Tokenized Insider recently featured the insights of Douglas J. Pepe, partner at Cohen & Gresser, on the July 13 decision in SEC v. Ripple Labs, which held that XRP, a cryptocurrency and the native token of Ripple, is not an “investment contract” within the meaning of the securities laws.

As Doug writes, the implication of the analysis conducted in this case is that XRP can be freely traded on secondary markets like Coinbase, Kraken and Bitstamp without complying with the requirements of the Securities Exchange Act of 1934, which is a “devastating blow to the SEC’s position in secondary market exchange cases.”

With over 2,000 subscribers, Tokenized Insider is an “essential guide to profitable opportunities in tokenized real estate and real-world assets.”

City A.M. recently featured the insights of Jeffrey Bronheim, head of the Cohen & Gresser’s London office, on the benefits of sharing expertise gained across government and law practice sectors. He writes: “The government should be proud that the people they attract and the training and experience they get are highly prized by other organisations. It is time the UK adopted the US's attitude to the 'revolving door' and welcomed it as an entirely good thing for both the public and private sectors." 

With 3.2 million unique visitors each month, City A.M. is London’s most-read financial and business newspaper, covering the latest economic, political and business news as well as other features.

SmartBlocks recently spotlighted Cohen & Gresser’s Douglas J. Pepe on its list of top innovators and influencers in the tokenization industry. The Top 32 Influencers You Need To Know list specifically lauds Doug for providing tools for tokenizing real-world assets and NFTs on the blockchain and for his work in the Ravencoin ecosystem.

Smartblocks is dedicated to helping businesses unlock the potential of their assets through end-to-end solutions for security tokens, tokenization of large assets, and decentralized finance (DeFi).

The Wall Street Journal featured C&G’s Mark Cohen and Chris Everdell recently in an article that described Cohen & Gresser as a go-to law firm for high profile cases. The article described the firm’s reputation for meticulous and persistent preparation, hard work, and deep knowledge of the law. To learn more, please visit our litigation and digital currency and blockchain technology practice pages.

International law firm Cohen & Gresser today announced that leading litigator and trial lawyer Douglas J Pepe will join the firm as a partner in its New York office.

Doug brings over 20 years of experience representing corporations, financial services clients (including hedge funds and private equity funds), law firms, and other clients in complex commercial litigation. His practice focuses on high-stakes securities litigation, legal malpractice cases, insurance disputes, mass torts, class action defense, and legal issues in the blockchain and digital currency space.

“I’ve co-counseled with Cohen & Gresser in the past and am thrilled to be joining a talented team with exceptional trial capabilities, high-quality work, and excellent judgment,” said Doug. “I look forward to building my practice here and to working with my new colleagues around the world on complex commercial disputes, professional liability defense, and blockchain advisory work.”

Doug has successfully litigated tens of billions of dollars in claims involving a wide variety of complex issues, including playing a leading role on the Court-appointed Executive Committee charged with directing the subrogation and property damage claims arising out of the 9/11 terrorist attack.

“I’m delighted to welcome Doug to the firm,” said Lawrence T Gresser, co-founder and global managing partner of Cohen & Gresser. “We know him well and like and respect him very much. He is a first-rate litigator and will be integral in providing elite client service and guidance in areas that are important to our clients, including growing our commercial and securities litigation practices, our professional liability practice, and our blockchain and digital currency group.”

Prior to joining Cohen & Gresser, Doug was a partner at Joseph Hage Aaronson LLC, a preeminent litigation boutique. Doug is a member of the American Law Institute and a fellow of the Litigation Counsel of America. He also serves as a Professorial Lecturer in Law at The George Washington University School of Law, where he teaches blockchain law and technology.

On Sept. 13, 2023, the U.S. Securities and Exchange Commission settled enforcement proceedings against the maker of the Stoner Cats web series arising from its sale of NFTs, reflecting a significant expansion of the SEC’s crypto enforcement efforts into the NFT space. In this C&G Client Alert, Douglas J Pepe and William E Kalema explore the SEC’s position in this instance and the broader implications of its stepped-up enforcement of crypto assets as securities.

In this newsletter for the Cercle des Administrateurs (Club for Board Members), Muriel Goldberg-Darmon discusses the future European rules that will apply to crypto-asset service providers, as well as the regulations that will prevent and sanction market abuse involving crypto-assets. Muriel also analyzes the risk of increasing litigation in the crypto-asset sector.

Alexandra Theobald wrote an article called “Can assets withdrawn from a digital exchange be clawed back in bankruptcy?," that was featured on Blockchain Law Alliance.

In this article for Forbes, Muriel Goldberg-Darmon mentions certain rules that should be included in the final version of the European regulation on Markets in Crypto-asssets (the MiCA Regulation). In particular, Muriel Goldberg-Darmon discusses topics concerning crypto-asset service providers, crypto-assets market abuse, stablecoins, and sustainable digital finance.

