Once valued at $32 billion, crypto exchange FTX Trading Ltd. (“FTX”) shocked the world as it collapsed and filed for bankruptcy at the end of 2022. (Max Zahn, ABC News). An article by CoinDesk initially triggered the crypto exchange fall when it reported that FTX and Alameda Research—a crypto trading firm founded by FTX founder, Sam Bankman-Fried—shared excessively close relationships and blurred finances. (Ian Allison, CoinDesk). Following the report, concerned investors requested withdrawals from the exchange, which caused the value of FTT—FTX’s native token—to nosedive…
Read MoreIn October of this year, the U.S. Securities and Exchange Commission (“SEC”) fined Kim Kardashian $1.26 million for touting a cryptocurrency on her Instagram account. (Clara Hudson, Bloomberg). Ms. Kardashian posted an advertisement for EthereumMax, a crypto asset security, and failed to disclose that she was paid $250,000 for the post. Id. The SEC also recently adopted significant changes to the Investment Advisers Act of 1940 (“Advisers Act”) to improve the regulation of financial securities advertising. (Ellen Kaye Fleishhacker et al., Arnold & Porter). The SEC replaced the outdated framework with the “Marketing Rule” to expand the definition of advertising, increase current disclosure requirements, and provide investment advisers with more flexibility. (Michael S. Caccese et al., K&L Gates). The Kim Kardashian case and the Marketing Rule highlight the SEC’s priority of public disclosure while acknowledging investment advisers’ need for flexibility and access to online marketing channels…
Read MoreOn September 16, 2022, following President Joe Biden’s Executive Order earlier this year, the White House released its first-ever comprehensive framework for regulating cryptocurrency (the “Framework”). (The White House). After six months of collaboration between agencies across the government, including the Securities and Exchange Commission (“SEC”) and U.S. Department of the Treasury (“USDT”), among others, the agencies developed a framework to advance several priorities relating to: 1) protecting consumers, investors, and businesses; 2) enhancing financial stability; 3) counteracting illicit finance; and 4) advancing responsible innovation…
Read MoreIn December 2020, the Securities and Exchange Commission (“SEC”) filed a complaint in the United States District Court for the Southern District of New York against Ripple Labs, Inc. (“Ripple”), one of the crypto asset industry’s most prominent companies. (Securities and Exchange Commission, Complaint). The complaint alleged Ripple’s XRP token was an investment contract, and therefore a security which required registration under Section 5 of the Securities Act of 1933 (“Securities Act”). (Securities and Exchange Commission, Complaint; Jeff Roberts, Decrypt). Regardless of the victor, this litigation will set precedent regarding digital asset regulation in the future…
Read MoreThe digital assets industry has grown exponentially since Bitcoin was first introduced in 2009. (Wulf Kaal, Digital Asset Market Evolution). Though the digital assets market value is infamous for its volatility, the worldwide market capitalization of digital assets reached over $3 trillion at its height in November 2021. (Joanna Ossinger, TIME). As investors and the public more frequently use cryptocurrencies, non-fungible tokens (“NFTs”), and decentralized finance, the risks associated with digital assets increase…
Read MoreSenators Kirsten Gillibrand (D-NY) and Cynthia Lummis (R-WY) introduced legislation on June 7, 2022 that would implement and divide oversight of the cryptocurrency market between the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”). (David A. Lopez-Kurtz, National Law Review; Soyoung Ho, Thomson Reuters). Proposed legislation of this kind may feel anathema to the underlying premise of blockchain technology and its freewheeling pioneers…
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