March 2024 - cypherpunks - lists.cpunks.org

SEC's Naked Short-Selling Suit Against NJ Firm To Continue
by Gunnar Larson 20 Mar '24

20 Mar '24

SEC's Naked Short-Selling Suit Against NJ Firm To Continue <https://www.law360.com/capitalmarkets/articles/1815409?nl_pk=abe82add-2a33-…> By Katryna Perera A New Jersey federal judge has ruled the U.S. Securities and Exchange Commission can largely proceed with its case against a trader and his firm accused of reaping $2 million from an illegal short-selling scheme, but said it cannot seek civil penalties for alleged trading that occurred in three securities. Opinion attached | Read full article » <https://www.law360.com/capitalmarkets/articles/1815409?nl_pk=abe82add-2a33-…> | Save to favorites » <https://www.law360.com/capitalmarkets/articles/1815409?nl_pk=abe82add-2a33-…>

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Former Exec Set For Fall Trial In WeWork Stock Fraud Case
by Gunnar Larson 20 Mar '24

20 Mar '24

Former Exec Set For Fall Trial In WeWork Stock Fraud Case <https://www.law360.com/capitalmarkets/articles/1815489?nl_pk=abe82add-2a33-…> By Stewart Bishop A New York federal judge on Tuesday set a fall trial date for the former CEO of real estate investment firm ArciTerra, who denied issuing a fake $77 million tender offer for WeWork shares in a bid to artificially pump up the stock price days before the office-sharing company slid into bankruptcy. Read full article » <https://www.law360.com/capitalmarkets/articles/1815489?nl_pk=abe82add-2a33-…> | Save to favorites » <https://www.law360.com/capitalmarkets/articles/1815489?nl_pk=abe82add-2a33-…>

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PACCAR Should Be 1st Step To Regulating Litigation Funders
by Gunnar Larson 20 Mar '24

20 Mar '24

PACCAR Should Be 1st Step To Regulating Litigation Funders <https://www.law360.com/competition/articles/1811459?nl_pk=6416fd97-1dc4-4e0…> Rather than reversing the U.K. Supreme Court's well-reasoned judgment in PACCAR v. Competition Appeal Tribunal, imposing a regulatory regime on litigation funders in parity with that of lawyers, legislators should build upon it to create a more transparent, competitive and fairer funding industry, says Rosa Curling at Foxglove. Read full article » <https://www.law360.com/competition/articles/1811459?nl_pk=6416fd97-1dc4-4e0…> | Save to favorites » <https://www.law360.com/competition/articles/1811459?nl_pk=6416fd97-1dc4-4e0…>

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Investigations and Oversight: Director Wray Discusses FBI’s Commitment to Government Accountability
by Gunnar Larson 20 Mar '24

