Tag: United States

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United States: SEC Proposes Amendments to Shareholder Proposal Rule
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United States: SEC Rescinds Conditions to Proxy Voting Advice Exemptions
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United States: Grayscale Appeals to DC Circuit on SEC Denial of Bitcoin ETP
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United States: CFTC Sues Crypto Exchange Gemini Trust Co.
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United States: All Square: Amended CFTC “Block Trade” Definition Officially Effective

United States: SEC Rescinds Conditions to Proxy Voting Advice Exemptions

By: Jon-Luc Dupuy and Keri Riemer

Update: On 28 July, 2022, the U.S. Chamber of Commerce, Business Roundtable and the Tennessee Chamber of Commerce & Industry sued the SEC, claiming that it did not follow proper procedures under the Administrative Procedure Act or provide adequate justification for its decision to repeal the exemption conditions described below.

On 13 July 2022, the Securities and Exchange Commission (“SEC”) repealed certain aspects of its 2020 reforms for proxy voting advice businesses (“PVABs”).

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United States: Grayscale Appeals to DC Circuit on SEC Denial of Bitcoin ETP

By: Stacy L. Fuller, Clifford C. Histed, Cheryl L. Isaac, Richard F. Kerr, Keri E. Riemer, and Peter J. Shea

On Thursday, Grayscale Investments, LLC (Grayscale) filed suit against the Securities Exchange Commission (SEC) in the D.C. Circuit asking the court to reconsider the agency’s rejection of listing a spot Bitcoin ETP on the New York Stock Exchange (NYSE). In its appeal, Grayscale argued that the SEC’s ruling regarding its spot Bitcoin ETP was “arbitrary and capricious,” because it disregarded facts about the ETP and erroneously determined that listing the ETP would be in contravention of NYSE’s duties under the Securities Exchange Act of 1934.

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United States: CFTC Sues Crypto Exchange Gemini Trust Co.

By: Clifford C. Histed, Cheryl L. Isaac, and Christine Mikhael

On 2 June 2022, the Commodity Futures Trading Commission (CFTC) filed a complaint against crypto exchange Gemini Trust Company, LLC (Gemini) in the U.S. District Court for the Southern District of New York for allegedly making false or misleading statements of material facts to the CFTC related to the bitcoin futures contract that Gemini launched on its exchange in 2017. If successful in this litigation, the CFTC would impose a derivatives trading and registration ban on Gemini and its employees, in addition to civil monetary penalties and profit disgorgement.

According to the CFTC’s complaint, Gemini intended to self-certify its bitcoin futures contract, and it engaged with CFTC staff between July and December 2017 in connection with the self-certification. The bitcoin futures contract was to be cash-settled by reference to the underlying bitcoin price, determined by the daily bitcoin auction that took place on the Gemini Exchange. In its complaint, the CFTC alleges that the Gemini bitcoin futures contract and related spot auction were readily susceptible to manipulation.

Specifically, the CFTC alleges that:

  • Gemini represented to the CFTC that Gemini required all transactions to be fully “prefunded”, despite the fact that Gemini was lending digital assets to traders on an unsecured basis at low rates;
  • Gemini made false or misleading statements relating to self-trading and did not effectively prohibit self-trading from occurring in the Gemini bitcoin auctions (with about 70% of the total auction trading volume resulted from one market participant trading with itself in December 2016);
  • Gemini entered into bespoke fee arrangements with certain market makers that were not available to all Gemini market participants and were not disclosed to the public; and
  • Gemini provided false or misleading statements to the CFTC regarding trading volume and liquidity on the Gemini Exchange.

The CFTC emphasized in its complaint that the bitcoin futures contract was particularly significant because it was to be among the first digital asset futures contracts listed on a U.S. derivatives exchange. This action makes clear regulators’ intense focus of crypto assets, and the stakes are high: If the CFTC is successful, Gemini and its employees and agents would effectively be banned from U.S. derivatives markets, in addition to being subject to civil monetary penalties and profit disgorgement. CFTC Chairman Rostin Behnam has previously warned that the agency’s recent crypto-related enforcement actions were just the “tip of the iceberg,” and the Gemini lawsuit is evidence that there are more enforcement actions to come.

United States: All Square: Amended CFTC “Block Trade” Definition Officially Effective

By: Cheryl L. Isaac and Michael G. Lee

On 25 May 2022, the U.S. Commodity Futures Trading Commission’s (CFTC) block trade no-action relief, provided in CFTC No-Action Letter (NAL) 20-35, expired. As of that day, all swap execution facilities (SEFs) are required to comply with the amended definition of “block trade” provided under CFTC Regulation 43.2.

“Block trades” are large, privately negotiated (either directly or through a broker) swap transactions that meet certain quantity thresholds. Block trades must qualify for execution apart from the SEF’s order book or trading platform in accordance with the relevant SEF’s rules, pursuant to CFTC Regulations.

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