Tag: sec

Posted on

Reps. Torres And Flood Highlight SEC Oversight Hearing With Chair Gensler

SEC Chair Gensler at House Financial Services hearing

Republicans didn’t waste any time questioning the moves and motives of Securities and Exchange Commission (SEC) Chair Gary Gensler at the House Financial Services (HFS) “SEC Oversight” hearing today.

Video is here.

Minutes before the hearing commenced, a full-throated rejection by the Committee’s Republican caucus “slamming the agency for its persistent failure to conduct thorough economic analysis or consider stakeholder feedback regarding its regulatory agenda” was announced in the form of a letter to Chair Gensler. Read the release -and the letter.

Yesterday’s letter on Bitcoin spot market ETF’s sent by HFS committee member Rep. Mike Flood may have been more impressive given its bipartisan nature – both Rep. Ritchie Torres (D, NY) and Rep. Wiley Nickel (D, NC) signed on.

two things

As it turned out, during the hearing, the most revelatory moment related to digital assets was arguably provided by a Democrat (Rep. Torres (D, NY) – see below), Tokenization is a tripwire when it comes to securities laws for Chair Gensler.

And, another highlight was Rep. Mike Flood’s (R, NE) questioning of Chair Gensler about Staff Accounting Bulletin 121 (SAB 121) and, separately, Flood’s announcement about the new “Uniform Treatment of Custodial Assets Act” which would gut the SEC’s bulletin. See below.

Also: This was an uninterrupted 4.5 hour hearing that ended at 2:29 p.m. ET. Wow. April’s House SEC Oversight hearing was only 3 hours and 45 minutes. Continue reading “Reps. Torres And Flood Highlight SEC Oversight Hearing With Chair Gensler”

Posted on

The Arrest of FTX CEO Sam Bankman-Fried (Updated)

Sam Bankman-Fried

What we know about FTX CEO Sam Bankman-Fried’s (SBF’s) arrest last night in the Bahamas following the implosion and bankruptcy of the cryptocurrency exchange he founded…

the arrest

    • Royal Bahamas Police Force announced SBF’s arrest shortly after 6p local time yesterday for what it said were offenses against the United States and The Bahamas. Read it. SBF had just said earlier in the day that he didn’t think he would be arrested.
    • Bahamas Attorney General says that it will continue its own “regulatory and criminal investigations” into SBF while the U.S. pursues its criminal charges. The release is here.
    • The State District Attorney’s office in New York State announced Bankman-Fried’s arrest in a tweet saying that it will reveal an indictment this morning. See the charges below.
    • The Securities Exchange Commission quoted its top enforcement official, Gurbir Grewal, who congratulated law enforcement on SBF’s arrest and announced his agency’s intent to pursue “separate charges for violations of securities laws violations.” Read the tweet. See the charges below.
    • More from The NY Times, WSJ and a wild story from Bloomberg on lawyer complaints about an exchange between the Bahamian government and SBF.

Continue reading “The Arrest of FTX CEO Sam Bankman-Fried (Updated)”

Posted on

Treasury, SEC and CFTC Leaders Commiserate With Financial Markets On Crypto

Secretary Yellen

It’s not every 350-person trade conference that could attract a Cabinet member and the chairs of two U.S. regulatory agencies. But, that’s the importance of the annual meeting of the Securities Industry and Financial Markets Association (SIFMA) to the Biden Administration and keepers of the financial system at-large. And crypto took a “bow” repeatedly during the day-long agenda.

SIFMA defines itself as representation for broker-dealers, investment banks and asset managers and was formed in the early 2000s from the merger of the Bond Market Association and the Securities Industry Association according to Wikipedia. The day’s content showed that crypto is a subset of key concerns for the industry which include public policy & financial regulation, “modernization of finance” and retail investors.

As stated during the meeting by SIFMA President and CEO Kenneth Bentsen, consumer protections are at the top of the list – at least publicly – in terms of his organization’s views on crypto’s entry into the global financial system.

Janet Yellen – prepared remarks

The first U.S. government representative to take the stage was U.S. Treasury Secretary Janet Yellen.

Her prepared remarks are here. The highlights include:

    • On the U.S. economy – Sec. Yellen began by reassuring the audience that there is “significant strength” in the U.S. economy amid the global tempest of war and inflation to name a few. But, “inflation remains too high, and we are contending with serious global headwinds.”
    • On crypto – She touted recent reports from Treasury in response to the Biden Executive Order on digital assets saying, “Our goal is to realize the potential benefits of digital assets while mitigating and minimizing their risks.” She stressed the need for “adequate regulation.”

Janet Yellen – Q&A

During the Q&A with SIFMA’s Bentsen, Sec. Yellen said regarding digital assets:
Continue reading “Treasury, SEC and CFTC Leaders Commiserate With Financial Markets On Crypto”

Posted on

Are Modifications Needed to the Howey Test? It’s Time for the Digital Asset Test

SEC Chair Gary Gensler

At The Financial Markets Quality Conference, hosted by Georgetown McDonough’s Psaros Center for Financial Markets and Policy in D.C., Securities and Exchange Commission Chair Gary Gensler participated in a virtual fireside chat covering everything from payment for order flow to crypto.

Gensler offered no surprises in his crypto-related answers. See the interview on YouTube.

He remains convinced all the regulation is in place with the Howey Test whose foundation was laid by securities laws created in 1933 and 1934 and then “tested” in a case in front of the Supreme Court in the 1946 focused on land sales of Florida orange groves. Ever since, it has served as the basis for understanding “What is a security.”

But, Chair Gensler was talking to a peer with interviewer and Georgetown professor Reena Aggarwal, who Gensler said volunteered as part of President Biden’s transition team for financial regulatory agencies. The dynamic seemed to allow for Ms. Aggarawal to press a bit further. With her crypto questions centered on regulatory needs, she drilled down to the baseline of the Howey Test which required a crisp answer from the Chair.

