29 August 2024 • 28 minute read

Blockchain and Digital Assets News and Trends - August 2024

Edited by:Margo Tank James Williams Elizabeth (Liz) Caires Eric Hall

This monthly bulletin is designed to help companies identify important legal developments governing the use and acceptance of blockchain technology, smart contracts, and digital assets.
While the use cases for blockchain technology are vast, this bulletin focuses on uses of blockchain and smart contracts in the financial services sector. With respect to digital assets, we have organized our approach to this topic by discussing it in terms of traditional asset type or function (although the types and functions may overlap) – that is, digital assets as:

Securities
Virtual currencies
Commodities
Deposits, accounts, intangibles
Negotiable instruments
Electronic chattel paper
Digitized assets

In addition to reporting on the law and regulation governing blockchain, smart contracts, and digital assets, this bulletin will discuss the legal developments supporting the infrastructure and ecosystems that enable the use and acceptance of these new technologies.

STATUTORY AND AGENCY DEVELOPMENTS

FEDERAL DEVELOPMENTS

Congress

Senator Cynthia Lummis (R-WY) introduces Bitcoin Strategic Reserve bill. On July 31, Senator Lummis announced she was introducing the Boosting Innovation, Technology, and Competitiveness through Optimized Investment Nationwide (BITCOIN) Act. If passed, the BITCOIN Act would establish a decentralized network of bitcoin “vaults” managed by the US Department of the Treasury that would collectively hold five percent of the total bitcoin in circulation. The bill reportedly elicited more than 2,200 letters sent to US senators in support.\

Treasury

Treasury officially withdraws proposed 2020 rule requiring customer identity collection for self-custody wallet users. On August 16,the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) officially announced that it had withdrawn a proposed rule under the Bank Secrecy Act (BSA) that would have required financial institutions to collect the identities of customers using self-hosted cryptocurrency wallets. When it was announced in 2020, the proposed rule faced significant backlash from lawmakers and the cryptocurrency industry, who objected that the rule was unworkable and likely to stifle innovation.

Treasury announces plans to revise the definition of “money.” On August 16, the Treasury Department published its Semiannual Regulatory Agenda in which it announced plans to revise the definition of “money” to enhance reporting requirements for cryptocurrency transactions. The change, which is scheduled for September 2025, is intended to align crypto regulations with those for traditional fiat currency. The new definition will cover digital assets with legal tender status, including central bank digital currencies, and it will also cover "convertible virtual currencies," which are defined as a medium of exchange that either has an equivalent value as currency or acts as a substitute for currency, but lacks legal tender status.

FDIC

FDIC proposes new restrictions on “brokered” funds. On July 30, the Federal Deposit Insurance Corporation (FDIC) announced proposed rules that would broaden how the FDIC defines “brokered deposits” to include, among other arrangements, “exclusive” relationships through which banks receive deposits from an exclusive outside supplier. The FDIC regards brokered funds as risky and has determined that high utilization of them correlates with a higher probability of failure. According to the proposed rules, removing these exceptions from the definition of “brokered” deposits would “significantly enhance the protections of the brokered deposit rule,” which generally limits the amount of brokered funds a bank can accept. In prepared remarks, FDIC Chair Martin Gruenberg pointed to the failure of crypto firm Voyager as an example of the risks the proposed rules seek to mitigate. Gruenberg argued that, because Voyager had an exclusive arrangement with one bank, it was not considered a deposit broker. As a result, its partner bank was permitted to accept Voyager’s deposits without meeting statutory capitalization requirements even though, when Voyager failed, the bank was exposed to all the same risk as if Voyager had been a deposit broker.

FINRA

FINRA report flags concerns with members’ crypto activities. On August 13, the Financial Industry Regulatory Authority (FINRA) published an update on its member institutions’ crypto activities. The update highlighted various themes in these activities, including private placements, alternative trading systems, custody services, and affiliated crypto asset businesses. FINRA also flagged potential violations of rules related to communications, supervision, outside business activities, anti-money laundering (AML), and market abuse. FINRA encouraged member firms to proactively address compliance challenges and risks associated with their crypto asset activities and warned that it has already taken action against members for failures in disclosing outside business activities, recordkeeping, and addressing ties to illicit funding. Following a 2023 survey of 600 member firms, FINRA found 390 had crypto ties, often indirectly through associated persons or affiliates.

