Posted on

Law Firm Perkins Coie Adds Ex-CFTC Counsel to Dedicated Crypto, Blockchain Group

Law firm Perkins Coie has hired Kari Larsen after identifying her “understanding of the impact that blockchain and crypto will have” on the legal sector.

U.S. international law firm Perkins Coie (PC) announced it had hired a former counsel for the country’s commodities regulator to work in its blockchain practice in a press release Nov. 6.

Kari Larsen, who previously worked at the Division of Enforcement of the Commodity Futures Trading Commission (CFTC), will now be based at PC’s Blockchain Technology & Digital Currency industry group.

The group originally formed in 2013, with PC keen to gain an understanding of the complex legal landscape which continues to evolve around cryptocurrency and related tokens in the U.S.

“I’m confident that Kari has a true understanding of the impact that blockchain and crypto will have on our industry,” Molly Moynihan, co-chair of the firm’s investment management practice and member of the firm’s management committee commented in the release, adding:

“Her extensive experience representing clients in a wide range of commodity and transactional matters, and regularly providing counsel on global matters related to U.S., U.K. and E.U. commodity laws and regulations, will be a significant advantage to our national practice.”

The move comes as legal advice concerning cryptocurrency handling remains highly sought-after in the weeks leading up to the emergence of fresh offerings targeting institutional investors.

As Cointelegraph reported, Dec. 12 should see the launch of the Intercontinental Exchange’s Bakkt platform, which will offer one-day physical Bitcoin futures. Earlier this week, the  U.S. Chicago Board Options Exchange (CBOE) noted that their BTC futures offering hit record volatility lows in October.

The path to regulatory certainty for Bakkt is complex, commentators have noted this week, some seeing the launch as a crucible for what is possible under the current U.S. climate.

Posted on

Law Firm Perkins Coie Taps CFTC Veteran for Blockchain Practice

Kari Larsen, a former executive at bitcoin derivatives startup LedgerX who previously served a stint as counsel for the Commodity Future Trading Commission (CFTC), has joined Perkins Coie LLP.

Larsen was named partner for the firm’s Blockchain Technology and Digital Currency industry group, Perkins Coie said Tuesday.

“Kari brings to bear a deep knowledge of derivative exchange platforms and the commodities sector to represent traders and CFTC registered entities focused on launching innovative products, including cryptocurrency products,” J. Dax Hansen, the industry group’s chair, said in a statement.

Larsen most recently served as counsel for New York-based Reed Smith LLP. Per her LinkedIn bio, Larsen’s remit at Reed Smith included issues surrounding initial coin offerings (ICOs) or token sales. She served at LedgerX as general counsel, chief regulatory officer and chief compliance officer, and worked as counsel in the CFTC’s Division of Enforcement between 1997 and 2000.

In an interview, Larsen said that her time at the CFTC left her with a lasting impression, complimenting the agency for being “sophisticated and nimble” when it comes to investigating new products and markets.”It’s a joy to work with the staff of the CFTC, in my opinion. I look forward to doing more as we look at these challenging aspects to these products [blockchain],” she explained.

Larsen said her interest in emerging markets is what directed her towards blockchain and crypto-related law in the first place, telling CoinDesk:

“I’ve always enjoyed working with markets as they’re emerging and really facing the challenges for creative solutions and yet still having they comfort and security of being within a regulated market.”

Word of the new hire comes just weeks after the firm hired Dana Syracuse, a former NYDFS attorney who aided in the development of the state’s cryptocurrency regulations, as well as the hire of former SEC Branch Chief Valerie Dahiya – both of who have joined the firm’s blockchain industry group.

Image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

CFTC Commissioner Cites CryptoKitties, Dogecoin When Talking DLT Uses

A commissioner of the Commodity Futures Trading Commission (CFTC) spoke positively about the potential uses for blockchain while emphasizing how his agency must respect its role in financial markets during a meeting of international regulators on Thursday.

CFTC Commissioner Rostin Behnam called for “an open mind” with regulating the financial technology space, highlighting a number of applications for distributed ledger technology (DLT) in particular during a speech at the 2018 International Swaps and Derivatives Association (ISDA) Annual Japan Conference in Tokyo.

Regulatory agencies such as the CFTC must better understand how new technologies work and how they might impact global markets in order to help innovators safely access financial networks.

“I have come to understand that innovation at the edge allows others to be creative and pursue their dreams and missions,” he said, adding:

“Just take a moment to think about all the possible use cases for DLT from agriculture to healthcare, finance to art, CryptoKitties to dogecoin. These innovations are more than just technology: They inspire us to find solutions for every problem or hurdle we encounter — and sometimes, they are just fun.”

Behnam added that he underwent a “listening tour” to learn more about issues around bitcoin and other crypto assets, DLT, artificial intelligence and cloud-based programming as part of an effort to better understand new technologies.

“I had no single goal in mind, just a desire to avoid being the typical regulator on the tail end of technological advancement, scurrying to keep pace with swift innovations that capture market efficiencies, open markets to new products and participants, and often reward those willing to take risk,” he explained.

The results of his tour now inform his view on the ecosystem, he said.

