I. Overview February 2023 was an active month for crypto-related enforcement actions. Enforcement agencies brought additional charges as part of the ongoing fallout of FTX. The Securities and Exchange Commission (“SEC”) brought another action against a celebrity for touting tokens, stopped a cryptocurrency-based investment scheme targeting vulnerable individuals, and brought charges against defendants for an alleged multi-billion dollar fraud involving…
Two months in and 2023 is set to be a big year for crypto enforcement. Fueled in part by the bankruptcy of FTX and other crypto-related companies in late 2022, regulators have begun to move past mainly rhetorical warnings regarding the crypto industry and to take a heavier hand. The SEC’s main claim has been for unregistered securities and exchanges,…
In a further response to the events over the past several months that have rattled the crypto industry, on February 23, 2023, the Federal Reserve Board (“FRB”), Federal Deposit Insurance Corporation (“FDIC”) and Office of the Comptroller of the Currency (“OCC”) (together the “Agencies”) issued their second joint statement (the “Statement”) in less than two months regarding crypto-asset-related risks. As…
On Monday, January 23, 2022, the New York Department of Financial Services (the “DFS”) released a letter (the “Guidance”) clarifying virtual currency custody and disclosure standards and practices that the DFS expects from entities that have received a “BitLicense” and New York limited purpose trust companies (the “VCE Custodians”). The Guidance is final and effective immediately. The Guidance complements existing…
On December 19, 2022, FTX Trading Ltd. issued a press release announcing a process for the voluntary return of avoidable pre-bankruptcy payments to “secure the prompt return of such funds to the FTX Estates for the benefit of customers and creditors.”[1] Seeking to clawback or “avoid” pre-bankruptcy transfers is commonplace in bankruptcy. Such transfers may include customer withdrawals, payments to…
In response to “significant volatility and exposure of vulnerabilities in the crypto-asset sector” throughout 2022, on January 3, 2023, the Federal Reserve Board (“FRB”), Federal Deposit Insurance Corporation (“FDIC”) and Office of the Comptroller of the Currency (“OCC”) (together the “Agencies”) released a joint statement (the “Statement”) highlighting risks to banking organizations related to crypto-assets and reiterating that banking organizations…
The recent wave of bankruptcies in the crypto industry, culminating in the collapses of Celsius, BlockFi, and FTX, has spurred financial regulators to adopt a more aggressive tone when discussing their enforcement priorities.[1] For instance, when announcing charges against FTX Founder Sam Bankman-Fried (“SBF”) for allegedly orchestrating a scheme to defraud FTX’s equity investors,[2] Securities and Exchange Commission (“SEC”) Chair…
On Thursday, December 15, 2022, the New York Department of Financial Services (“DFS”) released a letter (the “Guidance”) outlining the pre-approval application and evaluation process for New York regulated banking organizations that seek to engage in new or significantly different virtual currency-related activities, including virtual currency business activity. While conceptually similar to the approach federal banking regulators have taken in…
As we approach the end of the year, here are the Top 10 posts on the Debevoise Fintech Blog in 2022. If you are not already a Blog subscriber, click here to sign up. How Will Bankruptcy Courts Measure Customer Crypto Claims? October 10, 2022 In the wake of the industry’s significant bankruptcy filings, crypto watchers are focusing for the…
On December 14, 2022, Senators Elizabeth Warren (D-Mass.) and Roger Marshall (R-Kan.) introduced the Digital Asset Anti-Money Laundering Act of 2022 (the “Act”). According to the statement announcing the Act, the legislation is intended to mitigate the risks that digital assets pose to U.S. national security by bringing the digital asset ecosystem into greater compliance with the anti-money laundering and…