KelBel ⚖️ 🦁

Web3 lawyer and digital marketing biz owner carving out a path in this crazy world. Also, yoga…have you taken a deep breath recently?

[KelBel ⚖️ 🦁 @CryptoKelBells]

@JeffD_Esq Well… it depends.

[Jason Gottlieb @ohaiom]

Yesterday @matt_levine, the Greatest Financial Writer on Earth,[1] wrote 2 paras I want to explore. https://t.co/rWy1HgHWMo

[1] His free daily newsletter is best in the business. Go subscribe now. Footnotes in this thread in his honor.

[KelBel ⚖️ 🦁 @CryptoKelBells]

@brookejlacey Important caveat!

[KelBel ⚖️ 🦁 @CryptoKelBells]

@law_while_human My BigLaw experience was shocking. One of the things that had me speechless was when a mid level associate told me (a jr associate) how the other mid and senior associates and jr partners created rankings of who had the best boobs, who was the hottest, etc.

[KelBel ⚖️ 🦁 @CryptoKelBells]

@LawyerCat_ IHOP > Waffle House

[Carlo⚖️ @CarloDAngelo]

So, Who Is A "Digital Asset Broker" Under Proposed IRS/Treasury Regulations?

If approved, these new regs may likely be the most comprehensive and far-reaching set of KYC reporting requirements ever imposed on U.S. digital asset transactions.🧵

[KelBel ⚖️ 🦁 @CryptoKelBells]

@TaylinSimmonds Playbook

[okHOTSHOT @NFTherder]

Discord[.]io has been breached: 760K users private data including e-mails and hashed passwords are currently being offered on a dark market

Only affects Discord[.]io users. Note they've halted their services. Act accordingly 🫡

[KelBel ⚖️ 🦁 @CryptoKelBells]

@houstongolden Send

[_gabrielShapir0 @lex_node]

After sleeping on it a bit, I will try to explain my take on the Ripple case. WARNING: hyper-technical legal nerd shit ahead.

An "investment contract" *is* a contract.

Investment contracts can be express contracts that are entered into to invest in something—this is the classic kind of 'blue sky' investment contract Ripple talked about in its points & authorities.

The 33 Act and Howey jurisprudence created a new way investment contracts can exist—they can be deemed to exist as matter of law when the policy interests of the '33 Act so require. When the Howey test is satisfied, such policy concerns are implicated, and therefore an investment contract exists as a matter of law.

Ripple's theory was different—Ripple's theory was that there must be, as it were, a 'predicate contract' (a non-investment contract) in order for an investment contract to be deemed to exist under Howey. Ripple argued that predicate contract is not an investment contract, but is an 'essential element' of deeming an investment contract to exist.

Torres essentially rejected Ripple's theory—or rather, deemed it irrelevant b/c in every circumstance where she found the Howey test to be satisfied, there *was* a predicate contract (coincidentally (as it were), not (as Ripple argued) "essentially")

The reason why Torres found CEX sales and partner/employee distros were not investment contracts is *not* because they lacked a 'predicate contract'--it is because the Howey test was not satisfied by the objective circumstances of those transactions.

Torres did not find an investment contract to exist b/w Ripple and CEX buyers b/c the third element of Howey was not satisfied (XRP buyers in those txs could not reasonably expect Ripple's entrepreneurial efforts vis a vis their 'investment of money') and therefore no investment contract is implied under Howey. Those XRP buyers could not expect Ripple's efforts from their investment of money b/c they did not even know it was Ripple they were giving the money to. Not because of some lack of a predicate contract between them and Ripple. Naturally, the fact that they did not know they were dealing with Ripple also incidentally means they were not forming a predicate contract with Ripple—but that is a side-effect, not the reason why Howey fails to be met.

Torres did not find an investment contract to exist b/w Ripple and its employees and commercial partners because the employees and partners did not make 'an investment of money' and therefore the Howey test was not satisfied.

In neither of these fact patterns did Torres find that a lack of a 'predicate contract' is what caused the Howey test not to be satisfied. She stuck with the Howey test and simply measured its prongs against the facts.

The legally controversial part of Torres' opinion about CEXs, in my interpretation, is tying together the efforts and the money invested in a way that has not been done before AFAIK. She implicitly is saying that what you must expect are not entrepreneurial efforts in general—but, more precisely, efforts by the recipient of the money to use the money you invested in pursuit of the entrepreneurial efforts. This is a reasonable twist on Howey, but does indeed seem like a twist (and thus potentially controversial). It is different from how both the SEC and Ripple were thinking about the Howey test.

