Initial Coin Offerings and What the SEC Might Think About Them: An Update

By Daniel Portnov
SEC HQ front.jpgEarlier this week I attended the DC Bar’s Communities program “Crypto Update: Current Issues Relating to Blockchain, Digital Assets and ICOs” featuring two members of the Commission’s staff – Assistant Director Jennifer Leete from the Enforcement

Division and the Deputy Chief Counsel Jonathan Ingram from the Division of Corporate Finance.[1] Like our post earlier this year from Commissioner Jackson’s reception, Ms. Leete and Mr. Ingram offered valuable insight into Enforcement and CorpFin’s thinking on cryptocurrencies and ICOs. (Necessary disclaimer: the views of the individual staff members did not reflect those of the Commission or their colleagues.)

The key takeaways from the program included:

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Defending Research Misconduct Cases (Part I – The Overview)

We’ve written about Office of Inspector General investigations several times (see here and here and here). But there’s a small component of OIG investigations that relate to scientific research misconduct. This is the first of multiple posts about research misconduct investigations.

This series will explain how this particular investigative process works and offer some guidance about how to defend against those investigations.

The targets of research misconduct investigations are scientists and other researchers working at universities and other research institutions. Those scientists and researchers apply for federal funds for their work. If they win grants, then they use federal funds and report back to the government about the research.

This close nexus between private actors (the researchers) and billions of dollars of federal funds means that someone has to keep an eye out for fraud. This type of fraud has the gentler name of “research misconduct,” but the repercussions are still severe.

We’re talking about employment consequences, expulsion from federally-funded research for years, public shaming and, possibly, criminal charges.

When the government uncovers research misconduct, it does not hesitate to make that misconduct public. For example, every quarter, the Office of Research Integrity (ORI) publishes a newsletter on its website. A prominent part of the newsletter is called “Research Misconduct Case Studies.” In that section, ORI describes in some detail its findings of misconduct against a federally-funded researcher. The researcher’s name is prominently featured in the article, along with the likely career-ending punishment imposed.

If you aren’t a researcher, you may be wondering: What is the ORI? How did it get so powerful?

You may also be wondering: Why is this a topic for a white-collar criminal defense blog?

Let’s start with the second question first.

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10 Quick Takes on Michael Cohen’s Recent Plea Agreement – And What Cohen and Roger Clemens Have in Common

Baseball backgroundRemember when everyone was talking about whether now-Justice Brett Kavanaugh was lying to Congress when he seemed a bit less-than-candid about his drinking in high school?

Seems like a million years ago.

Anyway, it turns out that lying to Congress is a real thing! It can lead to real consequences!

I don’t think any criminal defense lawyer in her right mind thought that Kavanaugh would be charged with a false statement for saying that he never blacked out from drinking beer 35 years ago. Whether he lied when he answered questions about the timeline for learning of the allegations of sexual assault was a bit more serious.

But now, President Trump’s lawyer Michael Cohen has pleaded guilty a second time. This time it’s for lying to Congress.

Here is his plea agreement.

And here is the criminal information.

(An information is a type of charging document. It doesn’t need to be issued by a grand jury. An information is a simpler way to charge someone when there is a plea deal since the defendant can waive his right to a grand jury.)

Cohen apparently sent a two-page letter (JUST TWO PAGES) to the Senate Select Committee on Intelligence and to the House Permanent Select Committee on Intelligence. The committees were investigating Russian interference with the 2016 election. The letter discussed his efforts to help an unnamed company open a “branded property” in Moscow. He also testified before Congress.

(We all know what company is being described.)

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Posted in Congressional investigation, Perjury, Plea Agreement | Tagged | 1 Comment

SEC Investigations 101: Establishing the Pace and Scope

This post is the third in a series of posts for non-lawyers, or non-securities lawyers, who might suddenly find themselves on the wrong end of a Securities and Exchange Commission document request, subpoena or call from SEC’s Enforcement division staff.

SEC HQ front.jpgBy Dan Portnov

Unless you are, say, Elon Musk, the SEC may not make very clear the theory it has as to what you did wrong. Instead, SEC Enforcement Division staff may have a broad or vague idea of the alleged misconduct at the start of an investigation and deliberately cast a wide net, resulting in a subpoena (or document request) that is both substantively broad and covers a long period of time. In some cases, you may be left shaking your head at just how little the Staff seems to understand your business.

