Risk Update

BD + NFT — Non-fungible Tokenization Matter Law Firm Conflicts Allegation (Much Wow), Business Development Risk (New ABA Opinion),

Lawyers have an obligation to ensure employees don’t solicit clients, new ABA ethics opinion says” —

  • “Attorneys not only must refrain from engaging in improper direct solicitation of potential clients, but there is also an ethical responsibility to ensure that employees or others hired by the lawyers do not engage in such misconduct, according to a new ethics opinion from the ABA’s Standing Committee on Ethics and Professional Responsibility.”
  • “Formal Opinion 501, released Wednesday, identifies that a solicitation under ABA Model Rule of Professional Conduct 7.3(a) is a communication initiated on or behalf of a lawyer or a law firm directed to a specific person that the lawyer knows or reasonably should know needs legal services. The rule permits such direct, face-to-face solicitation if the contacted person is a lawyer, a family member or a close friend or a person who routinely uses the types of services offered by the lawyer.”
  • “The opinion focuses on a lawyer’s ethical responsibilities regarding third parties who solicit on behalf of the lawyer. Model Rule 8.4(a) provides that it is professional misconduct for a lawyer to knowingly assist or induce another to violate the rules—including engage in impermissible solicitation. The lawyer is subject to discipline under 8.4(a) if the lawyer knows of the third party’s conduct or requests or authorizes it.”
  • More via ABA at: “ABA issues guidance on ‘live person’ lawyer solicitation to clarify existing model rules

Fox Rothschild Faces DQ Bid In Athlete Shares Fraud Case” —

  • “A startup that aimed to ‘tokenize’ and sell shares of professional athletes says the firm representing investors in a $1 million fraud suit in New York federal court, Fox Rothschild LLP, once represented a co-defendant and should be tossed from the case.”
  • “New York-based SportBLX seeks to ‘tokenize’ professional athletes ‘by dividing them into tradeable, fungible units that fans and investors could buy and trade,’ according to the lawsuit. This would be done through a blockchain platform that SportBLX would create.”
  • “Cypress Holdings III LP sued startup SportBLX, parent company GlassBridge Enterprises and the startup’s founders, George Hall and Joseph DePerio, in February alleging investors were duped into pouring $1 million into the venture in 2019 based on misrepresentations of a business plan that didn’t materialize.”
  • “GlassBridge said in a letter Thursday that Fox Rothchild represented it ‘before and during the time period at-issue in this litigation on substantially related matters,’ including the company’s directors and officers liability insurance policy.”
  • “GlassBridge paid Fox Rothschild $847,285 in legal fees before the firm ended the representation in early November 2021, two months before Cypress filed its lawsuit, according to the letter filed in Manhattan federal court.”
  • “‘Through the prior representations, and at a time when GlassBridge first purchased and owned SportBLX assets, Fox Rothschild obtained sensitive and confidential information having to do with GlassBridge’s business,’ information that is ‘essential to Cypress’s allegations and GlassBridge’s defense,” the letter said.”