That's one way to satisfy Howey

The Business Law Prof Blog has a new home!  Old posts will remain where they are; new posts will appear at Business Law Prof Blog (1).  More information at our goodbye post, here.

 

Yesterday, the Department of Justice unsealed indictments of several cryptocurrency exchange operators for various forms of market manipulation, in coordination with SEC complaints targeting the same conduct.  It turns out there was an elaborate FBI sting operation involved, whereby the FBI actually created a token for the targeted individuals to manipulate.  The FBI set up a website and everything – the website is actually hilarious, because it describes the token with every bit of crypto-futurish-gibberish you can imagine.  To wit:

It almost reads like it was written by AI as a parody, but I hope a real human person got to draft this.  They must be so proud.

Anyhoo, that’s not the only interesting thing.  Here’s what’s also interesting.

Often, when DOJ comes for crypto, it just charges wire fraud.  That way – unlike the SEC – it can avoid getting into a fight about whether a particular token was or was not a security.  But market manipulation, specifically, is a security-related offense.  And the DOJ wanted to get at market manipulation.  By creating its own token, DOJ could be sure that the token satisfied the definition of a “security.”  It designed it to be a security! 

For example, one argument often made in these cases is that it can’t be a security unless there’s some kind of contractual or quasi-contractual claim that investors can make on the corporate assets.  And that’s just what NexFundAI promises:

So, this Law360 article has all the indictments/complaints and you can see – the SEC goes into detail about why their creation, the NexFundAI token (of course it’s AI) was a security. 

To be sure, both agencies bring securities manipulation claims against a few of the defendants who apparently were not involved with NexFundAI – so they will have to prove the security-status of some additional tokens.  But NexFundAI is sure going to make everything easier across the board.

 

And another thing... New Shareholder Primacy podcast up.  This time, I talk about one-person special committees and Mike Levin talks about how activist investors do their thing.  Available at Apple, Spotify, and Youtube.