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Cryptocurrency

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On June 27, 2023, the Official Committee of Unsecured Creditors (the “Committee”) in the BlockFi Chapter 11 bankruptcy reorganization case filed an Objection to the company’s Plan and essentially requested that the company be liquidated. The Official Committee is made up largely of 600,000 individual customers of BlockFi. The Committee based its position on the contention that the “the ‘reorganization’ case is over.” As it states, the Debtors’ investment bankers ran an extensive M&A process,…

BlockFi is a wealth management and trading firm for cryptocurrency holders that first commenced operations in 2017. In July 2021, we wrote about BlockFi’s bumpy road to going public, even though its valuation had just hit $5 billion. In February 2022, the SEC announced that BlockFi had agreed to pay $100 million in fines ($50 million to the SEC and $50 million to 32 states) to settle charges that it failed to register the offers…

The pace of the SEC’s crypto crackdown ramped up in early June 2023 with the Commission’s highest profile actions against crypto trading platforms since the crypto market turmoil at the end of 2022. The SEC’s actions place crypto trading platforms and the market as a whole on extremely uncertain regulatory footing in the US, and the frustration from the industry is palpable. The SEC’s enforcement activity comes immediately on the heels of promising legislative efforts from Congress,…

On May 19, 2023, the United States Department of Justice charged a Las Vegas man, Bryan Lee (“Lee”), for his alleged role in the CoinDeal fraud scheme, which involved more than 10,000 victims and $45 million. Lee has been charged with multiple counts of conspiracy, mail fraud, wire fraud and engaging in monetary transactions in criminally derived property. Lee is the third person to be charged by the DOJ in the scheme, after Neil Chandran …

As we have discussed often in this space, Chairman Gary Gensler of the United States Securities and Exchange Commission has repeatedly expressed his view that most cryptocurrency tokens are unregistered securities and that, in his view, existing securities laws are clear enough for cryptocurrency firms to comply with them. The crypto industry has a different view and, among other things, has bemoaned the practice of the SEC’s labeling of certain tokens as investment contracts through…

There has been much publicity over the lawsuit brought against celebrities such as Tom Brady and Larry David for their endorsement of FTX. In that case, the judge refused a request to serve Shaquille O’Neal through social media platforms, including Twitter, based on O’Neal’s allegedly taking steps to avoid service. But there is a similar case in Miami, assigned to district judge Cecilia M. Altonaga, brought against Tom Nash and other social media influencers in…

The U.S. Securities and Exchange Commission (SEC) has brought another string of cases against well-known celebrities for touting crypto assets on social media without disclosing the payments they received for these endorsements. Back in December 2022, the SEC made headlines for fining Kim Kardashian $1.26 million based on her Instagram posts that proclaimed the supposed benefits of EthereumMax and its EMAX tokens. (see our post here) These advertisements failed to disclose that she was compensated,…

Since the beginning of blockchain and cryptocurrency, it was apparent that there would be emerging legal issues unique to them, while other legal issues would be applied in the same way as they have always been applied, but simply to a new technology. The case discussed in this post looks at the issue of personal jurisdiction through that prism. HEX is a cryptocurrency marketed as the first blockchain certificate of deposit. Defendant CoinMarketCap is a…

If 2020 was the year that crypto spurred investment action, then 2022 will be remembered for triggering the “equal but opposite” regulatory reaction. And for good reason. With several high-profile insolvencies and an across-the-board fall in cryptoasset prices, regulators have been reminded of the risks that can accompany financial innovation. The Financial Conduct Authority (FCA), alongside HM Treasury and various other government and enforcement actors, have been monitoring developments in crypto markets and considering the…

Following a host of notable bankruptcy filings in the digital asset industry, the New York State Department of Financial Services (DFS) recently issued guidance (the DFS Guidance) to emphasize sound custody and disclosure practices for firms providing digital asset custody services to better protect customers in the event of an insolvency or similar proceeding. While the Guidance applies only to DFS-regulated digital asset firms, it picks up on a common concern from other U.S. regulators,…