Federal Reserve

Federal Reserve Board takes enforcement action against Customers Bancorp, Inc. for BSA compliance failures. On August 8, the Federal Reserve Board announced a consent order between the Federal Reserve Bank of Philadelphia and Customers Bancorp. Bancorp offers banking services to “digital asset customers” and operates an instant payment platform called Customer Bank Instant Token that uses blockchain to make payments between Bancorp’s commercial customers. According to the order, the Reserve Bank identified “significant deficiencies” in Bancorp’s risk management practices and compliance with AML rules, BSA rules, and regulations issued by the Treasury Department’s Office of Foreign Assets Control. The order requires Bancorp to develop several written plans to address the deficiencies, including a plan to identify and report specific risks related to its “digital asset strategy,” provide quarterly progress reports, and engage a third party to review Bancorp’s suspicious activity monitoring.

FBI

FBI issues warning to cryptocurrency exchange customers. On August 1, the Federal Bureau of Investigation (FBI) issued a public service announcement warning users of cryptocurrency exchanges about a common scam through which fraudsters impersonating exchange employees contact users through unsolicited calls or messages. According to the FBI, scammers express urgency often claiming that the user’s account is under attack and asking the user to log in using fake websites. Compounding the harm, some scammers even claim to be cryptocurrency recovery services that pretend to offer users the ability to recover stolen crypto for a fee.

STATE DEVELOPMENTS

Virtual currency

Wyoming reportedly launching its own stablecoin in 2025. On August 21, Wyoming Governor Mark Gordon reportedly announced that the state is preparing to launch its own US-dollar-backed stablecoin, called WAT, in Q1 2025. The token would be the result of the state’s Wyoming Stable Token Act, which the governor signed into law in March 2023 establishing the Wyoming Stable Token Commission. Like other stablecoins, WST would be backed with US dollars and US treasuries. WST will be initially launched on the high-throughput Solana blockchain.

INDUSTRY DEVELOPMENTS

Registered crypto broker-dealer Prometheum announces support for UNI and ARB custody. On August 21, registered securities firm Prometheum announced plans to expand its custody services to include tokens issued by Uniswap and Abitrum. The move is notable because of Prometheum’s status as a special-purpose broker-dealer registered with the US Securities and Exchange Commission (SEC) to custody and clear and settle crypto assets. The firm aims to demonstrate that it is possible for firms to provide digital asset services while complying with the SEC’s broad view that most crypto tokens are securities. Nevertheless, the firm’s services have been slow to come online. According to the press release, Prometheum’s first product, custody services for institutional investors, is scheduled to open its doors in Q3 2024, seven years after the company’s founding.

Chainalysis mid-year report finds decline in illicit activity despite increase in thefts and ransomware attacks. On August 15, blockchain analytics firm Chainalysis published its mid-year crypto crime report. The report generally concluded that legitimate crypto use cases are growing, while illicit uses are declining. According to Chainalysis, inflows to legitimate services are the highest they have been since 2021, suggesting a continued global adoption of cryptocurrency. The report also found, however, that scammers have transitioned to targeting fewer, higher-value victims with exploits and ransomware attacks. The new trend of “big game hunting” has ballooned the median ransomware payment from $200,000 in 2023 to $1.5 million in June 2024. Chainalysis attributed this trend to “organized groups” such as rogue nations that can “leverage sophisticated cyber infrastructure.”

ENFORCEMENT ACTIONS AND LITIGATION

FEDERAL

Non-fungible tokens (NFTs)

NFT Marketplace OpenSea hit with SEC Wells notice. On August 28, in a post on X (formerly Twitter), OpenSea co-founder and CEO Devin Finzer announced that the popular NFT marketplace had received a Wells notice from the SEC. The SEC typically issues Wells notices when it has completed an investigation and is preparing to initiate a formal enforcement action. In the X post, Finzer committed to “stand up and fight” and pledged $5 million to cover legal fees for NFT creators and developers who also receive a Wells notice.

