Risk Update

Crypto Conflicts — Decentralized, Permissionless, Blockchain Battles. (Much Risk Wow?)

Posted Dan Bressler

 

“Tether wants Roche Freedman off case over founder’s alleged conflict” —

  • “Tether wants Roche Freedman removed from a case against the cryptocurrency company after allegations that one of the law firm’s founders abused investor lawsuits to aid a corporate client.”
  • “On Thursday, Roche pulled out of other cases in California, including one against Binance U.S. over the collapse of stablecoin Terra USD.”
  • “The move came after a website called Crypto Leaks published video clips purportedly showing Roche admitting to using investor lawsuits to target competitors of Ava Labs, a crypto company in which he and other partners at the firm had a financial stake.”
  • “He said in a statement that the report contains falsehoods and that the video was illegally obtained by a person working for someone he sued and edited to remove context.”
  • “Founded in 2019 by a group of attorneys who left Boies Schiller Flexner, Roche Freedman is known for suing big crypto issuers and exchanges on behalf of investors. In withdrawal notices, Roche said he is ‘no longer involved’ in the firm’s class action practice.”
  • “Nonetheless, Tether asked U.S. District Judge Katherine Polk Failla on Thursday to remove Roche Freedman from the case against the company, saying that Roche’s withdrawal alone would not eliminate the conflict.”
  • “‘Even if he is no longer counsel of record, he would still have access to discovery materials, would retain the ability to direct the conduct of other lawyers at his firm and would profit from any potential recovery in this lawsuit,’ the company said in a letter.”

“SEC Seeks Early Win In FOIA Fight Over Crypto Conflict Docs” —

  • “The Securities and Exchange Commission asked a Virginia federal judge on Wednesday to give it an early win in its records dispute with a watchdog group over documents that might reveal former high-ranking SEC officials’ conflicts of interests associated with their oversight of cryptocurrency.”
  • “The SEC argues that any withholding or redaction of documents was legally justified, and that its search process need not be perfect, just reasonably designed to find all relevant records.”
  • “Empower’s records requests focused on three former SEC officials – chairman Jay Clayton, corporate finance head William Hinman and acting enforcement leader Marc Berger – and decisions they made with respect to certain cryptocurrencies.”
  • “Clayton, for example, stated publicly in June 2018 while head of the SEC that Bitcoin was not a security, leading its value to skyrocket, according to the lawsuit. He later left the SEC and joined One River Asset Management, a cryptocurrency hedge fund that focuses on Bitcoin and Ether. The lawsuit raised similar concerns relating to Berger and Hinman, both of whom are now employed at Simpson Thacher & Bartlett LLP, which is part of an industry group that seeks to ‘drive the use’ of Ethereum blockchain technology.”
  • “‘The SEC produced some records at the last minute ahead of its motion for summary judgement,’ Empower president and founder Jason Foster said in a statement. ‘Given the SEC’s pattern of bad faith negotiations on search terms and history of incomplete productions, we are skeptical that this production is fully responsive.'”
  • “In one instance, the commission cites the exemption covering trade secrets and confidential commercial or financial information to justify its decision to withhold parts of documents that have the ‘non-public name of a Simpson Thacher client, Simpson Thacher’s billing practices, and confidential information about the business operations of AT&T submitted to the SEC,’ that were provided as part of a confidential SEC investigation.”
  • “The commission also cites the exemption for deliberative process records, saying it redacted parts of records that showed internal discussions between the SEC’s Office of Ethics Counsel and the U.S. Office of Government Ethics about Hinman’s payments from a retirement plan. The agency said the records also showed internal talks between Hinman and OEC staff about whether he could attend a meeting of the London arm of a group of securities law firms.”