A four-count indictment was recently brought by the DOJ and SEC against three individuals, including a former employee of Coinbase, for alleged insider trading of crypto assets. While the DOJ brought the criminal case under the wire fraud and conspiracy statutes, the SEC asserted its claims under the securities laws – marking the first time the SEC has alleged insider trading in violation of securities laws in the crypto context.

• The SEC action directly raises the question whether the tokens at issue qualify as unregistered securities, with significant implications for whether the platforms that facilitate trading in those tokens are potentially exposed to legal liability as unregistered securities exchanges.
• While Coinbase is not named in the SEC's complaint as an unregistered securities exchange, the nine tokens mentioned in the complaint were all traded on Coinbase, leaving it unclear what, if any, consequences will result from the SEC’s enforcement action for Coinbase.
• These are also the first cases to allege “tippee” liability for insider trading in the crypto sphere -- a "tippee" being a person who receives and trades on information obtained by someone else (the "tipper") in violation of the tipper's duty to a third party.

In this client alert, Douglas Pepe, Christian Everdell, and Jesse Greenwald discuss the myriad of issues this case presents for the crypto sphere and analyze the potential implications on crypto exchange if the SEC’s action is successful.

In this bylined article for The Blockchain Law Alliance, Doug Pepe discusses a recent four-count indictment brought by the DOJ and related SEC enforcement action against three individuals, including a former employee of Coinbase, for alleged insider trading of crypto assets. These are the first cases to allege “tippee” liability for insider trading in the crypto context.

In addition, while the DOJ brought the criminal case under the wire fraud and conspiracy statutes, the SEC asserted its claims under the securities laws – marking the first time the SEC has alleged insider trading in violation of securities laws in the crypto context. The SEC action directly raises the question whether the tokens at issue qualify as unregistered securities, with significant implications for whether the platforms that facilitate trading in those tokens are potentially exposed to legal liability as unregistered securities exchanges.

Underwood v. Coinbase Global, Inc., et al., a closely-followed putative class action in the Southern District of New York, alleges that Coinbase, a secure online platform for buying, selling, transferring, and storing cryptocurrency, is in violation of the securities laws for selling 79 securities on its platform despite not being registered as an exchange or broker-dealer.

• Coinbase recently filed a Motion to Dismiss that has significant potential implications for the statutory seller defense in the crypto context.
• In its motion, the company argues that it is not a statutory seller and therefore lacks privity with its customers, absolving it of all liability under the Securities Act and Exchange Act.
• The basis for Coinbase’s motion is contained in its user agreement, which specifically states that when users buy or sell assets on the Coinbase site, they are not buying or selling them "from Coinbase."
• The case presents an interesting question in the context of suits against crypto exchanges: can statutory seller liability be extinguished by a user agreement saying that customers are not transacting with the exchange, even though the exchange maintains the keys and controls the crypto at all times until it is transferred to the customer?

In this client alert, Doug Pepe analyzes the arguments in Coinbase’s recent Motion to Dismiss in Underwood v. Coinbase Global, Inc., et al., explores the key questions they raise, and offers insight into the potential implications for the statutory seller defense in the crypto context.

 

Major League Baseball recently announced a partnership with Sorare, the operator of a fantasy soccer game featuring NFTs, to launch a similar NFT-based baseball game in which fans create a fantasy team of NFTs that represent Major League Players. This venture signals an increased public interest in NFT-based fantasy sports teams, which will likely grow in popularity over the next few years.

• Although details of the game have yet to be released, Sorare is expected to issue a set number of MLB NFT cards for each player that displays an image of the player in question, with their team and number, much like a physical baseball card. Participants can purchase the cards and then use them to build a team and compete against others.
• There is some concern among consumers that purchasing digital collectibles, such as NFTs, poses a higher risk than purchasing physical collectibles. If the game collapses, for instance, there is a possibility that purchased NFTs could lose their value.
• It remains to be seen how this partnership will play out, but given the previous success of Sorare’s fantasy soccer league and the continued public interest in cryptocurrency, it is likely that the MLB game will be a success.

In an article for Blockchain Law Alliance, Marvin J. Lowenthal breaks down why this partnership makes sense and analyzes the potential impacts it could have on NFT purchasing and fantasy sports leagues in the future.

In this C&G client alert, Doug Pepe and Marvin Lowenthal examine the impact of the New York Assembly's bill and highlight the key factors that the responsible departments will use to assess the environmental impact of the mining industry in New York.