FBI to use NFTs to contact fraud victims. On August 21, the US Attorney’s Office for the Southern District of Florida announced that it will be notifying investors in a cryptocurrency wire fraud scheme “by NFT” of the guilty plea from Austin Michael Taylor, founder of cryptocurrency company CluCoin. Taylor launched a token called CLU and withdrew more than $1.14 million from CLU investor funds for personal use. Investors in CLU “will be notified by NFT” to aid the FBI’s investigation and help identify Taylor’s victims for potential restitution.

District court sustains lawsuit against Shaq for unregistered sale of NFT-securities. On August 16, the US District Court for the Southern District of Florida denied Shaquille O’Neal’s motion to dismiss a lawsuit asserting the NBA star was responsible for promoting the sale of unregistered securities in violation of federal securities laws. Buyers of an NFT collection called the Astrals Project brought the lawsuit alleging that the 10,000 3D humanoid avatar NFTs meet the definition of an investment contract under the Supreme Court’s Howey test. According to the complaint, Shaq’s role in urging people to buy Astrals therefore violated Sections 5 and 12(a)(1) of the Securities Act. Applying the deferential standard on a motion to dismiss, the Florida court credited the plaintiffs’ allegations that Shaq solicited sales of the NFTs through Discord messages and Twitter posts. Though Shaq’s counsel tried to argue that Astrals holders controlled their own fortunes through successful gameplay with the NFTs, and therefore had no expectation of profit based on Shaq’s efforts, the court nevertheless found that the plaintiffs plausibly alleged that the project founders’ efforts, including Shaq’s, were the “essential managerial efforts which affect the failure or success of the enterprise.” The court’s opinion is one of a handful finding that NFTs can be sold as unregistered securities. We previously covered similar cases involving NBA TopShots NFTs and DraftKings Moments in our February 2023 and July 2024 issues, respectively.

Law professor sues SEC to prevent enforcement against planned NFT collection. On July 29, law professor and artist Brian L. Frye and musician Jonathan Mann filed suit against the SEC in the US District Court for the Eastern District of Louisiana. The suit, like many others filed in Fifth Circuit district courts, seeks a declaratory judgment that the plaintiffs’ offering of digital assets is not an offering of unregistered securities under federal securities laws. Professor Frye’s argument analogizes his NFT art to physical art and collectibles, which theoretically meet the requirements of an investment contract under the Supreme Court’s Howey test but have never been regulated as securities. The complaint presents a history of the SEC’s attempts to regulate NFTs as securities to establish that relief is warranted, while arguing that NFT art creates no obligation for the creator to undertake any ongoing action. While collectors may hope that the NFTs increase in value, such hopes do not translate to a “reasonable expectation of profit” under the Howey test. In an X thread explaining the case, Professor Frye also suggests that a fifth phantom Howey factor has been at work in the SEC’s non-NFT enforcement actions. That is whether the asset “looks like a security” – which he argues does not apply to NFT art.

Securities

SEC follows state regulators in settlement with Abra. On August 26, the SEC announced that it had filed and settled charges against Plutus Lending LLC, which conducted business as Abra and offered Abra Earn, a cryptocurrency lending protocol. According the SEC’s complaint, Abra Earn constituted an unregistered offering and sale of a securities while Abra operated as an unregistered investment company. The settlement follows similar enforcement actions brought by several state regulatory agencies, as covered in our June and April 2024 issues, and earlier settlements with the Commodity Futures Trading Commission (CFTC) and SEC as covered in our July 2020 issue.

SEC and Consensys litigate parallel cases in Texas and New York. On August 23, the SEC filed its reply in support of a motion to dismiss a declaratory judgment action that blockchain developer Consensys Software Inc. filed against the commission in April 2024. Consensys sued in the US District Court for the Northern District of Texas seeking a declaration that an ETH staking service, built into the company’s popular MetaMask cryptocurrency wallet, is not an unregistered securities offering. Consensys filed its declaratory judgment claim shortly after the SEC issued the company a Wells notice indicating that an enforcement action was likely. That enforcement action came on July 28 in the US District Court for the Eastern District of New York. In the New York case, the SEC charged Consensys with the unregistered sale of securities through its MetaMask staking service. Immediately after, the SEC moved to dismiss Consensys’s declaratory relief action in Texas. Consensys opposed the move citing the first-to-file rule, while the SEC has argued that an exception to the first-to-file rule permits a later-filed enforcement action to take priority over a declaratory judgment action in which the court’s jurisdiction is considered discretionary.

