In light of newly expanded qualifications for accredited investors, Law
Decoded looks at recent
interactions between crypto and public
companies.
It is a cruel twist of fate that during the first hiatus week in Law
Decoded’s existence, the SEC put out long-awaited updates to accredited
investor qualifications. Upon reading the news, your faithful and
ever-vigilant policy editor put down his phone, cast a wistful eye upon
the sun’s reflection dancing in the midground of the Atlantic Ocean.
Bracing himself with a deep quaff of Corona, he thought ‘Not today.’
Before the sorrow of not being the one to bring the news to you could
overwhelm him, he grabbed a battered borrowed surfboard and made for the
waves.
Never one to dwell on the past, I will keep most of this
week’s newsletter focused on more recent events. In our continuing
mission to boldly present you with only the freshest of takes etc. Last
week’s accredited investor shift is too fascinating to pass up, but it
ties in with some broader trends about the barrier between public and
private markets.
This week has highlighted U.S. federal
protection of publicly traded companies, while also amplifying
discussion of what exactly public trading should and should not do. It’s
an interesting debate in which crypto is a powerful case study. Aside
from being a theoretical new monetary system, cryptocurrencies have a
reputation for being among the most volatile investments accessible to
the general public. In bringing them to heel, the SEC hopes to at least
weed out overt frauds and scams.
The flip side is that even
without the example of crypto many people criticize the SEC for curating
walled gardens of private investment for rich insiders. Crypto
evangelists harp on about crypto breaching these walls. They do indeed
have a point. But so too does the SEC.
Accreditation rules the nation
Regarding the SEC’s announcement,
the basic function of the commission for its nearly 90-year history has
been to protect investors, full stop. A derived function is pruned
investment markets are more attractive to investors. While everybody
acknowledges that an overbearing regulator is bad for business, the
commission has played a critical role in seeing the U.S.’s investment
markets become the envy of the world since its Great Depression-era
origins — though huge forces like the Second World War, decolonization
and the collapse of old-world empires, Communism and even American
innovation helped out over the years.
The accredited investor
classification comes from Reg. D, an exemption to public filing that
says some people don’t need as much protection. It dates to the Reagan
years, though updates in the 2000s were a big part of ushering in the
era of the “unicorn,” a company with a valuation of over $1 billion
before its IPO — which doesn’t really happen without private investment.
At the same time, recent years have seen private investment under Reg. D
consistently dwarf IPO investment, which suggests that the rich can
just get richer on the ripest returns while public investors are stuck
waiting for companies who are in some sense already past their prime.
Largely
due to high-profile attacks on crypto offerings using Reg. D in the
U.S. (especially Telegram), 2020 has seen shifts to other exemptions
that allow retail investors but have lower caps on how much total money
can come in. The new rules are promising in that they open new avenues
for people to demonstrate investment savvy rather than just resources to
spare as a way of getting accreditation. But then again, will that just
incentivize companies to stay private longer?
Remaining private
saves firms from expensive disclosures and lets owners keep their power
consolidated. But tilting the table further in favor of private equities
runs the risk of cutting public markets off from new blood.
FBI raids teenager’s home in Bitcoin giveaway Twitter hack investigation
The FBI searched the home of a 16-year-old in Massachusetts, who they claim may have masterminded July’s twitter hack alongside Graham Ivan Clark.
Clark
is standing trial in Florida, where he faces charges that could add up
to centuries behind bars. It seems the second mastermind evaded
authorities for a month longer thanks to encrypted messaging services
Signal and Wire, which should do a lot to advertise for those services.
While
this unnamed second mastermind has yet to face charges, a troubling
component of the case is that it also seems like a really good
advertisement for being a publicly traded company in the U.S. Very few
murders see manhunts as far-reaching and efficient as this theft of some
$117,000 at the expense of TWTR’s reputation.
On the other hand,
murder is generally a state crime that doesn’t invoke federal
investigation in the same way as fraud committed across state lines.
Given Twitter’s role in modern political discourse, the hack was
especially scary because it brought out honest fears that more malicious
hackers could have used the same exploit to start wars, 280 characters
at a time.
In defense of Tesla
In a case of a stitch in time saving nine, the FBI busted a Bitcoin ransomware attack aimed at Tesla.
Now-jailed
Russian banker Pavel Kriuchkov allegedly spent a month in the U.S.
trying to recruit a Tesla employee into a ransomware scheme that
authorities say was aiming at extorting $4 million from the company.
Unlike
the Twitter case, which saw the attackers hoodwink an unwitting
employee into turning over critical access to accounts, a loyal Tesla
employee flagged Kriuckhov to the company, which in turn called on the
FBI. The details of the case remain hazy. The original case against
Kriuchkov doesn’t even name Tesla; CEO Elon Musk had to do that.
Meanwhile, TSLA stock is seeing a plummet on the last few days, in step with the broader tech market.
Further reads
Jim Harper of the American Enterprise calls on Zcash’s grant committee to put more resources into philanthropic applications of its privacy technology.
The Center for Strategic and International Studies looks at what China stands to gain from a digital yuan.
Leaders at Coin Center argue that regulators are unlikely to demand that crypto exchanges restrict services to approved wallet addresses. For now.
source link : https://cointelegraph.com/news/law-decoded-public-companies-private-markets-crypto-offerings-and-you-aug-28sept-4
