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,…
Nexo Financial LLC is a company that describes itself as a leading cryptocurrency institution offering a number of digital assets services through its website. It offered its customers, among other things, an Earn Interest Product (EIP), which allowed customers to lend certain digital assets in interest-bearing accounts. In a proceeding before the U.S. Consumer Financial Protection Bureau, Nexo argued in response to a civil investigative demand that the Bureau lacked jurisdiction because the Securities and Exchange…
Nexo Financial LLC is a company that describes itself as a leading cryptocurrency institution offering a number of digital assets services through its website. It offered its customers, among other things, an Earn Interest Product, which allowed customers to lend certain digital assets in interest-bearing accounts. On December 1, 2021, the Consumer Financial Protection Bureau (“Bureau”) served Nexo with a civil investigative demand (“CID”) requiring that a representative of the company appear by videoconference for…
Potentially in connection with the recent events rocking the crypto industry, FINRA is conducting a new sweep on “Crypto Asset Communications” by broker-dealers. If they haven’t already received the request, broker-dealers with crypto-related affiliates likely will be contacted. Notably, this is the first announced sweep that FINRA has issued in over a year. This Crypto Asset sweep is not limited to communications about crypto assets that are “securities,” and it requests recent crypto asset communications over a…
On November 23, 2022, New York Governor Kathy Hochul signed legislation that imposes a two-year moratorium on certain crypto-mining operations that run on carbon-based power sources. The “Purpose or General Idea” portion of the legislation provides: To establish a moratorium on air permit issuance and renewal for electric generating facilities that utilize a carbon-based fuel and that provides, in whole or in part, behind-the-meter electric energy consumed or utilized by cryptocurrency mining operations that use…
In yet another example of the United States government’s commitment to investigate and prosecute crimes involving cryptocurrency, two men from Massachusetts were sentenced on October 19, 2022 for their creation of a scheme with the intent to steal cryptocurrencies from high-profile executives in the crypto community as well as gain access to their social media accounts. Both of the men received sentences of slightly over two years in prison. The two men employed a simple,…
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…
On September 16, 2022 the White House released its Comprehensive Framework for Responsible Development of Digital Assets (Framework) for how the administration plans to address digital assets as a part of its “whole-of-government approach”, which was first outlined in a March 9 Executive Order (EO) issued by President Joe Biden. In the short-term, the Framework does little to alter the regulatory uncertainty that has allowed many bad actors in the digital asset space to thrive while stymieing responsible growth. There are…