20 Mar '24

https://www.fbi.gov/news/stories/investigations-and-oversight-director-wray… Investigations and Oversight: Director Wray Discusses FBI’s Commitment to Government Accountability In Getzen Lecture, Wray discusses how the FBI helps hold law enforcement, public officials—and itself—accountable The FBI pursues the cause of government accountability by investigating abuses of power by law enforcement officers and the corruption of public officials, and by holding our own workforce to a higher standard, FBI Director Christopher Wray said during the University of Georgia’s 2024 Getzen Lecture on Government Accountability on March 19. The lecture—which is held annually at the school’s Athens, Georgia, campus—invites current and former government leaders and other experts to share their thoughts on government accountability. “Our mission at the FBI is a broad one—to protect the American people and uphold the Constitution of the United States,” Wray said. “It covers everything from cyber to counterintelligence to counterterrorism to working with our partners to tackle violent crime. And, particularly relevant to this afternoon, it includes protecting the vulnerable and holding the powerful accountable.” In the United States, the rule of law comes first and applies to everyone—regardless of their socioeconomic status or position of power (or lack thereof), Wray said. This approach differentiates our nation from “authoritarian regimes, like Russia and China, where the rule of law is subordinated to their leaders’ despotic will,” he added. But to maintain the public’s trust in our justice system, he said, the FBI must demonstrate that it holds powerful people accountable when they break the law. “While there will always be people out there looking to exploit their positions of public trust by serving themselves rather than the American people, with an agency like the FBI on the job—and with institutions like UGA shining a light on why government accountability is so important in the first place—I like our chances,” Wray said. Holding Law Enforcement Accountable The FBI leads federal government efforts to investigate civil rights violations, including the responsibility to investigate what are known as color of law violations. “Those crimes occur when an individual acting under the authority of federal, state, or local laws—under what’s known as the color of law—willfully deprives someone of their constitutional rights,” he explained. “And that deprivation of rights can run the gamut, from excessive force, false arrest, or obstruction of justice to sexual assault, withholding medical care or the failure to keep an individual from harm. While color-of-law violations can be committed by anybody acting under their lawful authority— including probation and corrections officers, public officials, prosecutors, and judges—they too often involve law enforcement officers.” He then described an FBI Jackson Field Office investigation into a group of white law enforcement officers who in January 2023 “kicked in the door of a home where two Black men were staying and subjected them to an hour and a half of pure hell”—including physical and psychological abuse—even though the officers had “no probable cause to believe either had committed a crime.” The officers then went to extraordinary lengths to cover up their actions, including (but not limited to) destroying evidence, planting a gun on a victim, filing fraudulent reports, lying to investigators, and charging a victim with crimes he didn’t commit, Wray said. “All of that came out through the course of the FBI’s investigation,” Wray said, adding that the FBI also learned "three of the officers had committed color of law violations just a month earlier.” The investigation, which Wray said was a group effort between the FBI and “our state and federal partners” resulted in guilty pleas from all six officers, who are now awaiting sentencing. “I recognize that what happened in Mississippi is an extreme example,” he said. “In fact, it’s hard to imagine a more atrocious set of civil rights violations than those carried out by these guys. But, on the flip side, it’s hard to imagine more important work than investigating those crimes and seeking justice for the victims.” These criminals don’t represent “the vast majority of law enforcement officers,” Wray stressed. “I’m the leader of the country’s premier law enforcement agency, and I’ve spent most of my career working shoulder to shoulder with law enforcement officers ... so I’ve seen firsthand what they’re made of and what they do to make our communities safer,” he said. These ingredients, he said, include selflessness, courage, character, dedication, and service. Wray added that officers are overworked and underpaid, largely operate outside the spotlight, and are rarely recognized or credited for their efforts. Yet, he said, they do their jobs knowing that each time they bid their families farewell to head to work, they might be doing so for the last time. “It takes a pretty extraordinary person to choose that life,” he said. Wray said the contrast between officers who wear the badge to serve and protect and those who wield their power to harm others makes color of law violations harmful to both their immediate victims and the public's faith in the way our country holds criminals to account. “We’ve entrusted law enforcement officers with vast power and authority,” Wray said. “And when they abuse it—when they operate as though they’re above the law—they’re not just depriving victims of their civil rights. They’re degrading the public’s trust in our criminal justice system, one violation at a time.” Holding Public Officials Accountable Investigating public corruption is the FBI’s top criminal priority because of its dollars-and-cents cost to our nation’s’ government and taxpayers, which estimates put “at billions of dollars every year,” Wray said. Public