Reflecting its determination to monitor the crypto markets, the Security and Exchange Commission has renamed the Cyber Unit the “Crypto Assets and Cyber Unit” and is nearly doubling its size from 30 to 50 members, according to a May 3 press release from the agency. The additional permanent positions will include investigative staff attorneys, trial
Enforcers Eye Crypto Tax Dodgers, Their Accountants and Lawyers
As tax season approaches, cryptocurrency investors and their advisors are facing heightened scrutiny. The New York State Office of the Attorney General recently announced its commitment to hold “cryptocurrency tax cheats accountable.” Taxpayers who fail to properly declare their crypto income could face treble damages, interest, and penalties under the New York False Claims Act, in addition to criminal prosecution and separate liabilities and penalties under the tax law.
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FDIC Consumer Compliance Supervisory Highlights for State and Community Banks
On March 31, 2022, the Federal Deposit Insurance Corporation (FDIC) issued the March 2022 edition of its Consumer Compliance Supervisory Highlights. The publication provides a high-level overview of consumer compliance issues identified in 2021 through the FDIC’s supervision of state-chartered banks and thrifts that are not members of the Federal Reserve System. It provides important guidance regarding compliance priorities for these financial institutions.
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Former CFPB Deputy Enforcement Director Jeff Ehrlich Joins McGuireWoods in D.C.
McGuireWoods is pleased to announce that Jeff Ehrlich, former deputy enforcement director at the Consumer Financial Protection Bureau, has joined the firm’s financial services litigation practice as a partner in Washington, D.C.
Jeff joined the CFPB in 2011 and was promoted to deputy enforcement director in 2013. In that role, he led the CFPB’s
Despite BlockFi’s $100 Million Settlement with the SEC for Failing to Register as an Investment Company, BlockFi is Under Fire From Investors
On February 14, 2022, the Securities and Exchange Commission announced a settlement with a crypto lending company in a “first-of-its-kind enforcement action” for failing to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). In the novel settlement, BlockFi Lending LLC (“BlockFi”) agreed to pay $100 million in penalties — $50 million of which will be paid to the SEC, and the remaining $50 million allocated to 32 different state regulators for similar charges. As part of the settlement, BlockFi has undertaken to comply with the Investment Company Act either by registering as an investment company or by proving to the SEC Staff that it is not required to do so. BlockFi has 60 days from entry of the order to comply and may obtain an extension of another 30 days. Should BlockFi successfully come into compliance, it could be the first SEC-registered entity to offer a digital asset lending product.[1] Despite BlockFi’s groundbreaking settlement, BlockFi still faces a putative class action by investors.
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Biden Administration Signals Focus on Cryptocurrency as President’s Working Group Issues Report on Stablecoin
On November 1, 2021, the President’s Working Group on Financial Markets (PWG), along with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) (collectively, the Agencies) issued a Report on Stablecoins (the Report).[1] Stablecoins “are digital assets that are designed to maintain a stable value relative to a national currency or other reference assets.”[2] The Report recommends that Congress act promptly to enact legislation addressing stablecoins[3] and signals the Biden Administration’s focus on this issue and looming enforcement from governing agencies such as the Department of Justice (DOJ), Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC).
The Report provides an overview of stablecoins and decentralized finance (DeFi) platforms more generally; risks and regulatory gaps; and the group’s recommendation. In drafting the Report, the Agencies held discussions with key industry stakeholders, including Coinbase, Kraken, and Stripe. While the Report signals that one day we may see clarity on relevant guidelines related to stablecoins, the Report itself offers little clarity or specific guidance to stakeholders today.
New Nevada Law Protects Limited-English Proficiency Consumers by Requiring Translation of Certain Financial Legal Documents
How to provide financial services to limited-English proficiency (“LEP”) consumers has become a pressing legal issue. Both federal and state laws provide requirements and limitations regarding translations of financial documents. Earlier this year, the Consumer Financial Protection Bureau (“CFPB”) published a comprehensive statement encouraging financial institutions to provide services to LEP consumers. The CFPB also took enforcement action against a company for, among other things, deceptively marketing to Spanish-speaking consumers. Following the trend to protect LEP consumers, a new Nevada law, effective October 1, 2021, makes it a deceptive practice to not provide translations for certain financial contracts, agreements and disclosures (“Nevada Law”).
Under the Nevada Law, enacted as Assembly Bill No. 359, any person, who in the course of business, advertises and negotiates certain transactions in a language other than English must provide a translation of the contract or agreement that results from the advertising and negotiations. The translation must include every term and condition of the contract or agreement.
The CFPB’s “Change of Direction” After 1 Month: New Goals, More Attorneys
It was only just over a month ago that President Biden selected David Uejio, a long-time senior leader at the CFPB with a low public profile, to lead the agency temporarily as Acting Director. But already, Mr. Uejio has made very significant changes at the agency, implementing what he calls a “change of direction” with sweeping announcements on a weekly basis. Even as the Senate prepares to consider President Biden’s nominee, current FTC Commissioner Rohit Chopra, to lead the CFPB for a full term at a March 2 hearing, it is time to assess where the agency stands after the Biden Administration’s first month and the likely changes still to come.
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Supreme Court Decision Likely Expands the Reach of Fair Lending Laws to Protect Sexual Orientation and Gender Identity
In a landmark case last week, the Supreme Court held in Bostock v. Clayton Co., Ga. that the prohibition on sex-based discrimination in employment is violated when an employee is fired on the basis of homosexuality or transgender status. This article briefly explains why that decision, based on Title VII of the Civil Rights Act
SEC 2020 National Exam Program Examination Priorities
On January 7, 2020, the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) released its 2020 examination priorities. OCIE is prioritizing practices, products, and services that it believes present heightened risks to investors or market integrity. The examination priorities are organized around seven themes, many of which build on OCIE’s priorities