Still, this early stage presents a great opportunity to take some control of the investigation[1] as well as build credibility with the staff conducting the investigation. This post will walk through the first few steps that you, as the subject of or witness[2] in the investigation, should take.

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The Risk for President Trump (and Anyone Else) If He Answers Written Questions from a Prosecutor

Close up of pen writing a letterLast week, news hit that Donald Trump had received written questions from Special Counsel Robert Mueller. More interesting, President Trump asserted he answered them “very easily.”

Here’s what he said during the interview:

I write the answers. My lawyers don’t write answers. I write answers. I was asked a series of questions. I’ve answered them very easily — very easily. I’m sure they’re tripped up, because you know they like to catch people.

He made clear that he hasn’t submitted his answers yet, so there’s still an open question as to whether he will end up answering them at all since it’s a legal minefield to do so.

Trump has a sophisticated legal team working with him at this point, so I’m not sure his statement is completely accurate.

Let’s unpack all the issues with what he said.

Written Questions Are Not Normal

We can start with the basics: Prosecutors do not normally allow people to answer written questions rather than sit for an interview or appear before the grand jury.

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Posted in Criminal Investigation, False statements, Fifth Amendment, Grand jury, Perjury | Tagged | 1 Comment

SEC Investigations 101: Making Contact

SEC HQ front.jpgBy Dan Portnov

This post is the second in a series of posts for non-lawyers, or non-securities lawyers, who might suddenly find themselves on the wrong end of a Securities and Exchange Commission document request, subpoena or call from SEC’s Enforcement division staff.

Nobody ever expects the Spanish Inquisition call from SEC Enforcement. Still, when you find yourself on the line with Enforcement staff who have questions about a particular transaction or event, there is no need to panic. This post will walk through the basics, background and tips for dealing with that first call.

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New Sentencing Guidelines Amendments Have Two Good Provisions for White Collar Criminal Defendants (and Lawyers)

Counting blackboardOn November 1, 2018, several new amendments to the Sentencing Guidelines went into effect. Two of them are quite positive developments for defendants—and their lawyers—in white-collar criminal cases.

As a procedural matter, the new amendments were proposed by the U.S. Sentencing Commission in April 2018. When Congress did not take any steps to disapprove the changes, they automatically went into effect on November 1st. Congress isn’t doing much right now, so they went into effect a few days ago.

Let’s take a look at two helpful new provisions.

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SEC Investigations 101: How It All Begins

SEC HQ front.jpg

By Daniel Portnov

This post kicks off a series for non-lawyers, or non-securities lawyers, who might suddenly find themselves on the wrong end of an SEC document request, subpoena or call from SEC Enforcement division staff.

Receiving a call from SEC Enforcement Division staff can be a sobering experience, especially if you or your company turn out to be the focus of the SEC’s investigation. You will likely have a million questions. One of the first will probably be: “How did this all start?”

This post will explain generally how SEC Enforcement staff initiate their investigations, or a Matter Under Inquiry (“MUI” – pronounced “MOO-ey”). In many cases, the MUI is a precursor to a formal investigation.

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Should Jurors Be Allowed to Ask Questions During a Criminal Trial?

Multiethnic group of thinking people in glasses with question mark looking upThe judge in one of my recent criminal trials allowed the jurors to ask questions. It was mostly fascinating, though there were a few scary moments too.

On the one hand, it gave us valuable insight into what the jury was thinking. I’m sure it helped the prosecution too, but it was incredibly helpful to hear what questions the jury had as we crafted our defense.

All in all, I’m in favor of allowing jurors to ask questions with the right procedural limitations in place to make sure everyone’s rights are protected.

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Latest Developments in the SEC’s Cryptocurrency Enforcement

 

SEC HQ front.jpgBy Daniel Portnov

It’s been a busy 2018 for cryptocurrency enforcement by the SEC. Following statements by Chair Jay Clayton and Co-Director of Enforcement Stephanie Avakian announcing various cryptocurrency concerns, sweeps and initiatives,[1] several recent Commission enforcement actions have backed up its big talk. Nearly one year after the creation of Enforcement’s Cyber Unit, cryptocurrency enforcement has grown into a vital element of the agency’s mission to protect main street investors.

Let’s take a look at some recent developments in this area.

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