corruption—which can be carried out by public officials, regardless of how they get their jobs—can also infect and impact everything from border security and neighborhood protection to courtroom deliberations and even the quality of public infrastructure, he added. But at its core, public corruption denigrates the American people’s trust in their government and “undermines the strength of our democracy,” he said. The “secretive nature” of many public corruption violations can make them tricky to detect and prove, Wray said, but the Bureau’s long track record of investigating these types of crimes gives us an advantage. “On any given day, we’re working about 3,500 public corruption investigations with our federal, state, and local partners across the country—and our efforts pay off,” he said. “Over the past five years, we’ve disrupted nearly 2,000 criminal schemes and helped secure more than 3,000 convictions in this arena.” Those convictions include that of former Ohio House Speaker Larry Householder, who, Wray said, led “the most elaborate and extensive corruption scandal the state has ever seen.” Householder orchestrated a bribery scheme in which FirstEnergy—a company that owned two “failing nuclear power plants”—regularly paid off a tax-exempt organization run by Householder. In exchange, Householder’s organization worked to helped get a bill passed that provided “a billion-dollar bailout" for the troubled facilities, Wray explained. These corporate funds helped bankroll Householder’s bid for speaker and other state House candidates’ campaigns and pad the pockets of Householder and his team. “All in all, the FBI’s investigation found FirstEnergy paid upwards of $61 million in bribes to bail out their plants and to put and keep in office politicians like Householder who’d be loyal to the company over their constituents,” Wray said. But what the corrupt politicians and his cronies didn’t know was that the FBI had an inside source who “cooperated with our agents, recorded incriminating phone calls and conversations, and shared text messages sent by members of the conspiracy,” Wray said. As a result, he said, Householder was eventually convicted of racketeering and sentenced to 20 years in federal prison. FirstEnergy signed a deferred prosecution settlement and agreed to pay a $230 million penalty for conspiring to bribe elected officials and others. Holding Ourselves Accountable The FBI’s authority and power enable our public corruption investigations, but they also rightly force us to carry tremendous responsibility and undergo careful scrutiny, Wray said. “The work of the FBI is subject to a wide range of internal and external controls, all with the aim of holding our organization accountable for what we do,” he said. The Bureau's internal checks and balances include the Office of Professional Responsibility, the Inspection Division’s Internal Affairs Section, and whistleblower protections for all Bureau employees, he said. Department of Justice-level accountability includes oversight from the DOJ Office of Professional Responsibility and the department’s Office of the Inspector General, he added. On top of that, our efforts are monitored by Congress and our investigative steps are subject to judicial review, he noted. “All of those components are in place to make sure people have avenues for reporting violations of the law, dangers to public health and safety, and gross waste, fraud, and abuse” for the FBI to address and correct, he said. The oversight makes the FBI stronger and the public safer, he said. “For the FBI to be the world’s leading law enforcement agency, and for the American public to continue placing their trust in us as an organization, people need to know we’re committed to doing the right thing in the right way,” he said. He stressed that this commitment to process includes maintaining consistent operational rigor, “upholding the Constitution and rule of law,” and "following the facts, wherever they lead.” “Process is what enables us to say, ‘You may not like the result we reached, but you cannot credibly say we didn’t do our work by the book,’ and it’s what allows people to trust us in the long run: the people we do the work for and the people we do the work with,” he said. Learning from the Past Wray also acknowledged the FBI’s missteps with respect to Dr. Martin Luther King Jr.—including an October 1963 wiretap request against the civil rights leader that failed to “present a shred of evidence.” He also reflected on the psychological toll FBI surveillance took on Dr. King. “I do not think any organization can aspire to have an unbiased loyalty to process and truth if it’s not willing to turn the spotlight around and look at itself,” he said. “So that’s something we work hard to do.” The FBI’s mission requires its personnel to simultaneously preserve Americans’ constitutional rights and safeguard their communities, Wray said. And neither requirement may be ignored in the name of the other. New special agents and intelligence analysts now complete a curriculum that incorporates “those difficult historical lessons and how they relate to our core values: respect, compassion, fairness, integrity, accountability, leadership, diversity, and rigorous obedience to the Constitution” to ensure they understand the importance of balancing these professional obligations, Wray said. “Looking back on that dark chapter in our history reminds us what can happen when we become untethered from the rule of law, and from oversight and accountability for our actions,” he added. “And I’m proud to be part of an organization that does not hide from its history, but learns from it, instead.” “For the FBI to be the world’s leading law enforcement agency, and for the American public to continue placing their trust in us as an organization, people need to know we’re committed to doing the right thing in the right way." FBI Director Christopher Wray

