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Government Enforcement Exposed - "The GEE"
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19 Jul 2018 Cryptocurrencies — An Overview of the Legal Landscape, The Risks of Investing, and the Future of the Markets – Part 2

In my blog post yesterday, I gave an overview of the legal landscape of cryptocurrencies. Today’s post focuses on the biggest risks for people who want to trade cryptocurrency as well as a peek into what the future of this market looks like.   Trace Schmeltz recently spoke with Business First about crypto currencies and crime, taking a look at the legal side of bitcoins and other cryptos.   What are the biggest risks for people who want to trade cryptocurrency?   The most significant risks, each of which is discussed in turn below, are price manipulation and the lack of transparent pricing, fraud scams like so-called pump and dump schemes, cybersecurity issues and other custody problems, potential counter-party concerns, and liquidity issues.   Price…

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18 Jul 2018 Cryptocurrencies — An Overview of the Legal Landscape, The Risks of Investing, and the Future of the Markets – Part 1

In this two-part blog series, I will be giving an overview of the legal landscape of cryptocurrencies, touch on the biggest risks for those who want to trade cryptocurrency, as well as a look into what the future of this market looks like.   The current legal and regulatory environment for cryptocurrencies   Much has been said about the legal uncertainty around cryptocurrency.  Really, understanding what laws apply is quite simple.  Complying with multiple states’ laws is more difficult, of course.  As set out in the U.S. Commodity Futures Trading Commission’s (CFTC) “Backgrounder on Oversight of and Approach to Virtual Currency Futures Markets”:   US law does not provide for direct, comprehensive Federal oversight of underlying Bitcoin or virtual currency spot markets. As a result,…

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27 Oct 2015 Update from the Coscia Trial

Yesterday, the United States began its prosecution of Michael Coscia of Panther Energy Trading LLC for allegedly engaging in “the crime of spoofing,” as prosecutors framed it. We have blogged about this case before (here and here) and discussed it in the media in the following outlets: Bloomberg News, Wall Street Journal Law Blog, Crain’s Chicago Business and the Chicago Tribune.   In his opening statement, Assistant United States Attorney Renato Mariotti tried to make high frequency trading rudimentary, understandable, and impactful for the jurors. He used very basic analogies and explanations, in order to build a simple case. According to Mariotti, Coscia manipulated markets by using two trading programs—“Flash Trader” and “Quote Trader”—to make it appear there was more supply or demand in the…

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05 Jun 2015 CFTC and CME Collaborate to Chase Alleged Spoofers

The Commodity Futures Trading Commission’s (CFTC) ongoing use of its new anti-spoofing authority (Section 4c(a)(5)(C) of the Commodity Exchange Act) demonstrates a heightened awareness by exchanges of efforts by market participants to rapidly enter and cancel trades in order to manipulate market prices. In May 2015, the CFTC filed a complaint (Complaint) in the Southern District of New York against two traders who allegedly engaged in spoofing by layering trades in the Gold and Silver futures on the Commodity Exchange, Inc. (COMEX). The case is noteworthy for several reasons.   The Complaint alleges that defendants Heet Khara and Nasim Salim “entered orders or layered multiple orders to encourage market participants to trade opposite … smaller orders on the opposite side of the book.”  Once the…

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17 Apr 2015 What you need to know about United States of America v. Michael Coscia

This week, we have posted about two commodity enforcement trends (here and here). Yesterday, Judge Harry D. Leinenweber of the United States District Court for the Northern District of Illinois issued his opinion on the defendant’s motion to dismiss in the matter of the United States of America v. Michael Coscia, Case No. 14 CR 551. The decision is not remarkable, insofar as it is a motion to dismiss that takes the allegations of the criminal indictment as true, but it is instructive. Following are a few of the pertinent highlights.   The Commodity Exchange Act’s Anti-Spoofing Provision is not void for vagueness.  Coscia had argued that 7 U.S.C. §§ 6(c)(a)(5)(C) and 13(a)(2) were void, under the Due Process Clause of the United States Constitution,…