New York legislators will soon vote on a bill that would place a two-year moratorium on certain cryptocurrency mining operations that use proof-of-work authentication (POW) methods to validate blockchain transactions in an attempt to maintain compliance with NY’s greenhouse gas emission regulations. While the scope of this bill is relatively limited, how the legislator reacts could provide valuable insight into how receptive various NY departments are to the crypto mining industry as a whole.

• The bill’s underlying theory is that the continued expansion of crypto mining operations running POW authentication methods to validate blockchain transactions will negatively impact compliance with the Climate Leadership and Community Protection Act, which requires New York to substantially reduce greenhouse gas emissions.
• Despite some believing this bill will impose an outright ban on all mining, if passed, the bill won’t affect presently operating POW mining operations, instead only prohibiting the issuance of new permits. Mining operations that use alternative energies, such as wind or solar, will also remain unaffected.
• But the bill could still do serious and lasting damage to NY’s mining industry, as mining operations may be hesitant to invest substantial capital into New York if they fear having their operations shutdown at any time due to changes in the state’s regulatory landscape.

In an article for Blockchain Law Alliance, Marvin J. Lowenthal discusses the reasoning behind and the potential implications of this bill, as well as analyses its potential to become a template for how other states examine their own support for crypto mining.

On April 4, 2021, SEC Chairman Gary Gensler gave a new speech on crypto-related issues at the University of Pennsylvania Law School. The speech focused on three main topics: (1) crypto exchanges and other trading and lending platforms, (2) stablecoins, and (3) "Tokens."

• Chairman Gensler's speech provides new insight into the approach the SEC will be taking in each of these three key areas.
• We can expect inbound regulatory efforts in each of the three areas he addressed, with potential SEC-CFTC coordination on exchange registration requirements, and some form of regulation or increased enforcement efforts with respect to stablecoins and tokens.
• The SEC clearly intends to step up regulation and enforcement in these areas and, in particular, seems to be set on mandating registration for crypto trading platforms.

In this C&G client alert, Douglas J Pepe outlines the key takeaways from SEC Chairman Gary Gensler’s speech on crypto-related issues and provides insight on what to expect regarding future regulation.

The UK’s HM Treasury published its response to last year’s consultation on the UK regulatory approach to cryptoassets, stablecoins, and distributed ledger technology (“DLT”) in financial markets on the 4th of April 2022.

• The Response Document highlights the government’s post-Brexit push to drive transformational growth in the UK’s FinTech space through cryptoassets and DLT and confirms its plans to enact legislation to recognise stablecoins as a valid means of payment by bringing them into the existing regulatory perimeter.
• The Treasury’s move to make stablecoins a valid means of payment is the first in an array of measures set to be implemented to secure the UK’s status as “the world’s preeminent financial centre” and “a global hub for cryptoasset technology and investment.”
• The proposed changes should be seen as an effort by the UK to remain relevant in the FinTech space following its exit from the European Union and the damage to its reputation as an attractive business environment that accompanied it.

In this client alert, C&G’s crypto team provides key takeaways from the UK’s HM Treasury response document and offers insight regarding the government’s strategy to support the development of a “world-best crypto ecosystem.”

The Department of Justice (DOJ) has recently signaled a renewed focus on enforcement, and its priorities are being driven by world events.

• In the past few months, the DOJ has announced new task forces and more resources to combat fraud in connection with COVID-19 relief, criminal activity related to cryptocurrency, and sanctions violations by Russian entities and individuals linked to the Putin regime.
• These initiatives signal an uptick in criminal enforcement in the coming months, especially in the areas involving fraud, digital assets, sanctions, and money laundering.

This C&G client alert summarizes some of the recently announced initiatives, which shed light on the likely future enforcement priorities.

On March 9, 2022, President Biden issued an executive order on the “responsible development of digital assets.” He directed a “whole government” review of cryptocurrency assets, including directing the Secretary of the Treasury to convene the Financial Stability Oversight Council (“FSOC”).

• In conjunction with other agencies, the FSOC will study the risks and impact of digital assets and explore the possibility of creating a Central Bank Digital Currency in the United States.
• The order directs the executive agencies to explore creating a digital version of the U.S. dollar that could be used to facilitate digital transactions while still being controlled by the U.S. Department of the Treasury.
• President Biden expressed concern about the impact of cryptocurrencies on the integrity of the financial system.

In this C&G client alert, Douglas J Pepe and Alexandra K Theobald review the details of President Biden’s executive order on the “responsible development of digital assets” and offer insight into what we can expect from the government in terms of future guidance and enforcement efforts.

The cryptocurrency industry should brace itself for increased scrutiny from the DOJ and other enforcement agencies. The DOJ recently announced the creation of a National Cryptocurrency Enforcement Team (“NCET”), which will have the authority to tackle investigations and prosecutions of criminal misuses of cryptocurrency. NCET will not only pursue its own cases but will work closely with other federal agencies, subject matter experts, and law enforcement partners throughout the government to support existing and future cases across the country.