CFTC emblem image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

Bitcoin Hedge Fund and CEO Slapped With $2.5 Million Penalty for Ponzi Scheme

A New York federal court has ordered BTC hedge fund Gelfman Blueprint, Inc.and its CEO Nicholas Gelfman to pay over $2.5 million in penalties for a fraudulent Ponzi scheme.

A New York federal court has ordered cryptocurrency hedge fund Gelfman Blueprint, Inc. (GBI) and its CEO Nicholas Gelfman to pay over $2.5 million for operating a fraudulent Ponzi scheme, according to an official announcement published Oct. 18.

GBI is a New York-based corporation and denominated Bitcoin (BTC) hedge fund incorporated in 2014. As stated on the company’s website, by 2015 it had 85 customers and 2,367 BTC under management.

The order is the continuation of the initial anti-fraud enforcement action filed by the U.S. Commodity Futures Trading Commission (CFTC) against GBI in September 2017. The CFTC charged GBI for allegedly running a Ponzi scheme from 2014 to 2016, telling investors that it had developed a computer algorithm called “Jigsaw” which allowed for substantial returns through a commodity fund. In reality, the entire scheme was a fraud.

Per the announcement, GBI and Gelfman fraudulently solicited over $600,000 from at least 80 customers. Moreover, Gelfman set up a fake computer “hack” to conceal the scheme’s trading losses. It eventually resulted in the loss of almost all customer funds.

The current order charges GBI and Gelfman to pay over $2.5 million in civil monetary penalties and restitution. GBI and Gelfman are ordered to pay $554,734.48 and $492,064.53 in restitution to customers and $1,854,000 and $177,501 in civil monetary penalties, respectively.

James McDonald, the CFTC’s Director of Enforcement, said that “this case marks yet another victory for the Commission in the virtual currency enforcement arena. As this string of cases shows, the CFTC is determined to identify bad actors in these virtual currency markets and hold them accountable.”

Last month, the CFTC filed a suit with the U.S. District Court for the Northern District of Texas against two defendants for the allegedly fraudulent solicitation of BTC. Per the suit, defendants Morgan Hunt and Kim Hecroft were running two fraudulent businesses and misleading the public to invest in leveraged or margined foreign currency contracts, such as forex, binary options, and diamonds.

Posted on

‘Pivot to Asia,’ says Arrington After SEC Subpoena

Noted Crypto investor Michael Arrington announced in a Friday tweet that his firm Arrington XRP Capital is no longer investing in U.S. token deals. The news comes after the firm received its second subpoena from the SEC. Arrington states that the subpoena was seeking information regarding the firm’s role as an investor in a US based company.


Arrington’s announcement is disheartening, but not particularly surprising. The crypto industry continues to expand and mature, but the US government so far has been reluctant to establish clear regulatory guidelines for firms operating in the space.

Continued Regulatory Uncertainty

To date, government policy regarding the crypto industry has largely been limited to select enforcement actions, leaving investors and traders to guess which moves are legal. It remains unclear which regulatory body will ultimately have jurisdiction over the market. Crypto’s role as both a currency and a mechanism for fundraising via an ICO means that either the CFTC or SEC could plausibly claim to have jurisdiction.

US Government policy incoherence was highlighted during the recent 1Broker takedown. 1Broker is facing suits from both the SEC and CFTC, as well as asset seizure and criminal charges from the FBI. The SEC and CFTC suits that 1Broker violated rules and regulations that do not obviously pertain to 1Brokers alleged activities. The CFTC’s suit, for example, cites 1Brokers failure to register itself with the CFTC, a process that does not appear possible under current regulations.

Even some of the most basic questions, such as capital gains taxation for crypto traders, remain unsolved. Traders and investors who wish to operate in compliance with regulations are essentially forced to make their best on questions of compliance, hardly an ideal investing environment.

Arrington’s firm has been one of the most prominent figures to rule out investing in the United States, but there is growing fear in the industry that more and more investors may follow his course.

Growing Concerns

At a recent industry round-table held in Washington D.C., several attendees voiced their concerns about the declining regulatory competitiveness of the United States. Several representatives voiced concerns that their firms were at a competitive disadvantage with firms abroad who can raise capital more freely.

While the US has moved only slowly and sporadically towards a coherent crypto regulatory regime, other countries have been much more proactive. Switzerland and Malta are both examples of countries that have established friendly regulatory environments relatively quickly. Both jurisdictions have seen a surge of blockchain activity with entrepreneurs and startups flocking to set up shop.

Malta and Switzerland – Guides Going Forward?

Malta’s “Virtual Financial Assets Act” and “Innovative Technology Arrangement and Services Act” — both passed by the Maltese government in June — will go into effect on November 1st, 2018. The rapid turnaround time highlights the ability of smaller jurisdictions to quickly make changes to attract industry. Malta is already home to both Binance and BitBay.

It will always be easier for smaller countries to amend and change their rules than it would for the United States, a massive country with a slow and deliberative legislative process. Nevertheless, it is becoming increasingly clear that without regulatory clarity and relief, US-based investors and traders will be increasingly cut off from exciting developments in the crypto industry.

What country has the best crypto regulations? What should the US do to compete? Let us know in the comments below!


Images courtesy of Shutterstock, Twitter/@arrington.