Digital Assets

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The issue of whether the sales of digital assets constitute investment contracts (and therefore securities) remains at the forefront of SEC regulatory issues. Yesterday, in SEC v. Terraform Labs, a federal judge in New York rejected a fellow judge’s recent ruling in SEC v. Ripple Labs[1] that XRP was not a security when sold to the public on secondary markets.

On Monday, U.S. District Judge Jed Rakoff denied Terraform Labs’ motion to dismiss an SEC enforcement action.[2] In that case, the SEC alleged that Terraform Labs and its founder, Do Kwon, defrauded investors and sold digital assets in unregistered securities offerings. In its motion to dismiss, Terraform Labs argued that purchasers of UST did not have an expectation of it being an investment. In allowing the SEC’s case to proceed against Terraform Labs and Kwon, Judge Rakoff declined to follow the recent ruling in SEC v. Ripple.…

Continue Reading Federal Court in Terraform Labs Rejects Ripple Decision

Action Implicates Attorney-Client Privilege and Other Concerns

Factual Background

On January 10, 2023, the SEC filed a subpoena enforcement action against Covington, a large law firm that was victimized by the so-called Hafnium cyberattack by Chinese state actors.[1]  Hafnium reportedly was engaged in espionage to determine priorities of the incoming Biden administration in November 2020.  The SEC seeks names of Covington clients whose information was accessed by the attackers.  Covington has refused to supply the name of its clients, arguing that such information is protected by the attorney-client privilege and work-product doctrine, and that compliance with the subpoena would be unduly burdensome.…

Continue Reading SEC Files Subpoena Enforcement Action Against Covington & Burling, Seeking Names of Clients Impacted by Chinese State-Sponsored Cyberattack