Court

SEC responds predictably to Coinbase’s 2022 crypto rulemaking petition: No

The existing laws are sufficient, according to Chair Gensler. Coinbase says it’s not done yet.

The United States Securities and Exchange Commission has denied a Coinbase petition for rulemaking on transactions with cryptocurrencies that are securities. Coinbase filed the petition in July 2022 and pushed steadily for a response.

SEC Chair Gary Gensler announced the commission’s decision in a Dec. 15 statement. He gave three reasons for denying Coinbase’s petition, which requested “rules to govern the regulation of securities that are offered and traded via digitally native methods, including potential rules to identify which digital assets are securities.”

Gensler first argued that existing laws and regulations already apply to crypto. His phrasing was nuanced:

Gensler hints Grayscale ruling forced SEC to take ‘new look’ at Bitcoin ETFs

The SEC chair could be softening his stance on Bitcoin ETFs following the Grayscale court victory, but if so, he hasn’t admitted it outright.

United States Securities and Exchange Commission (SEC) chair Gary Gensler has hinted that the regulator has been rethinking its approach to spot Bitcoin (BTC) exchange-traded products following a recent Grayscale court decision.

Speaking to CNBC on Dec. 14, Gensler was questioned about the long list of pending spot Bitcoin exchange-traded fund (ETF) applications. He said the SEC has “between eight and a dozen filings” going through the process at the moment.

“We had in the past denied a number of these applications,” he said before adding that the courts have weighed in on that. What followed was a statement suggesting that the agency could be changing its tack on Bitcoin:

3AC co-founder Su Zhu to be released by year-end after court grilling: Report

Three Arrows Capital co-founder Su Zhu has faced his first interrogation in a Singapore court and is reportedly set to be released soon.

Su Zhu, co-founder of bankrupt cryptocurrency lender Three Arrows Capital (3AC), is reportedly set to be released this month after facing an extensive interrogation in a Singapore court.

Zhu was arrested in Singapore in September 2023 when he attempted to flee the country after a local court sentenced him to four months of imprisonment. At the time, 3AC’s joint liquidator, Teneo, said that Zhu was planning to assist on matters related to 3AC and to help recover assets from the defunct firm.

According to Bloomberg’s Dec. 13 report, Zhu faced his first interrogation in Singapore this week, responding to Teneo lawyers in a two-day court hearing. Citing people familiar with the matter, Bloomberg said lawyers sought details about how the fund failed and the whereabouts of assets. According to Bloomberg’s sources, Zhu is to be released this month based on standard provisions for good behavior.

AI guidance for judges in England and Wales warns against risks

Senior judges in the U.K. have published AI guidelines for the judiciary to follow, which advise how to use AI and warn of the potential risks of using the technology in trials.

A group of four senior judges in the United Kingdom have issued judicial guidance for artificial intelligence (AI), which deals with the “responsible use” of AI in courts and tribunals.

The guidance, published on Dec. 12, is directed toward magistrates, tribunal panel members and judges in England and Wales, and it is intended to inform and warn court officials.

The guidance points out potentially useful instances of AI usage, primarily in administrative aspects such as summarizing texts, writing presentations and composing emails.

Crypto lawyer wants to depose Changpeng Zhao for civil case

The Moskowitz Law Firm, which represented many crypto investors in class-action lawsuits, cited the former Binance CEO’s “unique knowledge” of issues in calling for his deposition.

Adam Moskowitz, who has been the lead attorney in a number of civil cases involving crypto firms, filed a motion to take a deposition from former Binance CEO Changpeng “CZ” Zhao.

In a Dec. 8 filing in the United States District Court for the Southern District of Flordia Miami Division, Moskowitz said Zhao’s testimony would be “crucial to the claims and defenses of all parties” involved. The law firm filed the motion as part of a $1 billion lawsuit against Zhao, Binance and crypto influencers, which a court ordered stayed in August.

Moskowitz and his firm have represented several clients in cases against high-profile crypto firms and related entities. He was counsel for many victims of the collapse of FTX in a lawsuit targeting celebrities who promoted the crypto exchange, as well as a suit claiming investors suffered losses from soccer star Cristiano Ronaldo touting Binance’s nonfungible tokens.

Bitzlato ex-CEO Legkodymov pleads guilty to 1 count in Brooklyn court

The Hong Kong-based crypto exchange had no KYC and was a major support for the darknet marketplace Hydra.

Anatoly Legkodymov, co-founder and former CEO of cryptocurrency exchange Bitzlato, pleaded guilty to one count of operating an unlicensed money services business on Dec. 6. Legkodymov appeared in New York Eastern District Court in Brooklyn before Judge Eric Vitaliano.

In court, Legkodymov agreed to dissolve Bitzlato and forfeit $23 million in cryptocurrency. He had filed a criminal cause for pleading, which is understood to indicate the intention of entering a guilty plea. Breon Peace, United States Attorney for the Eastern District of New York, said:

Legkodymov was arrested in Miami on Jan. 17, 2023 during a coordinated international effort to take the exchange down. Its website was blocked by France the same day. According to the United States Department of Justice, Spain, Portugal and Cyprus, along with the European Union Agency for Law Enforcement Cooperation (Europol), also took part in the operation against it.