• The announcement further suggests that NCET’s initial mandate will broaden the enforcement focus from criminal actors themselves to those who enable and facilitate illicit activities involving cryptocurrency.
• Cryptocurrency exchanges should take appropriate steps to work with counsel to avoid becoming the subject of a DOJ investigation or prosecution.
• The increased scrutiny will also likely extend to all cryptocurrency-focused businesses, NFT platforms, companies that accept cryptocurrency as payment, and even those that merely do business with third parties dealing in cryptocurrency.
• Given the heightened scrutiny from the DOJ and a constantly evolving regulatory landscape, all companies in the industry should evaluate compliance programs and practices to mitigate risk and exposure.

In this C&G client alert, Christian R Everdell and Barbara K Luse explore the specifics of the NCET mandate, including its anticipated collaboration with the SEC and other federal agencies, and examine what’s on the horizon for cryptocurrency exchanges and other cryptocurrency-focused businesses. The authors identify some key takeaways for companies dealing with cryptocurrency, including cryptocurrency exchanges, crypto funds and financial institutions, and more.

Bonnie J Roe explores how Regulation A may be the best alternative for conducting an initial coin offering in her latest article for Bloomberg Law. 

Christian R Everdell analyzes the potential implications of the regulation of cryptocurrency as a result of Ryan Coffey v. Ripple Labs, Inc. in his latest article for Law360. 

Christian R Everdell continues his examination of SEC enforcement actions regarding initial coin offerings in an article published by the New York Law Journal, this time analyzing the SEC’s response to RECoin, PlexCoin, and Munchee.

Even start-ups are being disrupted! In this article, C&G counsel Christian Everdell examines the SEC’s role in regulating Initial Coin Offerings.

Recently, legitimate businesses have begun to recognize the potential value of distributed ledger technology as a stand-alone technological innovation with numerous benefits, including, among other things, preventing money laundering. In this article, Christian R Everdell examines some of the potential applications of Blockchain technology to prevent crime.

Douglas J. Pepe joined Buchanan's Sahel Assar, Blockchain & Digital Assets Practice Group Leader and Tax Counsel, in this Blockchain 101 CLE presentation.

They discussed the basics of blockchain and crypto technology, laws and regulations, and U.S. domestic crypto policy.

Partner Douglas J. Pepe, who is also a Professorial Lecturer in Law at The George Washington University School of Law, participated as a panelist in The George Washington International Law Review’s annual symposium. This year’s theme was “Finance’s Final Frontier: The Role of Digital Assets & Cryptocurrency within the Global Economy.”

Other speakers participating in this symposium were CFTC Commissioner Kristin Johnson, GW Law Deans Rosa Celario and Michael Abramowicz, Scott Farnin of BetterMarkets, Dr. Mardoqueo Tóchez of the Embassy of El Salvador, and David Hirsch of the SEC Division of Enforcement, among others.

Doug and the other speakers discussed international law and policy challenges involving global technological advancement and economic shifts created by the rise of digital assets and their adoption as legitimate currency.

Douglas J. Pepe spoke with Mark Fidelman of Cryptonized in an episode titled “Demystifying Tokenized Security Laws.” They discussed blockchain asset law and the difference between a Bitcoin and a blockchain asset, and how blockchain assets are essentially an empty vessel that can be filled with legal rights and obligations.

Other topics discussed in the episode:

• The intersection between law and technology, and how blockchain can be used to enforce legal obligations.
• The Ice Wallet that Doug Pepe invented. The wallet is designed for cold storage and communication with a blockchain using optical technology.

View the full episode here.

Douglas J. Pepe guest lectured a Harvard Law School course called "Blockchain, Cryptocurrency and Fintech” in December 2022.

Doug Pepe joined Stephan Unger, Professor at Saint Anslem College, for a conversation on the history, possibilities, and implications of living in a new era – the age of the decentralized ledger.

Christian R Everdell spoke about cryptocurrencies, blockchain, ICO enforcement actions, and government-backed and private stablecoins as a guest lecturer at Harvard Law School's Computer Crime Law class.

Partner Chris Everdell spoke about cryptocurrencies, blockchain, and ICO enforcement actions as a guest lecturer at the Computer Crime Law class at Harvard Law School.

Christian Everdell participated on the "Focus on CryptoCurrency: How to Identify Transactions that are Using Digital Currency to Avoid U.S. Sanctions" panel at the ACI's 11th Flagship Conference on Economic Sanctions: Enforcement & Compliance. The panel discussed how new payment methods are challenging the existing banking system for risk and compliance, how non-US companies use digital currency to avoid US sanctions rules, and how financial institutions can protect themselves.