Cryptocurrency / Digital Coin Investigations

Cryptocurrency and Digital Coin Investigations and Litigation

Which tokens do regulators consider cryptocurrencies rather than securities? When is a digital token just a token? How are digital coins regulated and by whom? And what can happen if you are contacted by state or federal regulators or investigators or become involved in litigation that involves crypto or digital coin? You may need the advice and services of an experienced cryptocurrency investigations attorney.

Cryptocurrencies, digital coins, virtual coins, and tokens are bits of computer code created on something called a “blockchain.” Blockchain technology lets users engage in financial transactions directly with one another online, without a bank or any other financial intermediary.

Cryptocurrencies and digital coins are still new. The first digital coin, bitcoin, was created in 2009. Since then, cryptocurrencies and digital coins have proliferated. It is hard to be precise, but most estimates place the number of bitcoin users in the U.S. between seven and sixteen million.

What Can Firms That Offer Cryptocurrencies and Tokens Expect?

New legal and regulatory issues regarding cryptocurrencies and digital coins emerge almost daily. Firms that offer cryptocurrencies and digital coins can expect to be closely scrutinized by regulatory authorities.

The Securities and Exchange Commission investigates financial professionals and firms engaged in cryptocurrency and digital coin transactions when those transactions may have violated federal securities laws. The SEC may consider the offering of a digital coin (known as an initial coin offering or an “ICO”) to be a securities offering subject to the same SEC rules and regulations as other securities. According to the SEC’s website:

“Digital assets and the technology behind them may present a new and efficient means for carrying out financial transactions, [but] they also bring increased risk of fraud and manipulation because the markets for these assets are less regulated than traditional capital markets.”

How Does an ICO Work?

An ICO is the digital equivalent of an initial public offering (IPO). Instead of fundraising by selling shares, a firm sells digital coins, generally called tokens, in exchange for money or digital currencies such as bitcoin or ether.

For example, in 2018, Kodak issued an ICO for KODAKCoin, a currency used to buy photo rights on the KodakOne digital photography platform. And Overstock.com raised $134 million with an initial coin offering that the company launched in 2017. Yet, the digital coin that Facebook is issuing – Libra – is a cryptocurrency. It is important to know the difference.

The SEC may investigate whether an ICO is an offering of a security rather than an offer of a cryptocurrency. State regulators from Texas, New York, Massachusetts, and other states have also investigated issuers of digital coins that they considered unregistered securities offerings.

An Experienced Cryptocurrency Lawyer Can Help

If you are investigated by the SEC for activity related to cryptocurrencies and digital coins, you need to be represented by an experienced cryptocurrency lawyer. Crypto lawyer Lisa Bragança is a former Branch Chief in the Division of Enforcement of the Chicago Office of the SEC. She has represented many firms and people in SEC investigations, including people in the cryptocurrency and digital coin industry.

Lisa is also a former Chair of the Chicago Bar Association Securities Law Committee, and she is currently the president of the PIABA Foundation, a not-for-profit investor advocacy group. Lisa is a member of the Financial and Emerging Technology Committee of the CBA as well as the Women’s White Collar Defense Association (WWCDA).

As an experienced cryptocurrency attorney, Lisa represents financial and investment professionals, officers, directors, employees of private and public firms, and others in cryptocurrency and ICO investigations. She is able to represent clients living in all fifty states and even overseas.

When you become a client at Bragança Law LLC, attorney Lisa Bragança will explain how the law applies to your circumstances, and she will personally represent you to get you the best possible result. Lisa has the experience in investigations and litigation to navigate the investigation process for you. As a former SEC Enforcement Branch Chief, she understands the SEC investigation process and helps every step of the way.

A Respected Cryptocurrency Author and Speaker

Attorney Lisa Bragança is the author of a number of articles on cryptocurrency and digital coin regulation, and she speaks frequently on these topics:

1. She is the co-author of “Cryptocurrencies and Tokens: What Are They and Who Regulates Them?” published in the PIABA Bar Journal, Vol. 25, No. 1 (2018).
2. She is the author of “Dipping Your Analog Toe into Digital Coins,” published in the January 2019 ABA Law Practice Magazine.
3. She is co-author of “3 Lessons from a Crypto Mock Trial,” published on Law 360.
4. She spoke at the American Bar Association TechShow 2019 on “Bitcoin and Blockchain for Lawyers.”
5. She spoke at the 2017 PIABA Mid-Year Meeting on cryptocurrency and token regulation.

Cryptocurrency firms and their investors face a number of emerging legal concerns and questions. Bragança Law LLC, represents those who are under investigation by state and federal agencies.

Cryptocurrency Investigations are on the Rise

Cryptocurrency investigations are increasing. In 2018, the Securities and Exchange Commission brought twenty enforcement actions and opened dozens of investigations involving digital assets. Only two years earlier, the SEC did not even mention cryptocurrencies in its 2016 annual report.

The Securities and Exchange Commission is not the only regulator investigating the digital currency market. Securities regulators and attorneys general in eight states issued cease-and-desist orders to ICOs in 2018.

The Financial Industry Regulatory Authority (FINRA) brought its first crypto-related disciplinary action in the same year, and the Department of Justice has announced that it is developing a comprehensive strategy to combat cryptocurrency fraud.

What Triggers a Cryptocurrency Investigation?

A cryptocurrency investigation by the SEC, the Department of Justice, or state regulators may be opened based on a complaint from an investor, a tip from a whistleblower, or information from FINRA (the Financial Industry Regulatory Authority) or other regulatory agencies. The SEC and state regulators have at various times sent out subpoenas or requests for information to a broad array of those in the crypto and digital coin space. An investigation could arise out of a tax audit, a divorce, or any kind of civil litigation.

If you are under investigation or suspect you may become involved in a government investigation concerning crypto or digital coins, you need legal advice from a cryptocurrency lawyer who understands blockchain and the applicable law.

How Can You Contact Bragança Law LLC?

You can reach Bragança Law LLC at (847) 906-3460, or by completing the contact form here on our website.