Continue reading “Are Modifications Needed to the Howey Test? It’s Time for the Digital Asset Test”

Posted on

CFTC Action Brings DAOs Into The Enforcement Crosshairs

Up until last week, few had ever heard of bZeroX, let alone Ooki DAO.

But what a difference an enforcement action makes as the Commodity Futures Trading Commission (CFTC) announced on Thursday a $250,000 penalty against bZeroX and its founders, Tom Bean and Kyle Kistner, as well as charges for members of the decentralized autonomous organization (DAO), Ooki DAO, for offering “illegal, off-Exchange digital-asset trading, registration violations, and failing to comply with Bank Secrecy Act.”

Wait… a DAO? Oh yes. Time will tell if the action creates a chilling effect for Americans participating or having an interest in DAOs. Many think that if they join a particular DAO’s Discord channel, they are now a part of a DAO.

But, the CFTC took it a step further saying Ooki DAO members were defined “as those holders of Ooki tokens that have voted on governance proposals with respect to running the business.”

The basis of the CFTC charges for the DAO suggest that the alleged offending assets of bZx Protocol may have been transferred to what was pitched to DAO members as a decentralized structure that could overcome today’s regulatory requirements:

“…On approximately August 23, 2021, bZeroX transferred control of the bZx Protocol to the bZx DAO, which subsequently renamed itself and is currently doing business as the Ooki DAO. The Ooki DAO operates the Ooki Protocol (formerly the bZx Protocol) in the exact same manner as bZeroX and thus is continuing to violate the law in the same manner as bZeroX. By transferring control to a DAO, bZeroX’s founders touted to bZeroX community members the operations would be enforcement-proof—allowing the Ooki DAO to violate the CEA and CFTC regulations with impunity, as alleged in the federal court action. The order finds the DAO was an unincorporated association of which Bean and Kistner were actively participating members and liable for the Ooki DAO’s violations of the CEA and CFTC regulations.”

One of the Commission’s five members, Summer Mersinger, dissented (see the detailed release) on the part of the order related to token holders in the DAO but agreed on the punishment for bZeroX and its founders.

Continue reading “CFTC Action Brings DAOs Into The Enforcement Crosshairs”

Posted on

Rep. McHenry Tempers Expectations On Imminent Stablecoin Legislation

Rep. Patrick McHenry

Rep. Patrick McHenry (R, NC) was the focal point of Politico’s “Writing the Rules of Crypto” event today at Washington, D.C.’s Hotel Washington.

The congressman clearly wanted to temper expectations on whether a bill on stablecoins could be forthcoming from the House Financial Services committee where he serves as Ranking Member along with Chairwoman Rep. Maxine Waters (D, CA).

Politico reporter Sam Sutton guided the panel discussion and cut right to the chase with McHenry asking him, “What’s the hold-up with stablecoin legislation?”

McHenry launched in eagerly saying, “A lot.  First, it’s an election year – big policymaking in an election year is hard.” Then, he provided a brief history on why regulatory guardrails were needed as well as revealing the influence of state stablecoin legislation – in particular, New York’s – which has helped inform the work undertaken thus far by the Financial Services committee in coordination with the Fed and Treasury.

Continue reading “Rep. McHenry Tempers Expectations On Imminent Stablecoin Legislation”

Posted on

Senator Thune Talks Controls on SEC Purse and Personnel

Senator John Thune

This morning in Washington, D.C., Senator John Thune (R, SD), the Senate Minority Whip, spoke on a variety of investment topics circulating through Capitol Hill at a Punchbowl News event sponsored by American Investment Council.

With mid-term elections less that two months away Thune remained sanguine about Republican prospects to overtake the majority in the Senate.

Nothing was mentioned about his recent co-sponsorship of the bipartisan Digital Commodities Consumer Protection Act, which gives regulatory authority over bitcoin and ether to the Commodity Futures Trading Commission (CFTC).

But, he did speak about general dissatisfaction with recent practices of securities regulators – namely the Securities and Exchange Commission led by Biden Administration appointee Gary Gensler, its Chair.

Overall, the SEC’s commission tilts Democratic with a 3-2 edge.

Thune was interviewed by Punchbowl News Founder, Anna Palmer and elaborated on the dynamics between the SEC and Republicans today.

Continue reading “Senator Thune Talks Controls on SEC Purse and Personnel”

Posted on

Senator Lummis Asks For Disclosure Requirements From SEC’s Gensler Before Next Congress

Senator Lummis

It was a relatively brief interaction, but in engaging with SEC Chair Gary Gensler at his Senate Banking Committee hearing last week, Sen. Cynthia Lummis (R, WY) provided an update on her bipartisan Responsible Financial Innovation Act (RFIA) co-sponsored with Sen. Kirsten Gillibrand (D, NY).

Senator Lummis also generated news about the SEC’s crypto disclosure requirements.

View at 1 hour 36 minutes of the video for Thursday’s hearing on oversight of the SEC.

Lummis told SEC Chair Gensler that she and Sen. Gillibrand expect to re-introduce the bill early in the new Congress next year.

In order to meet that deadline, she asked that Chair Gensler and SEC staff work with her and Gillibrand on Section 301 of the bill to understand the necessary disclosures required by digital asset companies.

Throughout the brief interaction, Sen. Lummis made multiple mentions of her Democratic colleague’s involvement appearing to signal to the Democrat Gensler, who was appointed by a Democratic administration, that this isn’t just a Republican initiative.

Continue reading “Senator Lummis Asks For Disclosure Requirements From SEC’s Gensler Before Next Congress”