Keith Miller Partner

The staffs of the Division of Trading and Markets of the SEC and FINRA published a joint statement on July 8, 2019, articulating primary regulatory concerns regarding broker-dealers’ ability to comply with financial responsibility rules in the context of digital asset securities.

The U.S. Securities and Exchange Commission (SEC) Strategic Hub for Innovation and Financial Technology (FinHub) published a framework on April 3, 2019, for analyzing whether a digital asset is offered and sold as a security under the federal securities laws.

The end of the year has been a very busy time for the SEC in the digital asset space. From speeches to the issuance of joint statements to enforcement actions, there are many things to highlight, discuss and consider.

During a speech in San Francisco last week at the Yahoo Finance All Markets Summit, William Hinman, Director of the Division of Corporation Finance of the Securities and Exchange Commission (SEC), provided some welcome clarity regarding the applicability of the federal securities laws to digital assets and tokens projects.

This update was published in ABA Business Law Today  "Ether Is Not A Security: Summary of SEC Division of Corporation Finance Director Hinman’s Remarks," on 06.2018.

On February 6, 2018, the United States Senate Committee on Banking, Housing and Urban Affairs conducted a hearing entitled “Virtual Currencies: The Oversight Role of the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission.” Hearing. The Chairman of the U.S. Securities and Exchange Commission (SEC), Jay Clayton, and the Chairman of the U.S. Commodity Futures Trading Commission (CFTC), J. Christopher Giancarlo, provided testimony.

Just like the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) is actively policing the virtual currency market. On January 24, 2018, the CFTC announced an enforcement action against two individuals and a company, My Big Coin Pay, Inc., for fraudulently offering the sale of a “fully functioning” virtual currency.

In its most significant action since issuing the DAO Report in July 2017, the SEC again took aim at initial coin offerings on December 11, 2017, when, through its new Enforcement Cyber Unit, the SEC entered into an administrative settlement with Munchee, Inc., for conducting unregistered offers and sales of securities.

On Friday, December 1, 2017, the SEC filed an emergency action in federal district court in Brooklyn alleging that Dominic Lacroix and Sabrina Paradis-Roger, both from Quebec, Canada, raised approximately $15 million in a purported fraudulent unregistered Initial Coin Offering (ICO) involving PlexCoin. In its complaint, the SEC alleged that a recidivist Quebec securities law violator, Dominic Lacroix, and his company, PlexCorps, had raised millions from investors since August 2017 by promising a 13-fold profit in less than a month. In addition to filing the action, the SEC sought and obtained an asset freeze.

On June 30, 2017, the SEC and the U.S. Attorney brought parallel civil and criminal fraud charges against Renwick Haddow, the owner of an unregistered broker-dealer entity named In Crowd Equity Inc., and two corporate entities named Bitcoin Store, Inc. and Bar Works, Inc. (SEC Litigation Release, US Attorney Press Release) In addition to filing the civil complaint, the SEC sought and obtained an emergency asset freeze against Haddow, Bitcoin Store, and Bar Works.

This article explores the factual and legal contours of SEC administrative settlements with a fund administrator, as well as related enforcement actions against investment managers, to better understand the affirmative steps the SEC is expecting financial service providers to take to help root out fraud and misappropriation in the financial services sector.

At the annual “SEC Speaks” conference held February 23-24, 2017, in Washington, D.C., the U.S. Securities and Exchange Commission’s senior leadership reviewed the agency’s efforts in 2016 and previewed future trends.

This update was also published in Law360 on 02.27.2017, "SEC Speaks '17: Changing Priorities Amid Agency Transitions."

On November 14, 2016, the SEC convened four panels of individuals at the forefront of the FinTech industry to address the rapid growth of recent innovations in FinTech. Panelists addressed how these innovations impact four main areas: investment advisory services; trading, settlement, and clearance activities; capital formation; and investor protection. The over-arching theme of the forum was the overlay of financial regulation in the rapidly-changing securities industry and how regulation needs revision to better address emerging technologies. Below we have summarized the four panels and the key takeaways.

U.S. District Judge Alison Nathan of the Southern District of New York issued a decision yesterday finding that bitcoins are money under the plain meaning of Section 1960, the federal money transmission statute. In July 2015, Anthony Murgio and two others defendants were arrested and charged with operating an illegal bitcoin exchange – Coin.mx. Murgio sought to dismiss two counts – operating, and conspiracy to operate, an unlicensed money transmitting business. He argued that virtual currency falls outside the definitional scope of the applicable statute. The court disagreed.

Despite much hype over the ruling by a Florida court that bitcoin is not money, the likeliest outcome of Monday’s decision will be legislative amendments to Florida’s money transmitter laws, rather than the sweeping impact envisioned by some.

The SEC announced yesterday a settlement with Bitcoin Investment Trust (BIT) and SecondMarket, Inc. (SecondMarket). According to the Administrative Order, the SEC claims that BIT and SecondMarket redeemed BIT shares during an ongoing distribution and, therefore, violated Rules 101 and 102 of Regulation M.

The SEC announced two administrative settlements in June, with a fund administrator that provided accounting and fund administration services to several private funds based on its alleged failure to heed red flags and correct faulty accounting by two private fund managers.

This update was republished in the Journal of Investment Compliance May 2017 issue, " SEC Charges Private Fund Administrator With Gatekeeping Failures ."

The Financial Stability Oversight Council (FSOC) recently published its Annual Report, providing insight into its perspective on market developments and emerging threats. The FSOC, which includes representatives from the Treasury Department, the Federal Reserve, the Commodity Futures Trading Commission and the Securities and Exchange Commission, recognized that distributed ledger systems offer opportunities to lower transaction costs and improve efficiencies. However, the FSOC also acknowledged that certain risks are inherent, and therefore careful regulatory coordination is necessary.