Court sustains SEC’s enforcement action against Kraken. On August 23, the US District Court for the Northern District of California denied a motion to dismiss filed by centralized cryptocurrency exchange Kraken. The motion sought dismissal of the SEC’s lawsuit alleging that Kraken had acted as a broker, dealer, exchange, and clearing house for “crypto asset securities” in violation of Sections 5, 15(a), and 17A(b) of the Securities Act. The SEC alleged that certain cryptocurrencies sold and traded on Kraken’s platform constituted unregistered securities under the Supreme Court’s Howey test. Kraken had tried to argue that tokens sold on its platform are secondary sales that lose the qualities of an investment contract, meaning buyers have no expectation of profit derived from the efforts of the third-party token issuers. Kraken’s argument cited the reasoning of another California federal district court in Ripple Labs that seemed to insulate secondary sales of the cryptocurrency XRP from regulation as securities transactions. The court, citing the deferential standard on a motion to dismiss, credited the SEC’s allegation that secondary buyers were influenced by promotional efforts and therefore plausibly developed an expectation of profit that motivated their investments. In particular, the SEC’s lawsuit names 11 cryptocurrencies, including SOL and NEAR. According to the SEC, the developers behind these tokens sold them to fund development, operations, and marketing efforts for the blockchains, which promises plausibly carried through to purchasers on secondary markets like Kraken. The court also rejected Kraken’s argument based on the major questions doctrine, which contended that the SEC’s regulation of crypto exceeds its delegation of congressional authority. According to the court, the Supreme Court’s major questions doctrine cases involved issues of “far greater impact on the economy than what the SEC proposes here.”

Ninth Circuit upholds Hodl Law dismissal. On August 22, the US Court of Appeals for the Ninth Circuit ended a bid by crypto law firm Hodl Law to force the SEC to recognize that ETH is not a security. The lawsuit, filed in November 2022, sought a declaratory judgment that the law firm’s plans to use ETH was not a violation of federal securities laws. In June 2023, the SEC won a motion to dismiss arguing that Hodl had failed to demonstrate “a realistic danger” of any SEC enforcement action. The court of appeals affirmed. For more information on the original complaint, see our December 2022 issue.

Mango DAO votes to approve settlement with SEC. On August 26, Solana-based decentralized cryptocurrency exchange Mango Markets voted through its decentralized autonomous organization (DAO) to offer the SEC a settlement proposal presumably resolving impending enforcement actions against the DAO, its development company Mango Labs, and an affiliated company Blockworks. Though the proposal did not disclose the existence of any formal charges against any of the entities, it did disclose the SEC’s allegation “that the DAO has violated Sections 5(a) and 5(c) of the Securities Act of 1933, that Mango Labs has violated 15(a) of the Securities Exchange Act of 1934, and that Blockworks has violated Sections 5(a) and 5(c) of the Securities Act of 1933 and Section 15(a) of the Securities Exchange Act of 1934.” Those allegations presumably stem from the offer and sale of MNGO token, the crypto asset used to govern the Mango’s trading platform. Like most DAOs, holders of the token use it to anonymously participate in voting on proposals that affect the management and development of Mango, such as this proposed settlement. If the SEC accepts the proposed settlement agreement, Mango would be required to pay $223,228 in penalties, stop the sale and distribution of its MNGO token, request MNGO delisting from other trading platforms, and burn or destroy any MNGO in the DAO’s treasury. A rogue proposal to immediately burn the treasury’s MNGO tokens failed on August 26. For more information on Mango, see our January 2023 issue.

Digital Chamber of Commerce files amicus in Supreme Court. On August 21, the Digital Chamber of Commerce, which advocates on behalf of major cryptocurrency industry players, filed an amicus brief in an investor dispute involving chip manufacturer Nvidia that will be argued before the Supreme Court. According to the petition for certiorari, investors in Nvidia brought the lawsuit alleging that the company had failed to disclose that cryptocurrency miners represented a substantial segment of its customer base thereby exposing the company’s value to the volatility of cryptocurrency markets. In its brief, the Digital Chamber argues that permitting the investors’ dispute would invite “frivolous securities lawsuits based on nothing more than unfounded negative perceptions about the cryptocurrency industry.”

