Digital Assets: What to Do When the SEC Comes Calling

Last week, the Wall Street Blockchain Alliance (WSBA), in partnership with the global law firm of Linklaters, hosted a forum on dealing with investigations or inquiries from the Securities and Exchange Commission (SEC).

Enforcement actions or investigations by the SEC in the world of securities happens with great regularity. In fact, the Enforcement Division of the SEC is the largest sector of the Commission and new enforcement actions are typically revealed every week of the year. In the somewhat opaque realm of digital assets, having solid legal counsel is an absolute necessity as the ecosystem continues to evolve in the US.

The forum, entitled “When the SEC Comes Calling: A Deep Dive into Investigations, Enforcement, and What Not to Tweet,” involved a group of attorneys well known in the digital asset-blockchain world as well as more traditional securities. Participating lawyers included Joshua Ashley Klayman, Kayvan Sadeghi, Doug Davison, Rebecca Rettig, Jason Nagi, Ron Quaranta, Kenneth Herzinger, and Jason Gottlieb.

While it is now crystal clear that, in the US, post-DAO ICOs were pretty much all securities offerings, some other digital asset offerings, such as Telegram’s Reg D funding round, have inspired a legal discussion as to where the line is being drawn by the Feds.

And of course, be careful as to what you say on Twitter…

Below is a series of comments shared by the legal experts that participated in the WSBA/Linklaters forum on SEC investigations. Crowdfund Insider would like to thank WSBA/Linklaters for sharing their insight.


“Frequently, panels and fireside chats focus on how to structure transactions in light of regulatory guidance and recent enforcement actions.  But, in my experience, we seldom get to hear practical advice from experienced securities litigators concerning what companies may expect – and how to react – when the SEC “comes calling,” or, as we learned on Thursday night, quite literally, calls.  That was our goal for the Wall Street Blockchain Alliance’s first event of the year, and our brilliant, dynamic panelists really delivered.  I learned so much, and we at Linklaters were thrilled to welcome the blockchain community into our home.”

Joshua Ashley Klayman, Linklaters and Wall Street Blockchain Alliance

“Any company active in the crypto space should start preparing for a call from the SEC before it happens.  If you get ahead of it, there are steps you can take to identify and minimize risk, and plan so that when you do get a call it will be less stressful, less expensive, and less risky.”

Kayvan Sadeghi, Schiff Hardin

“In terms of how to respond to an SEC enforcement investigation, there is no “one size fits all approach;” rather, one of the first key strategic issues to resolve is to land on an effective approach that best suits the client’s objectives, which turns on a number of factors, such as the nature of the possible exposure, the strength of any defenses, and practical business-specific limitations and objectives.  In the end, finding an approach that manages downside risk for the client under the circumstances ought to determine the response.”

Doug Davison, Linklaters

“An SEC investigation is a mosaic, and when you receive a phone call, letter, or other inquiry, you only see a few small tiles that comprise a case.  As a result, do not discuss SEC inquiries with anyone—even your work colleagues—and immediately engage counsel that has experience with SEC investigations to be your guide.”

Jason Nagi, Polsinelli

“Companies should not view their relationship with the SEC only as a “defensive” one—that is, only when they receive an inquiry, subpoena or complaint from the Commission.  It is critical for companies to be proactive in taking steps towards regulatory and legal compliance at the outset, as well as throughout the lifecycle of the business as it changes or enhances its model or products, to avoid ever having the “SEC come calling.” 

Rebecca Rettig, FisherBroyles

“The Wall Street Blockchain Alliance was very proud to bring together the sharpest legal minds at the intersection of law and digital assets for our ‘When the SEC Comes Calling’ event in New York City. Given the importance and growing frequency of regulatory actions in the cryptoasset and blockchain ecosystems, this was a timely and thought-provoking discussion that was extremely valuable for attendees and the wider industry.”

Ron Quaranta, Wall Street Blockchain Alliance

“SEC investigations may spring from any of a large number of different sources, including SEC sweeps in new areas of focus, analysis by the Staff of periodic filings made with the SEC, examinations by OCIE, market surveillance conducted by the SEC and SROs, complaints from disgruntled investors, internal whistleblower tips, and breaking news in the financial press.  The first step is to lock down the relevant documents and get your arms around the facts.”

Kenneth Herzinger, Orrick

“The SEC v. Telegram case shows the Commission struggling to apply a bright-line test for ‘what is a security,’ dating from the era of the ENIAC computer to a modern financial system in which securities can transform over time into currencies or commodities and vice versa.”

Jason Gottlieb, Morrison Cohen

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