A former product manager for Coinbase Global Inc. and his brother agreed to settle U.S. Securities and Exchange Commission (SEC) charges related to insider trading of crypto asset securities, the regulator said yesterday, Reuters reported. Former Coinbase product manager Ishan Wahi and his brother, Nikhil Wahi, agreed to settle charges that they engaged in a scheme to trade ahead of multiple announcements regarding at least nine crypto asset securities that would be made available on Coinbase's platform, the SEC said in a statement. Ishan Wahi was sentenced to two years in prison earlier this month after pleading guilty to related criminal charges. In January, Nikhil Wahi was sentenced to 10 months in prison.
Federal Reserve officials were divided at their last meeting over where to go with interest rates, with some members seeing the need for more increases while others expected a slowdown in growth to remove the need to tighten further, minutes released Wednesday showed, CNBC reported. Though the decision to increase the Fed’s benchmark rate by a quarter percentage point was unanimous, the meeting summary reflected disagreement over what the next move should be, with a tilt toward less aggressive policy. At the end, the rate-setting Federal Open Market Committee voted to remove a key phrase from its post-meeting statement that had indicated “additional policy firming may be appropriate.” The Fed appears now to be moving toward a more data-dependent approach in which myriad factors will determine if the rate-hiking cycle continues. “Participants generally expressed uncertainty about how much more policy tightening may be appropriate,” the minutes said. “Many participants focused on the need to retain optionality after this meeting.” Essentially, the debate came down to two scenarios. One that was advocated by “some” members judged that progress in reducing inflation was “unacceptably slow” and would necessitate further hikes. The other, backed by “several” FOMC members, saw slowing economic growth in which “further policy firming after this meeting may not be necessary.”
In related news, Federal Reserve policymakers also suggested that they viewed with concern the partisan standoff over the debt limit, with “a number” of them saying earlier this month the central bank should be ready to act to preserve financial stability if needed, Bloomberg reported. Those signals were included in minutes of the Fed’s May 2-3 policy meeting, released on Wednesday. “Many participants mentioned that it is essential that the debt limit be raised in a timely manner to avoid the risk of severely adverse dislocations in the financial system and the broader economy,” the Fed said in the release. Republican lawmakers and the Biden administration remain at loggerheads over boosting the debt limit, as they were when the Fed met. Negotiators have so far been unable to agree on conditions, with GOP members demanding sweeping spending cuts Democrats oppose and the Democrats urging revenue measures that Republicans reject. Chair Jerome Powell has in public repeatedly said that “no one should assume that the Fed can protect the economy” if the Treasury can’t make good on all federal obligations. Read more.
U.S. prosecutors are reviewing stock trading by some of First Republic Bank's employees during the lender's recent collapse, Bloomberg Law and Reuters reported. The Justice Department is looking into whether anyone working at the firm used inside information in transactions as the bank was crumbling, the report added. Regulators seized First Republic and sold its assets to JPMorgan Chase & Co. in early May, in a deal to resolve the largest U.S. bank failure since the 2008 financial crisis. The probe, which is at an early stage, is also scrutinizing the company's financial disclosures, Bloomberg Law reported. In late March, Massachusetts regulators also opened an investigation into sales of company stock by top executives at First Republic in the weeks leading up to the recent banking turmoil.
The U.S. Securities and Exchange Commission on Wednesday voted to propose a plan to bolster the resiliency of clearinghouses during times of significant market stress, such as the 2021 "meme stock" trading frenzy, Reuters reported. Clearing agencies and their infrastructure are often referred to as the plumbing of the market, and stand between buyers and sellers of every trade, taking on the risk if one side defaults, or acting as central securities depositories. The SEC proposal builds on rules passed in 2016 and would require clearinghouses to monitor margin exposures on an ongoing basis and gives them the authority to make intraday margin calls as frequently as circumstances warrant, the regulator said. Specifying the ongoing monitoring of intraday exposure, and under what circumstances intraday margin calls would be made, would strengthen clearinghouses' risk management and give greater transparency around how they manage intraday risk, the SEC said.
U.S. high-speed trading giant Jump Trading entered a secret deal to prop up the TerraUSD cryptocurrency a year before the coin’s collapse, new court filings show, highlighting the ties between Chicago-based Jump and disgraced crypto mogul Do Kwon, the Wall Street Journal reported. The Securities and Exchange Commission posted the court filings late Friday as part of its fraud lawsuit against Mr. Kwon and his company, Terraform Labs. The filings confirm that Jump was the unnamed U.S. trading firm in the SEC’s lawsuit that made some $1 billion in profit through its dealings with Terraform Labs, according to the SEC. Jump hasn’t been accused of any wrongdoing in connection with TerraUSD or the coin’s May 2022 collapse. The crash wiped out some $40 billion in value from the crypto markets and cost thousands of investors their savings. One year before the collapse, in May 2021, the stablecoin TerraUSD fell below its $1 peg to nearly 90 cents before staging a recovery. Mr. Kwon later touted the rebound as an example of how TerraUSD “automatically self-heals,” bolstering investors’ belief that the algorithmic mechanism behind TerraUSD would keep it tied to the dollar, the SEC said in its February lawsuit.
