Litigation & Investigations

Whistleblowers are often thought of as public company insiders who report alleged wrongdoing like insider trading, market manipulation, submitting false or misleading company disclosures or other securities and commodities law violations. The emergence of the digital asset industry, and the expanding number of crypto companies using public-facing blockchains, has changed this paradigm. Now anyone with the time, skill, and inclination can audit every transaction on a public blockchain, and the concept of the “traditional” whistleblower has greatly expanded in this relatively unregulated space.

Last month, the Fifth Circuit Court of Appeals reversed the lower court’s March 2021 dismissal in Oklahoma Firefighters Pension and Retirement System v. Six Flags Entertainment Corporation. In the now-revived class action, investors sued Six Flags in relation to 11 Chinese theme parks that Six Flags licensed to a local company for construction and operation, which were expected to be a major driver of Six Flags’ revenue growth – before construction stalled and the licenses were ultimately cancelled in February 2020, these Chinese parks were expected to contribute up to $60 million in pre-tax profits to Six Flags. In the Fifth Circuit’s opinion, the Court ruled that the lower court had excessively discounted the Complaint’s factual allegations, and that the Complaint did, in fact, sufficiently allege material misstatements and scienter.

In recent years, companies and investment managers have increasingly considered environmental, social, and governance (“ESG”) issues in corporate strategy and decision-making, whether in response to investor pressure or due to self-imposed changes via internal processes.  Indeed, a market has developed for ESG-compliant investments over the past few years.  And while ESG-focused investing is more popular than ever, the topic has become increasingly politically fraught.

On December 16, 2022, United States Attorney General Merrick Garland issued two related memoranda (collectively, the “Garland Memo”) which provide guidance to federal prosecutors regarding department policies for charging, pleas, and sentencing. Following publication of the Garland Memo, on January 17, 2023, Assistant Attorney General for the DOJ’s Criminal Division Kenneth Allen Polite Jr. announced important revisions to the Criminal Division’s Corporate Enforcement Policy (the “CEP”), which alter how it will evaluate corporate criminal matters.

On January 10, 2023, the Financial Industry Regulatory Authority (“FINRA”) issued its 2023 Report on FINRA’s Examination and Risk Monitoring Program (the “Report”).

On January 3, 2023, the First Circuit released an opinion that provides a straightforward analysis of the legal standards for determining if statements are non-actionable opinions, as well as the viability of materiality and scienter defenses.

On January 4, 2023, the New York State Department of Financial Services (“DFS”) announced that it reached a $100 million settlement with Coinbase, Inc. (“Coinbase”) following an investigation that revealed “significant failings” in the company’s anti-money laundering (“AML”) compliance program.

The Financial Industry Regulatory Authority (“FINRA”) recently announced that it is conducting targeted sweeps of broker-dealers concerning their communications about “crypto assets.”

On October 26, 2022, the Securities and Exchange Commission, in a 3-2 vote, adopted a new rule, Exchange Act Rule 10D-1. Rule 10D-1 directs national securities exchanges adopt listing standards to require all issuers establish and enforce policies requiring “clawback” of incentive-based compensation paid to corporate executives when that compensation is based upon the issuer’s meeting misreported financials that later require an accounting restatement.  

Crypto litigation, fueled by a surge of investors and market volatility, has ballooned in recent years.  For example, numerous securities class actions and government subpoenas followed the May 2022 collapse of the $60 billion Terra network, along with stablecoin TerraUSD and the LUNA token.

On October 26, 2022, the Securities and Exchange Commission (SEC) proposed a new rule and amendments under the Investment Advisers Act of 1940 (the “Act”) that would add significant guardrails to the common practice of registered investment advisers (RIAs) using third-party service providers (“Proposed Rule”).

It’s official: Reg BI is no longer an idle tool in FINRA’s arsenal.

In a significant August 2022 ruling, the California Court of Appeal narrowed the reach of Title III of the Americans with Disabilities Act (ADA) and the Unruh Civil Rights Act (Unruh) as they apply to online-only businesses. The Appeals Court held in Martinez v. Cot’n Wash Inc. that the websites of online-only businesses are not places of public accommodation within the meaning of the ADA or with regard to Unruh.  This decision is a welcome relief for small and medium-sized businesses throughout the country that have been frequent targets of demand letters and lawsuits from California plaintiffs.

Calls for strong US-based crypto regulation and leadership are growing after the U.S. Attorney for the Southern District of New York (SDNY) announced charges against three men in the "first ever cryptocurrency insider trader tipping scheme." The SEC's decision to charge the same three defendants with securities fraud could have broad implications beyond this case, classifying crypto assets traded on Coinbase as securities.  

This article provides a brief summary of the public comments submitted to the SEC regarding the Commission's proposed climate-related rules, and analyzes and summaries the key points the comments conveyed.

In this article, Mintz attorneys explore the SEC's recently issued proposed regulations on "greenwashing" and how the rules would effect investment advisers and investment companies if implemented.

As the DOJ, SEC, and other regulators continue to ramp up their crypto enforcement teams, the US Attorney’s Office in the Southern District of New York stepped into the spotlight this week with an indictment alleging “insider trading” in the NFT market by an OpenSea employee.

The NFT space is now accustomed to novel use cases and new project launches on a near daily basis. From NFTs involving real estate, to property in the metaverse, to NFT funds, innovation is the name of the game. But until a few days ago, we had not seen a corporate-style acquisition in the NFT space. This news is another reminder that technological innovation continues to outpace regulatory guidance.