SEC and US Attorney charge BitClout founder with securities fraud. On July 30, the SEC announced it had charged Nader Al-Naji in connection with an alleged fraud scheme involving the social media platform BitClout. According to the SEC’s complaint, Al-Naji raised $257 million from the sale of an unregistered crypto asset security called BTCLT while falsely claiming that proceeds from the sale would not be used to pay him or BitClout employees. Instead, the SEC alleges, he took more than $7 million to rent a mansion in Beverly Hills. In attempt to avoid SEC regulation, Al-Naji touted BitClout as a fully autonomous decentralized social network. In a parallel action, the US Attorney’s Office for the Southern District of New York announced a criminal wire fraud charge against Al-Naji.

SEC charges NovaTech and founders in $650 million Ponzi scheme. On August 12, the SEC announced charges against NovaTech Ltd., a multilevel marketing and crypto investment company, and its founders Cynthia and Eddy Petion for allegedly perpetrating a fraudulent multilevel marketing (MLM) scheme that extracted more than $650 million from more than 200,000 investors worldwide. According to the complaint, between 2019 to 2023, NovaTech falsely promised safe investments and high returns, specifically targeting members of the Haitian-American community using religious overtones. In reality, the company used the funds to pay existing investors and commissions for promoters, while the Petions siphoned off millions. The SEC’s complaint also named several promoters who rose through the ranks of the MLM scheme.

SEC charges brother in $60 million Ponzi scheme. On August 26, the SEC announced charges against brothers Jonathan and Tanner Adam for their alleged role in a Ponzi scheme affecting more than 80 victims. The SEC also announced that it had frozen the brothers’ assets and the assets of their companies GCZ Global LLC and Triten Financial Group LLC. According to the SEC’s complaint, the brothers lured investors with the promise that they had developed an automated arbitrage bot that could run on a cryptocurrency trading platform. Investors thought they were providing funds to execute arbitrage trades when, in reality, the brothers allegedly used the funds to pay off earlier investors and bankroll the brothers’ lavish lifestyles, including a $30 million condo in Miami.

Commodities

CFTC awards whistleblower $1 million for uncovering unnamed digital asset trading violation. On August 8, the CFTC announced that it had awarded a whistleblower $1 million for “significant information and assistance” in the CFTC’s investigation and successful enforcement action involving digital asset trading. Though specific information about the enforcement action was redacted, the order granting the award disclosed that six whistleblowers submitted claims for awards, though only one provided “critical” information warranting an award.

Virtual currency

$5 million in Tether seized from pig butchering scammers. On August 22, the US Attorney’s Office for the Eastern District of North Carolina announced that it had seized nearly $5 million in the US-dollar-backed stablecoin Tether that had been stolen from victims of a long-running “pig butchering” scheme. “Pig butchering” refers to a common scam through which fraudsters connect with victims online, earn their trust – often through romantic overtures – and then induce them to make investments in fake cryptocurrency projects. In this case, the FBI and Tether worked together to trace the victims’ funds and seize them.

Illicit finance

US and German officials seize wallet provider Cryptonator’s domain. On August 1, the Internal Revenue Service (IRS), US Department of Justice (DOJ), FBI, and German Federal Criminal Police Office (FKA) reportedly seized the web domain for cryptocurrency wallet provider Cryptonator. According to a criminal complaint filed in the US District Court for the Middle District of Florida, Cryptonator’s founder Roman Pikulev operated Cryptonator as an unlicensed money transmitter business that processed more than $235 million in illicit funds. Pikulev allegedly failed to implement AML controls and permitted users to onboard without any identification in violation of know-your-customer (KYC) requirements under federal law. The DOJ alleges that Cryptonator catered to criminals and darkweb agents, receiving and processing proceeds from hacking incidents, ransomware scams, and identity theft schemes. A report from TRM Labs revealed that Cryptonator processed four million transactions worth $1.4 billion. Among other illicit sources, $25 million came from darknet markets and $71 million was associated with sanctioned addresses.

