This post concerns a lawsuit brought by the United States Commodity Futures Trading Commission (CFTC). The complaint alleges that, from approximately June 1, 2019 to approximately August 23, 2021, bZeroX, LLC (bZeroX) designed, deployed, marketed, and made solicitations concerning a blockchain-based software protocol that accepted orders for and facilitated margined and leveraged retail commodity transactions (functioning similarly to a trading platform). This protocol (the bZx Protocol) permitted users to contribute margin (collateral) to open leveraged positions…
Early posts in this blog mentioned how former U.S. Securities and Exchange Commission (SEC) Chairman Jay Clayton famously told Congress in February 2018 that “I believe every ICO I’ve seen is a security.” His successor, current SEC Chairman Gary Gensler, has said on multiple occasions (for example, here) that he believes the vast majority of digital tokens are securities. In a decision issued on November 7, 2022, U.S. District Judge Paul J. Barbadoro held that…
Bittrex, Inc. is a company based in Bellevue, Washington that provides an online virtual currency exchange and hosted wallet services. The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) alleged that Bittrex violated programs for sanctions against Cuba, Iran, Sudan, and Syria, as well as Ukraine-related. More specifically, according to OFAC, Bittrex failed to prevent persons apparently located in the sanctioned jurisdictions from using its platform to engage in over $263 million worth…
The U.S. Securities and Exchange Commission announced on October 3, 2022 that it brought charges against Kim Kardashian for touting on social media a crypto asset security offered and sold by EthereumMax without disclosing the payment she received for the promotion. The following are based on the SEC Order, On June 13, 2021, Kardashian promoted EthereumMax with a post on her Instagram account. She received approximately $250,000 for the post. At the time of her…
The court in LCX AG v 1.274M US Dollar Coin et al, No. 156444/2022 (N.Y. Sup. Ct Aug, 22, 2022) stated that its decision was one of first impression. Plaintiff LCX is a virtual asset service provider in Liechtenstein. It alleged that approximately $8 million worth of virtual assets, all based on the Ethereum blockchain, were wrongfully taken on January 8, 2022. The case was initiated when the stolen funds, stored in Ethereum Wallets 0x29875…
The U.S. Securities and Exchange Commission has talked recently about an ever-increasing scope of its jurisdiction — such as with respect to NFTs — and recently brought its first insider trading case dealing with cryptocurrencies. But on August 16, 2022, the SEC brought a type of case that is similar to many others over that past five years. It sued Dragonchain Foundation, Dragonchain Inc., the Dragon Company as well as founder and chief developer Joseph Roets in…
On August 1, 2022 the US Securities and Exchange Commission brought a lawsuit alleging that Forsage was a fraudulent crypto scheme. According to the Complaint, Defendants Vladimir “Lado” Okhotnikov, Jane Doe a/k/a Lola Ferrari, Mikail “Mike” Sergeev, and Sergey Maslakov (the founders of Forsage) created, operated and maintained an online pyramid and Ponzi scheme through Forsage.io (“Forsage”), a website that allowed millions of retail investors in the United States and elsewhere to enter into transactions…
We wrote last week about the SEC’s recent insider trading lawsuit in which it identified nine tokens as “securities.” We made the following observation: “The potential implications of the SEC’s identifying these nine assets as securities are obvious. Securities exchanges must be registered with the SEC. There are undoubtedly numerous cryptocurrency platforms that sell the nine tokens and which are not so registered. Will the SEC next train its sights on those platforms?” It looks…
The SEC has brought numerous cases in which it alleged that specific tokens were “securities” and that their offerings violated the securities laws. Those cases were typically brought against the issuers. However, the SEC upped the ante in a lawsuit it brought on July 21, 2022 in which the SEC declared that nine cryptocurrencies were “securities,” but in a case not brought against the issuers. The lawsuit is the SEC’s first insider trading case dealing…
We have followed for years the saga of the many applications for a spot Bitcoin ETF that have been denied by the U.S. Securities and Exchange Commission (SEC). See here and here. This included the hope, when current SEC Chairman Gary Gensler was originally appointed, that the SEC might view things differently, but it was not meant to be, as the string of denials continued. There was one bright spot, in October 2021, when the…