The legally controversial part of Torres' opinion about employees and partners is a very very narrow reading of 'investment of money'--but it could just be that the SEC did not plead enough of a quid pro quo by the employees and partners for receiving the XRP.

Overall, the reasoning of the opinion I think is debatable, but on the specific interpretation I set forth above, I think the opinion is *reasonable*. It is making more sense to me now than it did yesterday. I think most people are mistakenly portraying it as a victory for Ripple's legal arguments but this is clearly not the case, as Torres rejected Ripple's proposed 'essential elements' construal of the Howey test. Torres stuck with the plain language of the Howey test.

[⚡️ @M4573RCH]

@0xBiZzy @iCrazyTeddy Prob yea

[Carlo⚖️ @CarloDAngelo]

SEC Sues Binance and Coinbase: Here's a Quick TLDR
In two consecutive days, the U.S. Securities and Exchange Commission (SEC) against two major cryptocurrency trading platforms, Binance and Coinbase, along with related entities and individuals, for allegedly operating as unregistered securities exchanges, brokers, and clearing agencies. The SEC also charges both entities with the unregistered offer and sale of securities.

However, there are several key differences between the charges and the circumstances surrounding each case:

Scope of Charges:
In the case of Binance, the charges are more extensive and involve a broader range of allegations, including operating unregistered exchanges, broker-dealers, and clearing agencies; misrepresenting trading controls and oversight; and the unregistered offer and sale of securities. The SEC also accuses Binance of secretly allowing high-value U.S. customers to continue trading on the Binance com platform, despite claiming that U.S. customers were restricted.
In contrast, the charges against Coinbase are more focused and primarily revolve around operating as an unregistered securities exchange, broker, and clearing agency, and the unregistered offer and sale of securities in connection with its staking-as-a-service program.

Level of Deception:
The SEC alleges Binance engaged in an "extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law." This includes misleading investors about risk controls, corrupting trading volumes, concealing operations, and not disclosing where investor funds were being held.
While Coinbase is also accused of violating securities laws, the Coinbase complaint doesn’t alleged deceptive practices as cited in the Binance complaint.

Founder Involvement:
The founder of Binance, Changpeng Zhao, is directly implicated in the charges, whereas the Coinbase complaint does not list Coinbase's founder, Brian Armstrong, as a defendant.

[Eli🎀⚖️.eth (Eliana) @eliana_esq]

🚨 Shaq hit with class action lawsuit for allegedly selling unregistered securities through his project-Astral NFTs. /1

[KelBel ⚖️ 🦁 @CryptoKelBells]

@eliana_esq I just saw a tiktok where the women’s fully clothed IG photos were altered to make her look naked. And then they distributed them 🥹.

[Carlo⚖️ @CarloDAngelo]

🚨Crypto Crime Update: Closing arguments yesterday in the Nate OpenSea trial. Jury deliberations have begun in the first ever NFT "insider trading" criminal wire fraud and money laundering trial.

In May of 2022, Former OpenSea employee, Nathaniel Chastain, was indicted on one count of wire fraud, in violation of 18 U.S.C. § 1349, and one count of concealment money laundering, in violation of 18 U.S.C. § 1956(a)(1)(B)(i). The government essentially accuses Chastain of using his insider knowledge to profit from NFTs featured on OpenSea's homepage. Chastain was responsible for selecting NFTs that would be featured on OpenSea’s homepage. The government alleges Chastain abused his position by buying featured NFTs and then selling it at a profit using anonymous accounts

The defense reseted its case on Friday and the Judge scheduled closing arguments for Monday, May 1, 2023. Yesterday the parties made their closing arguments and the case is now with the jury for deliberations.

Chasten is charged with one count of wire fraud and one count of money laundering. If convicted at trial, he faces a possible maximum sentence of 20 years in prison.

[KelBel ⚖️ 🦁 @CryptoKelBells]

@WrongsToWrite I look for my brother on the streets every time I visit the state he lives in. Addiction fucking sucks.

[Ron Hammond @RonwHammond]

1) This week in Congress and crypto: After a busy week of oversight and stablecoins, the House is chugging right along with the 3rd highest priority in the crypto space: market structure. 2 hearings this week in the House on the same day and the exact topic. Here's what to expect

[KelBel ⚖️ 🦁 @CryptoKelBells]

@betty_nft @Deadfellaz @LinkedIn thank you!

[0xAK @AshKernen]

🚨🚨 Breaking: @yugalabs awarded summary judgment against @ryder_ripps, et al for false designation of origin, cybersquatting + against a finding of fair use under First Amendment/Rogers, unclean hands, and knowing misrepresentation. Damn, talk about KO👊https://t.co/nXkzQNtX4h