Tax

Sixth Circuit permits taxpayer standing to challenge IRS reporting rule for transactions exceeding $10,000. On August 9, the US Court of Appeals for the Sixth Circuit ruled that a group of plaintiffs who regularly transact in cryptocurrency, including the nonprofit Coin Center, have standing to assert constitutional challenges to a recent amendment to Title 26 of the US Code, Section 6050I, under the Infrastructure Investment and Jobs Act of 2021. The amendment requires anyone engaged in a trade or business who receives $10,000 in cash – which, under the act, includes cryptocurrency – to file a Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business. Form 8300 reports certain personal information to the IRS such as the name, address, and social security number of the person from whom the cash was received. Among other claims, the plaintiffs’ lawsuit alleges that the new reporting requirement violates their Fourth Amendment rights because they have a “reasonable expectation of privacy” in digital asset-based transactions. The court of appeals found the Fourth Amendment claim ripe for adjudication and remanded it to the district court.

STATE

Virtual currency

Wisconsin launches crypto scam tracker. On July 30, the Wisconsin Department of Financial Institutions (DFI) launched its new scam tracker to help consumers avoid common crypto and other investment scams. According to DFI’s press release, Wisconsinites lost more than $3.5 million to cryptocurrency fraud between 2022 and June 2024. The tracker collects consumer reports and provides descriptions of reported scams in a searchable database.

Manhattan DA shuts down fake crypto recovery business. On August 1, Manhattan District Attorney (DA) Alvin Bragg announced charges against Michael Lauchlan for defrauding customers of his company Coin Dispute Network (CDN). According to the press release, Lauchlan claimed CDN could trace and recover stolen or lost cryptocurrency for a fee. In reality, the DA alleges, Lauchlan generated fake testimonials and blockchain tracing reports and, on at least three occasions, stole additional ETH from his customers. In total, Lauchlan defraud more than 175 customers.

Digital assets

California DMV puts 42 million car titles on chain. As of July 30, the California Department of Motor Vehicles (DMV) has reportedly digitized more than 40 million car titles and recorded them on the Avalanche blockchain. The measure is designed to combat lien fraud by creating a public immutable record of ownership. California drivers will be able to claim their titles through a digital wallet app and, eventually, transfer titles on the blockchain.

Money laundering

Federal Reserve Bank of New York analyzes Tornado Cash sanctions as a case study for DeFi regulation. This month, the Federal Reserve Bank of New York published Staff Report no. 1112, titled Regulating Decentralized Systems: Evidence from Sanctions on Tornado Cash. The report analyzes sanctions that the Treasury Department imposed on once-popular crypto mixing service Tornado Cash (TC) as case study on the effectiveness of regulation in decentralized systems. The study’s authors examined the impact on market reaction, transaction volume, and diversity of users to conclude that sanctions had an “immediate and lasting impact,” but that eventually “net flows into TC contracts recover[ed] to and surpass[ed] pre-announcement levels for most pools,” which suggest that TC “remains viable as a privacy tool.” Nevertheless, based on evidence that many actors choose not to validate transactions connected to TC, the authors conclude that decentralized systems can be susceptible to censorship.

SPOTLIGHT ON INTERNATIONAL DEVELOPMENTS

Russia embraces cryptocurrency in the face of international sanctions. On July 30, Russian legislators reportedly passed a bill that will permit businesses to use cryptocurrency to conduct international trade. The law, which become effective next month, is said to be part of the country’s efforts to circumvent international sanctions for Russia’s invasion of Ukraine. Russia has apparently faced delays in international settlements with its few remaining trading partners such as China, India, and the UAE. While cryptocurrency payments within Russia remain banned, the law is also reported to include new regulations for mining cryptocurrencies and authorizes Russia’s central bank to create an “experimental” infrastructure for cryptocurrency payments.

India’s Central Bank Digital Currency tops five million users. On August 26, in remarks before the RBI@90 Global Conference on Digital Public Infrastructure and Emerging Technologies, Reserve Bank of India (RBI) Governor Shri Shaktikanta Das announced that its central bank digital currency (CBDC) pilot has obtained more than five million users since its launch of both wholesale and retail CBDCs in 2022. According to Das, up to 16 banks are now offering the CBDCs to retail customers. Despite the promising adoption numbers, Das emphasized that the digital currency should be “phased in gradually” to permit the RBI to study its impact on monetary policy, the financial system, and the economy more generally. For the RBI, the programmability of CBDC represents a “key” promise for financial inclusion.

