Tag Archives: David M. Adlerstein

Cryptoasset Developments: Prospects for Legal Clarity

by Kevin S. Schwartz, David M. Adlerstein, Samantha M. Altschuler, and Sabina M. Beleuz Neagu

Photos of the authors

Left to Right: Kevin S. Schwartz, David M. Adlerstein, Samantha M. Altschuler, and Sabina M. Beleuz Neagu (photos courtesy of Wachtell, Lipton, Rosen & Katz)

A resilient cryptoasset industry is emerging from weathering years of headwinds — from edicts prohibiting the banking of the industry, to an SEC leadership bent on aggressive regulation-by-enforcement in lieu of transparent rulemaking. Looking ahead, tailwinds abound: Bitcoin and Ether exchange-traded products, approved just this year, already have over $150 billion in assets under management. Leading financial institutions have announced plans to tokenize substantial new funds on public blockchains. And tens of millions of Americans own cryptoassets, as use cases continue to proliferate — from payments for goods and services, both on- and off-blockchain; to decentralized financial (DeFi) platforms; to the authentication of content provenance (an essential need amidst AI’s rapid development). With a new Administration and Congress in the offing, there are at last prospects for regulatory clarity in an arena long clouded by uncertainty.

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Cryptoasset Developments: Observations on the Thawing Crypto Winter

by Kevin S. Schwartz, Rosemary Spaziani, David M. Adlerstein, Samantha M. Altschuler, and Sabina M. Beleuz Neagu

Photos of the authors

Left to right: Kevin S. Schwartz, Rosemary Spaziani, David M. Adlerstein, Samantha M. Altschuler and Sabina M. Beleuz Neagu (Photos courtesy of Wachtell, Lipton, Rosen & Katz)

The U.S. cryptoasset industry just rang in the new year with the watershed SEC approval of the first spot ETFs for a digital asset.  With the approval of the first bitcoin Spot ETFs, making possible a path for millions of Americans to have direct bitcoin exposure in retirement and other traditional investment accounts, it is an appropriate time to reflect on significant recent developments that may shape the crypto industry in the year to come.

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SEC Halts Cryptoasset “Staking-As-A-Service” Program Amidst Tightening Regulatory Enforcement Environment

by Kevin S. Schwartz, David M. Adlerstein, and David E. Kirk

Author photographs

From left to right: Kevin S. Schwartz, David M. Adlerstein, and David E. Kirk (Photos courtesy of Wachtell Lipton Rosen & Katz)

Late last week, the SEC filed and simultaneously settled charges against the Kraken cryptoasset exchange for failing to register as a security the offer and sale of its “staking-as-a-service” program. The complaint’s allegations against Kraken, coupled with statements by the SEC’s Chairman, indicate that the SEC may pursue staking-as-a-service programs that have features like Kraken’s as unregistered securities offerings, raising fundamental questions for a sector of the crypto-industry with assets most recently valued at $91.8 billion. This also represents the latest in a series of actions by regulators attempting to shape the status and availability of particular financial products through enforcement tools rather than prescriptive guidance that might aid market participants in adapting existing rules to novel financial products.
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Initial Observations on the FTX Debacle

by Kevin S. Schwartz, Rosemary Spaziani, David M. Adlerstein, and Samantha M. Altschuler.

The dust has not yet settled from the remarkable fall to earth of cryptoasset exchange FTX, associated hedge fund Alameda, and their Icarus-like founder, as revelations and conjecture continue to be disseminated at least daily about what happened and the collateral damage. While there are sure to be many important lessons from this situation as the facts and their effects become clear, some initial observations bear mentioning:
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Financial Institutions M&A 2022: Navigating Challenges, Realizing Opportunities

by Edward D. Herlihy, David S. Neil, Richard K. Kim, Lawrence S. Makow, Jeannemarie O’Brien, Nicholas G. Demmo, David E. Shapiro, Joshua M. Holmes, Matthew M. Guest, Mark F. Veblen, Brandon C. Price, Jacob A. Kling, Raaj S. Narayan, Rosemary Spaziani, David M. Adlerstein, Amanda K. Allexon, Lori S. Sherman, Eric M. Feinstein, Steven R. Green, Meng Lu, Amanda K. Toy, Matthew T. Carpenter, Kwon-Yong Jin, and Emily J. Hantverk.

Bank M&A surged in 2021 with total deal value reaching approximately $78 billion, its highest level since 2006, including 13 deals announced with values above $1 billion. Deal activity was driven by consolidation among large regional banks, continuing a trend that was kickstarted by the BB&T/SunTrust merger in 2019 and picked up steam in late 2020 with significant acquisitions by PNC and Huntington. Ironically, the pandemic in some ways provided a stimulus for bank mergers by prolonging low interest rates and slowing loan growth while massive government relief programs bolstered credit quality and increased deposits. At the same time, stay-at-home measures spurred a customer migration from branches to mobile platforms and accelerated increased competition from financial technology companies, necessitating increased investment in technology, often facilitated by greater scale. These combinations illustrated the increasing importance of scale and accelerating digital and technological investment and the significant synergies and value creation that a well-planned and executed strategic merger can create for shareholders and other constituencies on both sides of a transaction.
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SEC Civil Insider Trading Case Has Broader Repercussions for Cryptoasset Market

by Kevin S. Schwartz, Rosemary Spaziani, David M. Adlerstein, David E. Kirk, and I. Andrew Mun.

On July 21st, the U.S. Attorney’s Office for the Southern District of New York criminally charged three individuals, including a former employee of the cryptoasset exchange Coinbase, with wire fraud in connection with alleged trading of particular cryptoassets ahead of Coinbase’s public announcement that it would make a market in them. In a parallel action, the SEC brought civil insider trading charges against the same individuals, asserting that their trades violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The criminal action itself is notable as the first insider trading case involving cryptocurrency markets, but it does not address the legal status of the traded cryptoassets. The SEC’s civil action, however, expressly asserts that at least nine of the cryptoassets at issue are securities that are subject to the federal securities laws.
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Cryptoassets at an Inflection Point

by David M. Adlerstein

Cryptoassets and the underlying blockchain technologies are becoming increasingly mainstream, with stablecoins, decentralized finance (DeFi), and digital representation of ownership (NFTs) rapidly gaining footing.  While these technologies have attractive features, and may yet prove revolutionary for our economy, this rapid growth also poses significant risks, implicating longstanding principles of prudential regulation, market integrity, and investor protection.  The challenge facing U.S. regulators and lawmakers is one of balance:  to protect investors and market integrity, and curb excesses that could significantly harm the economy, while preserving the technology’s benefits for market participants and the U.S.’s position at the industry’s vanguard.  Following are some considerations which could help strike an appropriate balance on some of the most salient issues posed by cryptoassets’ rapid growth.

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