsuit alleging that XRP is a security will determine whether nearly all other existing altcoins are securities.

Read the full article here.