HSBC Securities Inc. and Scotia Capital have agreed to pay $15 million and $7.5 million, respectively, to settle charges of widespread recordkeeping failures, the U.S. Securities and Exchange Commission said yesterday, Reuters reported. The SEC said that it had charged HSBC Securities, a unit of HSBC Holdings Plc, and Scotia Capital, a unit of the Bank of Nova Scotia, "for widespread and longstanding failures by both firms and their employees to maintain and preserve electronic communications."
Securities and Exchange Commission Chair Gary Gensler on Wednesday warned that a failure by Democrats and Republicans in Washington to reach a deal on raising the U.S. debt ceiling would impact trading, the ability of businesses to raise money, and investors. Gensler, a Democrat who was appointed by President Joe Biden, said the standoff has already affected short-dated U.S. Treasury bills, Bloomberg News reported. “If the U.S. Treasury as an issuer were actually to default, it would have very significant, hard-to-predict, and likely lasting effects on investors, issuers and markets alike,” Gensler said in prepared remarks for a conference hosted by the International Swaps and Derivatives Association in Chicago. “It would make the Cyclone Roller Coaster at the 1933 Chicago World’s Fair look like a kiddie ride.” Republican congressional leaders and the White House remain in protracted negotiations over possible budget cuts as part of a deal to raise the debt ceiling before June 1. That’s the date on which Treasury Secretary Janet Yellen has warned the U.S. risks breaching its ability to pay its outstanding obligations. Officials are expected to meet again on Friday to try to come to a solution.
Bittrex and several affiliates went bankrupt on Monday after its U.S. operations were shut down at the end of April in response to a regulatory crackdown, Bloomberg News reported. The bankruptcy, which the Seattle company said doesn’t impact its non-U.S. operations, comes less than a month after the U.S. Securities and Exchange Commission accused the crypto platform of having flouted securities rules for years. Bittrex Global will continue operating as normal for customers outside the U.S., the company said. For users who didn’t withdraw their assets before the shutdown, Bittrex intends “to ask the court to activate those accounts as soon as possible so that customers meeting the necessary regulatory requirements will be able to withdraw them.” Bittrex listed assets and liabilities of as much as $1 billion each in its chapter 11 petition. Related entities Desolation Holdings LLC, Bittrex Malta Holdings Ltd. and Bittrex Malta Ltd. also entered bankruptcy, court papers show. The SEC sued Bittrex in federal court last month, alleging it broke the regulator’s rules from 2017 through 2022 while bringing in at least $1.3 billion in revenue. The SEC said Bittrex at times acted as a brokerage, exchange, and clearing agency, but didn’t register with the SEC.
The Securities and Exchange Commission has been waging a campaign to regulate cryptocurrencies since 2017, arguing it has the authority to oversee many digital coins and the platforms that trade them, the Wall Street Journal reported. The SEC can only regulate digital coins that are classified as securities, a category that includes assets such as stocks and bonds. SEC Chair Gary Gensler has said that most crypto tokens fall within that category. This means that many were distributed illegally, because securities can only be sold to the public if they are registered with the SEC and the issuers provide financial and risk disclosures. Selling securities to the broader public, including crypto tokens, without registration makes the issuer liable for violating investor-protection laws. Regulators first warned crypto companies that many cryptocurrencies looked like securities in 2017, when the SEC outlined how it would use a Supreme Court test to define them. Since then, the SEC has labeled almost 80 crypto tokens as securities, including many whose sale involved some kind of fraud. That is a small percentage of the total number of cryptocurrencies that trade in the U.S., showing how little of the industry has been addressed in six years of enforcement. The SEC says each token requires its own in-depth legal analysis.
The Securities and Exchange Commission is investigating the conduct of First Republic Bank executives before the government seizure and sale of the lender to JPMorgan Chase & Co., Bloomberg News reported. The SEC is looking into whether any members of the then-executive team of First Republic improperly traded on inside information. It couldn’t immediately be determined which former executives are the focus of the inquiry. No one previously or currently at the bank has been accused of wrongdoing, and the investigation could end without anyone being accused of wrongdoing. First Republic was seized by regulators and sold to JPMorgan on Monday in a government-led deal after a drama-filled weekend. Separately, the SEC has been probing the trading activity of Silicon Valley Bank executives before its collapse in March.