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17 Apr 2015 Recent Enforcement Trends In The Commodity Markets (Part 2)

Last fall, Aitan Goelman – the Director of Enforcement for the Commodity Futures Trading Commission – made two interesting points that appear to be indicative of a couple of enforcement trends. Specifically, he stated that: (i) real deterrent of market manipulation requires putting people in jail; and (ii) the CFTC is going to start trying cases before Administrative Law Judges. Jean Eaglesham, “CFTC Turns Towards Administrative Judges,” The Wall Street Journal (Nov. 9, 2014). At a minimum, these two points demonstrate the beat cop’s resolve to triage all available resources in order to ensure the sanctity of the swaps and futures markets. At the outside, they define a troubling scenario in which administrative law judges with no trading experience will determine whether complex trading was…

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13 Apr 2015 Recent Enforcement Trends in the Commodity Markets (Part 1)

Last fall, Aitan Goelman – the Director of Enforcement for the Commodity Futures Trading Commission (Commission) – made two interesting points that appear to be indicative of enforcement trends. Specifically, he stated that: (i) real deterrent of market manipulation requires putting people in jail and (ii) the CFTC is going to start trying cases before administrative law judges. Jean Eaglesham, “CFTC Turns Toward Administrative Judges,” The Wall Street Journal (Nov. 9, 2014).   At a minimum, these two points demonstrate the beat cop’s resolve to triage all available resources in order to ensure the sanctity of the swaps and futures markets. At the outside, they define a troubling scenario in which administrative law judges with no trading experience will determine whether complex trading was or…

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02 Jan 2015 Year in Review: Government Enforcement/Financial Litigation Developments

This year we have seen a number of interesting and important developments in the world of government enforcement and financial/regulatory litigation. Here are our “Top 5:”   Wal-Mart permits the discovery of privileged internal investigation documents   As we discussed in August, the Wal-Mart decision out of the Delaware Supreme Court was significant because it made clear that the attorney-client and work product privileges are not impenetrable when it comes to internal investigations – at least not in Delaware. The Court, in formally adopting the Garner Doctrine, found that even when all parties agree that the privileges exist and apply, the privileges may be overcome and shareholders may be entitled to privileged documents if they can show “good cause.” While the decision was important and…

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19 Sep 2014 NASAA: State Securities Regulators’ Views on Top Emerging Enforcement Issues

  At the North American Securities Administrators Association (NASAA) Annual Conference earlier this week in Indianapolis, the NASAA Enforcement Section gave a preview of the results of its annual survey of securities administrators. In that survey, state securities regulators identified binary options, marijuana-related investments, stream of income investments and the cybersecurity of digital currency as the primary emerging enforcement concerns.   Binary options. Described by one regulator as “the flavor of the week in terms of investor fraud,” these options, with a fixed expiry time, are all-or-nothing investments. If the option expires in-the-money, the investor gets a fixed amount of cash; if it expires out-of-the-money, the investor gets nothing. Because they are easy to understand and do not require any leverage, state regulators believe relatively unsophisticated…

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17 Sep 2014 News from Down Under: The Case against Leighton Holdings Further Highlights Problems with the Facilitation Payments Exception

  Traditionally, Australia has not vigorously enforced its anti-corruption laws.  In fact, an OECD report released in October 2012 found that, as of that date, enforcement of Australia’s Bribery of Foreign Officials Act was “extremely low,” considering the number of Australian companies exposed to bribery risk. It notes that as of 2012, only 1 of 28 referred allegations resulted in a prosecution. That may be changing with Monday’s report in the Australian Financial Review that Leighton Holdings, an international contracting company based in Australia and active in mining and oil and gas, has internal emails and other documents that show that it have paid substantial bribes in Iraq to secure oil and gas contracts. According to that article, among other things, certain leaked emails which…

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