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Matthias Kleinsasser

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Matthias Kleinsasser is a seasoned litigator with experience in federal district court, bankruptcy court, and Texas state court. He regularly represents officers, directors, and other clients involved in private securities litigation, as well as in investigations brought by regulatory agencies. Read More.

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In a recent and highly anticipated decision, a court in the Southern District of New York held that Ripple’s cryptocurrency token – XRP – is not inherently a security.  In a setback to the SEC, the court also held that certain sales of XRP to retail investors through blind “bid/ask” transactions[1] were not securities transactions when considering the economic realities and under the totality of the circumstances.  SEC v. Ripple Labs, Inc., et al.[2] 

The court delivered its decision on these “programmatic sales” of XRP to retail investors, as well as its decisions on “institutional” and other types of sales of XRP, when ruling on competing summary judgment motions.  Even though the court’s rulings were limited to the transactions at issue and could be appealed, its decision undermines the SEC’s current position that it requires no additional authority from Congress to regulate both sales of tokens and cryptocurrency trading platforms. Continue Reading Ripple’s Legal Waves: Ripple Summary Judgment Ruling Could Have Wide-Ranging Impact

On April 5, the Public Company Accounting Oversight Board levied a $100,000 fine against Scott Marcello, the former Vice Chair of Audit at KPMG.  The penalty is noteworthy for two reasons: (1) it’s the largest monetary penalty ever levied by the PCAOB in a case settled with an individual; and (2) it’s the first matter in which the PCAOB has sanctioned someone for failure to reasonably supervise, despite being authorized to impose sanctions on this basis under the Sarbanes-Oxley Act of 2002 (SOX).  See Section 105(c) of the Sarbanes-Oxley Act of 2002 (SOX).
Continue Reading The PCAOB Brings First Failure-To-Supervise Case

There has been lots of breathless commentary in the financial press and the blogosphere over the SEC’s August 2021 filing of an insider-trading case involving so-called “shadow trading.” Shadow trading as defined in a 2020 academic paper occurs when someone possessing material, nonpublic information (“MNPI”) obtained from his or her employer uses it to trade in the securities of a competitor or economically-linked public company.[1]  This is in contrast to the more usual insider trading, in which the stock being traded is that of the subject company. In Panuwat, the defendant is charged with misappropriating MNPI from his employer and using it to trade in a competitor’s securities.[2]  Earlier this week, a district court in the Northern District of California denied a motion to dismiss the SEC’s complaint, allowing the enforcement action to proceed.[3]
Continue Reading SEC Complaint Upheld in Rare – But Not Unprecedented – Shadow Trading Case

Capital raising through Special-Purpose Acquisition Companies (“SPACs”) has gone through the roof in the last two years.  Last year was by far the single highest deal value for SPACs, and the first quarter of 2021 has already surpassed last year’s total deal value.[1]  Given the explosion of SPAC transactions, often backed by celebrities, it is a safe bet that the SEC will increase its scrutiny of SPACs.

In fact, on March 25, 2021, Reuters reported that the SEC has requested voluntary information from Wall Street banks on SPAC deals.[2]  Whether this inquiry broadens into a full-scale industry sweep remains to be seen, but it is clear that the hotbed of SPAC activity has captured regulatory attention.  Also notable is that the plaintiffs’ bar has been filing lots of cases arising from SPAC transactions, which can be a harbinger of SEC inquiries.  For these reasons, it is important to understand the regulatory risks of these deals.Continue Reading SPACs in the Spotlight: Skyrocketing Deal Volume Invites Regulatory Scrutiny

The dust has settled on the 2020 election, and the Biden administration has begun pressing forward with its policy objectives. Critical to achieving such objectives is the Democrats’ control of both the House of Representatives and the Senate, albeit by the narrowest of margins after the Democratic senatorial candidates won their run-off elections in Georgia. As a result of the Georgia elections, Vice President Harris will be able to cast the tie-breaking vote in the case of a deadlock in the Senate. What does the change in administrations mean for SEC enforcement?
Continue Reading What to Expect from the SEC Under the Biden Administration

The Securities and Exchange Commission’s disgorgement powers have made legal headlines a couple of times over the last few years – most notably, with the U.S. Supreme Court’s decisions in Kokesh v. SEC, 137 S. Ct. 1635 (2017) and Liu v. SEC, 140 S. Ct. 1936 (2020).  Disgorgement surfaced again with the recent passage of the National Defense Authorization Act for Fiscal Year 2021, Section 6501 of which doubled the statute of limitations for some disgorgement actions from five years to 10. 
Continue Reading Four Things You Need to Know About the Extended Limitations Period for SEC Disgorgement

On September 3, 2020, the Securities & Exchange Commission charged Daniel Kamensky with abusing his fiduciary position as co-chair of the Neiman Marcus Group Unsecured Creditors’ Committee by pressuring a rival bidder to abandon its bid for securities so that Kamensky’s hedge fund could purchase them at a lower price.  The U.S. Attorney’s Office for the Southern District of New York also brought charges against Kamensky for securities fraud, wire fraud, extortion, and obstruction of justice.  The allegations—if proven—are a fascinating story in and of themselves.[1]  But they also serve as an excellent illustration of the pitfalls awaiting Unsecured Creditors’ Committee members who ignore their fiduciary duties.
Continue Reading Charges Against Marble Ridge Capital Founder Illustrate the Pitfalls That Await Members of Unsecured Creditors’ Committees Who Ignore Their Fiduciary Duties

The Fifth Circuit overturned a U.S. District Court’s approval of a settlement between Ralph Janvey, the Receiver for Stanford International Bank, and various insurance company Underwriters, under which the Underwriters had agreed to pay $65 million to the Stanford Receivership estate.  Writing for the Court, Judge Edith H. Jones held that the District Court abused its discretion in approving the settlement because the injunction issued by the District Court (referred to as a “bar order”) nullified claims by third-party coinsureds to policy proceeds without an alternative compensation scheme.  The settlement also improperly released third-party tort and statutory claims against the Underwriters that the estate did not own.
Continue Reading Fifth Circuit Overturns Receiver’s Settlement Barring Third-Party Claims Against Stanford Financial Insurers

KPMG must pay $50 million after the Securities and Exchange Commission charged the accounting giant with cheating on training exams and using purloined information concerning audit inspections to be conducted by the Public Company Accounting Oversight Board (PCAOB).  KPMG agreed to the $50 million penalty and also accepted a public censure as part of the settlement.
Continue Reading Audit Firm to Pay $50 Million Penalty for Using Information Pilfered From PCAOB