The U.S. Department of Justice issued a Memorandum to all U.S. Attorneys and entered into a Memorandum of Understanding (MOU) with the U.S. Department of Labor on December 17, 2015 to bolster the federal government’s arsenal to hold employers criminally liable for worker safety and health violations.  

The SEC recently announced an administrative settlement against Commonwealth Capital Management, LLC (CCM), a mutual fund adviser, and the members of the boards of two mutual funds for their failure to properly evaluate fund advisory contracts.

The U.S. Securities and Exchange Commission touted an expansive regulatory agenda at this year’s "SEC Speaks" conference, held Feb. 20-21, 2015, in Washington, D.C.

The U.S. Securities and Exchange Commission (SEC) touted an expansive regulatory agenda at this year’s “SEC Speaks” conference, held February 20-21, 2015, in Washington, D.C.  

As the title suggests, there remains an open question as to whether virtual currency accounts, hosted wallet services and vault services located abroad may trigger FBAR filing requirements.

You or your client decide to jump into the exciting but volatile world of Bitcoin and virtual currencies. What are some of the most important tax-related implications of dealing in virtual currency, and what are the hidden reporting requirements associated with such transactions?

In United States v. Newman, the U.S. Court of Appeals for the Second Circuit dealt a substantial blow to federal prosecutors’ epic crackdown on insider trading by raising the bar for the government’s burden of proof in “remote tippee” cases that have plagued the financial industry in recent years.

The U. S. Attorney for the Southern District of New York, Preet Bharara, has issued several recent statements signaling a steady pursuit of criminal conduct related to bitcoin. 

In another installment of the continuing saga surrounding the shuttering of the Silk Road online marketplace and arrest of its alleged creator and operator, Ross William Ulbricht (Ulbricht), a Southern District of New York judge denied Ulbricht’s motion to dismiss the four-count indictment against him.

Yesterday, the Securities and Exchange Commission (SEC) announced that Erik Voorhees (Voorhees), co-owner of Bitcoin-related websites Satoshi DICE and FeedZeBirds, has agreed to pay approximately $50,000 to settle allegations regarding the unregistered sale of securities.

Late last month, New York Department of Financial Services (DFS) Superintendent Benjamin Lawsky (Lawsky) (accompanied by DFS Assistant Deputy Superintendent Maria Filipakis, General Counsel Danny Alter, and Deputy General Counsel Dana Syracuse) presided over two days (five panels) of virtual currency-related hearings.

The virtual currency industry is in the news once again following the October 1, 2013, Federal Bureau of Investigation’s shutdown of the “Silk Road” website.

Riding the coattails of an August 6, 2013 federal court ruling that alleged Ponzi-schemer Trendon Shavers’ Bitcoin-based investment scheme constituted an investment contract, and therefore is a “security” under the federal securities laws, various federal and state lawmakers have aligned their attention to issues affecting the virtual currency market.

In response to the SEC’s first civil complaint arising from online virtual currency trading, alleged Bitcoin Ponzi schemer Trendon Shavers recently challenged the district court’s authority to hear the case.

On July 23, 2013, the SEC ventured into the electronic currency world by filing a civil complaint against virtual currency “trader” Trendon Shavers and his company, Bitcoin Savings and Trust, in the U.S. District Court for the Eastern District of Texas.

Federal authorities have initiated several recent enforcement actions that are indicative of continuing regulatory changes in the virtual currency industry.

In this article, Pravin Rao, Keith Miller, Jose Lopez, and Charles Mulaney highlighted the SEC's enforcement priorities in 2013, as presented at "The SEC Speaks" conference held in Washington, DC, from February 22-23, 2013.  A continuation by the SEC to accelerate its efforts to protect investors and promote the integrity of the marketplace emerged from this year’s conference. At the heart of these efforts are increasingly effective programs in enforcement and examination.

The annual “SEC Speaks” conference, in which Securities and Exchange Commission (SEC) representatives review the agency’s efforts over the past year and preview the year to come, was held on February 22-23, 2013.  A back-to-basics “investor protection” theme emerged from this year’s conference, as the SEC reposts in the wake of Chairman Mary Schapiro and Enforcement Director Robert Khuzami departing.

In the wake of the recent admissions by Barclays Bank PLC that its traders sought to manipulate the London Interbank Offered Rate ("LIBOR"), corporations and other investors are only now beginning to appreciate the magnitude of the scandal and to consider how it might impact their own investments.

On March 19, 2012, the U.S. Securities and Exchange Commission announced that in exchange for his substantial cooperation during the agency's enforcement action against AXA Rosenberg Group LLC and its CEO, Barr M. Rosenberg, it would not take enforcement action against an unnamed former AXA Rosenberg senior executive.

On March 19, 2012, the Securities and Exchange Commission announced that in exchange for his substantial cooperation during the agency's enforcement action against AXA Rosenberg Group LLC and its CEO, Barr M. Rosenberg, it would not take enforcement action against an unnamed former AXA Rosenberg senior executive.

Watch the panel.

Is technological advancement in governance and strategy making funds more efficient and easier to manage, or are corporate governance risks and challenges reaching a point that should concern investors?

Keith Miller (NY), Jacob Farber (WDC) and Lowell Ness (PAO) were panelists along with clients from Overstock, Morgan Stanley and Factom. The panel focused on business innovation driven by blockchain technology and decentralized technology, as well as related and underlying enabling technologies.

Panelist on the “Virtual Currencies and Payment Systems” session at the NY Society of CPAs annual Anti-Money Laundering Conference held in New York.  The panel explored the implications for CPAs and their clients, including the integration of virtual currencies and payment systems into clients’ businesses, current regulatory scrutiny, and potential disclosure and tax issues.