Global standards-setting organizations publish Digital Asset Annex to accommodate digital assets in repo transactions. On August 19, in a pair of press releases, the International Capital Market Association (ICMA) and the International Securities Lending Association (ISLA) announced that they had published a Digital Assets Annex for use with the 2011 version of the Global Master Repurchase Agreement (GMRA 2011) and the 2010 version of the Global Master Securities Lending Agreement (GMSLA 2010). GMRA 2011 and GMSLA 2010 are industry-standard legal agreements used in the financial markets to govern repurchase agreements and securities lending transactions, respectively. ICMA and ISLA published the Digital Asset Annex to standardize the terms market participants use when transacting in repurchase agreements or securities lending agreements. Among other innovations, the Annex addresses novel issues made possible by instant settlement available on many blockchains.

International law enforcement operation detains alleged FutureNet fraudster. On August 21, Interpol and Polish authorities reportedly arrested Roman Zimian one of the co-founders of the global “FutureNet” scam allegedly responsible for defrauding investors out of $21 million in Poland and South Korea. According to Interpol, Zimian had been wanted since 2022 for his role in a Ponzi scheme, which promised investors outsize returns through investments in cryptocurrency from 2016 to 2020. Despite his arrest two years ago, Zimian reportedly escaped house arrest until he was found this month hiding under a false identity in Montenegro.

DLA PIPER NEWS

The Financial Times recognizes DLA Piper as one of the Most Innovative Law Firms in North America.

The Legal 500 ranks DLA Piper Tier 1 in FinTech: Crypto. DLA Piper was also ranked in Tier 2 for FinTech, and Margo Tank was ranked as a “Leading Individual.”

Chambers FinTech Legal ranks DLA Piper in all four categories including Band 2 for Blockchain and Digital Assets, with Margo Tank individually recognized in Band 3 in the Blockchain & Digital Assets and Payments & Lending areas.

DLA Piper’s Commodities, Digital Assets, and Carbon Compliance and Enforcement team draws on decades of collective experience in the commodities and securities industry to help companies navigate new and complex commodities enforcement matters, including those related to agriculture, metals, energy, digital assets, and carbon/sustainable commodities, among others.

RECENT AND UPCOMING EVENTS

DLA Piper attorneys presented at the following:

On July 24, Joseph Piesco spoke on a webinar panel entitled, “Digital Accessibility Lawsuits in 2024.”

In June, Michael Fluhr and Christina Sharma co-chaired a webinar panel entitled, “Cryptoassets: Emerging legal trends in common law and civil law jurisdictions.” The panel discussed how courts in the UK, Europe, and the US have been determining crypto asset disputes and what that means for creators, developers and owners. Panelists were Edwald Netten, Dan Jewell, Andrea Pantaleo, Matthew Miller, and Deborah Meshulam.

On April 5, David Stier, Vice Chair of the ABA’s Banking Law Committee – Bank Secrecy Act and Anti-Money Laundering subcommittee, spoke on a panel titled “Cryptocurrency & Illicit Finance: Risk Mitigation Strategies” at the ABA’s Business Law Section Spring 2024 meeting in Orlando, Florida.

On April 10, Eric Forni spoke on panel titled “Hot Topics in SEC and DOJ Enforcement” in Miami. The panel covered enforcement developments and SEC policy on crypto assets.

PUBLICATIONS

In the newly published book, Banking [on] Blockchain: A Legal and Regulatory Primer, published by the American Bar Association, David Stier, Emily Honsa Hicks, and Eric Hall co-authored a chapter on AML/KYC requirements and the BSA, as well as provided general editorial assistance on other chapters. The book, a comprehensive guide to the legal and regulatory landscape surrounding the use of blockchain technology, decentralization, and digital assets within the financial services while offering guidance on how financial institutions may navigate the complex regulatory environment.

Cryptocurrency and Digital Asset Regulation, published by the American Bar Association and co-edited by Deborah Meshulam and Michael Fluhr, includes chapters by Meshulam, Fluhr, and Margo Tank.