Jury in Terraform Labs case shouldn’t decide whether crypto is a security — SEC

According to the SEC, the tokens at issue in its civil case against Terraform Labs should be a “legal question” for a court, “not a factual question for the jury.”

Lawyers representing the United States Securities and Exchange Commission requested the judge in its civil case against Terraform Labs and co-founder Do Kwon determine whether certain crypto assets are securities rather than a jury.

In a Dec. District Court for the Southern District of New York, the SEC argued that the matter of cryptocurrencies as securities under the commission’s guidelines was a “legal question to be determined [by] the Court, not a factual question for the jury.” According to the SEC, sending the question of whether certain cryptocurrencies in the Terraform Labs case qualified as securities under the Howey test — the commission’s standard for determining what is a security — opened the matter up for discussion.

“There is no genuine dispute of material fact that Defendants’ crypto asset offerings involved an investment of money, in a common enterprise, with an expectation of profit to be derived from Defendants’ efforts,” said the SEC.

The SEC has taken it upon itself to label different cryptocurrencies as securities in various lawsuits, including enforcement actions against Binance and Coinbase. In the commission’s case against Ripple, a federal judge ruled in July that the XRP (XRP) token did not necessarily qualify as a security, potentially leading to the SEC dropping charges against CEO Brad Garlinghouse and executive chair Chris Larsen.

The question of what cryptocurrencies qualify as securities or commodities in the United States has been an ongoing debate among lawmakers and regulators, as has the role the SEC should play in regulating digital assets. Many experts are also speculating that the SEC may soon decide on whether to approve a spot crypto exchange-traded product for the first time.

Sam Bankman-Fried will not file any post-trial motions, say lawyers

The former FTX CEO was found guilty of seven felony charges on Nov. 2, for which he could face up to 115 years in prison.

Following his conviction on federal fraud charges on Nov. 2, former FTX CEO Sam “SBF” Bankman-Fried will not pursue any post-trial motions.

In a Dec. 1 letter to Judge Lewis Kaplan in United States District Court for the Southern District of New York, lawyers representing Bankman-Fried said they had “decided not to file any post-trial motions” but reserved their rights to pursue claims on appeal. The filing was the latest following SBF’s conviction on Nov. 2 as he awaits sentencing on March 28.

It’s unclear whether prosecutors plan to move forward with Bankman-Fried’s second trial in March.

After the jury verdict was handed down, Bankman-Fried returned to the Brooklyn Metropolitan Detention Center, where he is expected to remain until sentencing. 30, crypto blogger Tiffany Fong interviewed a former mob enforcer, Gene Borrello, who reported on some of SBF’s experiences in jail.

Terraform Labs and SEC lawyers spar over whistleblower in court: Report

Though many filings in the SEC case were made under seal, Judge Jed Rakoff reportedly suggested that nothing would remain confidential should the matter go to trial.

Lawyers representing the United States Securities and Exchange Commission and Terraform Labs and co-founder Do Kwon sparred in court over information provided by a whistleblower in the securities lawsuit.

According to a transcript of court events provided by Inner City Press on Nov. 30, the SEC reiterated its claims that Terra and Kwon “committed fraud” using the LUNA token, citing sealed evidence provided by an unnamed whistleblower.

“The SEC has misrepresented Do Kwon’s statements,” said Kwon’s and Terra’s lawyer, according to the report.

OK – now at SEC v Terraform Labs & Do Kwon, Inner City Press will live tweet, thread below https://t.co/zRKCGlc0T4

— Inner City Press (@innercitypress) November 30, 2023

The arguments came in a hearing of the U.S. 28, the judge approved the confidential treatment of certain materials filed by Jump Crypto, the firm under scrutiny for its alleged involvement in the events leading to the depegging of UST.

Kwon, who was arrested by authorities in Montenegro in March for using falsified travel documents, could face extradition to either the U.S. Attorney’s Office charged Kwon with eight criminal counts related to fraud at Terraform Labs.

Evidence mounts as new artists jump on Stability AI, Midjourney copyright lawsuit

The battle continues as artists amend a lawsuit previously struck down by court authorities against major AI companies that have allegedly violated creative copyright laws.

A copyright lawsuit filed against multiple companies developing artificial intelligence (AI) tools has been amended, with artists and their legal teams continuing to allege their creative works have been misused.

On Nov.

The new artists include H.

According to the amended class action case, Stability AI, Midjourney and DeviantArt, along with new defendant Runway AI, have produced systems that create art in the style of the artists when the artists’ names are used as prompts fed to the AI.

The plaintiffs claim that, as a result, users have generated art that is “indistinguishable” from their own.

“AI image products are primarily valued as copyright-laundering devices, promising customers the benefits of art without the costs of artists.”

In addition, the artists allege that Midjourney — one of the most popular generative AI tools for creating art, with roughly 16.4 million users, according to its website — has violated rights that fall under federal trademark laws in the United States.

The claims point to Midjourney’s website promoting a list containing the names of over 4,700 artists, including some of the plaintiffs, that can be used as generative prompts.