Monthly Archives: August 2023

SEC launches artificial intelligence sweep

In at least two cases, regulators have asked private funds 15 sets of questions about how they’re using AI, including a description of their “models and techniques,” a “list of algorithmic trading signals and associated models,” the source and providers of their data, and internal reports of “any incidents where AI use raised any regulatory, ethical, or legal issues,” according…

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Crypto Scam Token Case Yields Novel Win for Andreessen Horowitz

Venture firm Andreessen Horowitz and other backers of the Uniswap Protocol—a cryptocurrency exchange that runs on self-executing “smart contracts”—won a novel court ruling Wednesday absolving them of federal securities liability to platform users victimized by “scam tokens.” Judge Katherine Polk Failla dismissed the proposed class action, which also targeted exchange founder Hayden Adams, several affiliates, and two other investment firms—Paradigm…

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Disgorgement Accounting After Liu v. SEC in Securities Enforcement Cases

In Liu v. the Securities and Exchange Commission (SEC), the Supreme Court determined that disgorgement remedies for SEC civil penalties shall be limited to the defendant’s “net profits.” This holding changes the calculus for award determinations in billions worth of corporate and individual defendant settlements with the SEC every year. Much of the back and forth in those negotiations has…

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Guest Post: New SEC PE and Hedge Fund Disclosure Rules Winners? The Lawyers | The D&O Diary

On Monday, August 23, 2023 the Securities and Exchange Commission (SEC) voted to approve Private Fund Adviser amendments to the Investment Advisers Act of 1940, updating existing compliance rules for Private Equity Firms and Hedge Funds. The initial proposal was floated in February 2022, so the SEC did provide the market with a heads up that there would be increased…

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SEC Could Issue New Arguments to Reject Spot Bitcoin ETF: Berenberg

It is quite possible that the U.S. Securities and Exchange Commission (SEC) will prepare alternative arguments to justify continued rejections of spot bitcoin (BTC) exchange-traded-fund (ETF) applications based on concerns about the spot bitcoin market, German investment bank Berenberg said in a research report Wednesday. *** The panel did not compel the SEC to approve a spot bitcoin ETF, but…

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DOJ, SEC Investigate Tesla Over Secret Glass House Project – WSJ

Manhattan federal prosecutors are investigating Tesla’s use of company funds on a secret project that had been described internally as a house for Chief Executive Elon Musk, people familiar with the matter said. The U.S. Attorney’s Office for the Southern District of New York has sought information about personal benefits paid to Musk, how much Tesla spent on the project—which…

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Grayscale Can Be a Bitcoin ETF – Bloomberg

One possible interpretation of this case is that the SEC’s decision to block spot Bitcoin ETFs was unusually egregious, and a court fixed that, and there are no broader implications for anything. And that’s possible, because the spot Bitcoin ETF decision really was weird. But another possible interpretation is that the modern SEC has become more aggressive about regulating the…

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SEC Defends Administrative Judges in Initial Supreme Court Brief

Administrative law judges should be able to adjudicate enforcement proceedings in which the government seeks civil penalties for securities violations, the Securities and Exchange Commission said in its opening brief before the US Supreme Court. The Fifth Circuit’s ruling against the use of ALJs rests on a misunderstanding of legislative power, and Congress didn’t violate the constitution by allowing the…

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