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HSBC Securities Can't Exit Ex-Rep's Whistleblower Suit
by Gunnar Larson 20 Mar '24

20 Mar '24

HSBC Securities Can't Exit Ex-Rep's Whistleblower Suit <https://www.law360.com/banking/articles/1814794?nl_pk=feb6bbba-7878-4d39-be…> By Sydney Price A New York federal judge on Monday green-lit a whistleblower retaliation suit by a former HSBC Securities employee who claimed he was fired for reporting "rampant front-running" by HSBC traders, saying that while certain claims must be trimmed the suit plausibly alleges protected activity was a contributing factor to his termination. Opinion attached | Read full article » <https://www.law360.com/banking/articles/1814794?nl_pk=feb6bbba-7878-4d39-be…> | Save to favorites » <https://www.law360.com/banking/articles/1814794?nl_pk=feb6bbba-7878-4d39-be…>

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Brazen' Text By LA Pol Surfaces In Raymond Chan RICO Trial
by Gunnar Larson 20 Mar '24

20 Mar '24

Brazen' Text By LA Pol Surfaces In Raymond Chan RICO Trial <https://www.law360.com/governmentcontracts/articles/1815000?nl_pk=4126fe73-…> By Craig Clough A former lobbyist received a "brazen" text from then-Los Angeles City Councilmember Jose Huizar in 2018 seeking a bribe from his developer client, according to testimony heard on Monday by a Los Angeles federal jury considering racketeering and bribery charges against another former city official, Raymond Chan. Read full article » <https://www.law360.com/governmentcontracts/articles/1815000?nl_pk=4126fe73-…> | Save to favorites » <https://www.law360.com/governmentcontracts/articles/1815000?nl_pk=4126fe73-…>

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Voyager Investors Suing Mark Cuban Seek Class Cert
by Gunnar Larson 20 Mar '24

20 Mar '24

Voyager Investors Suing Mark Cuban Seek Class Cert. <https://www.law360.com/fintech/articles/1814615?nl_pk=d2b3e7ef-ab62-4a62-80…> By Carolina Bolado Investors suing billionaire Mark Cuban over his role in promoting now-bankrupt Voyager Digital Ltd. have pushed for class certification and urged the court to rule that Voyager was selling unregistered securities. Motion attached | Read full article » <https://www.law360.com/fintech/articles/1814615?nl_pk=d2b3e7ef-ab62-4a62-80…> | Save to favorites » <https://www.law360.com/fintech/articles/1814615?nl_pk=d2b3e7ef-ab62-4a62-80…>

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During Spring Bank Panic of 2023, Liquidity Advances from FHLBs Topped Those of Q4 2008, when Wall Street Was in Collapse
by Gunnar Larson 19 Mar '24

19 Mar '24

https://wallstreetonparade.com/2024/03/during-spring-bank-panic-of-2023-liq… By Pam Martens and Russ Martens: March 19, 2024 ~ According to data from the Federal Deposit Insurance Corporation, using a graph from the St. Louis Fed above, the liquidity crisis among banks in the spring of last year was far more dramatic than has been acknowledged by banking regulators. According to the data, during the worst financial crisis since the Great Depression (at the end of the fourth quarter of 2008 when Wall Street was in a state of collapse), banks had borrowed a total of $790 billion in advances from Federal Home Loan Banks (FHLBs). But during the bank panic in the spring of last year, those FHLB advances topped the Q4 2008 number, registering $804 billion as of March 31, 2023. According to data from the Congressional Budget Office, at the end of the quarter before the banking panic of 2023 (the quarter ending December 31, 2022) two of the banks that failed in the spring of 2023 were among the top 10 borrowers from the Federal Home Loan Banks. Those two banks were Silicon Valley Bank and First Republic Bank. The CBO report explains the FHLB loan system as follows: “The principal business activity of FHLBs is to borrow in the capital markets and issue advances to their member institutions. Advances come in two forms: traditional advances and liquidity advances. Traditional advances are intended but not required to be used by members to finance residential housing or by a community financial institution to fund loans for small businesses, small farms, or community development activities. The mortgage-related advances can be used as longer-term funding for loans that are not sold in the secondary mortgage market—such as loans retained by a member in its portfolio—or as interim funding for loans that a member ultimately sells or securitizes. “FHLBs may also make liquidity advances to members, provided that the member is solvent, has the necessary collateral, and has reasonable prospects of returning to a satisfactory financial condition. In that capacity, the FHLBs serve as an alternative to using the Federal Reserve’s discount window, allowing members facing liquidity shocks (that is, urgent demands for cash) to access short-term funding without experiencing the regulatory and market oversight often associated with borrowing from the discount window…” Adequate and timely regulatory oversight was exactly what was missing at the banks that failed in the spring of 2023. According to data released by the Federal Home Loan Banks for the quarter ending December 31, 2023, it is not just small or medium size banks that are tapping advances from the FHLBs. As of that date, the top three borrowers were the following: JPMorgan Chase, the largest bank in the U.S., had outstanding FHLB advances of $41.7 billion. Wells Fargo and PNC Bank each took second place with advances of $38 billion each. Also ranking among the largest borrowers was Flagstar Bank, the federally-insured bank of the publicly-traded New York Community Bancorp. (ticker NYCB). As of December 31, 2023, Flagstar had outstanding advances at the FHLBs of $20.25 billion. NYCB’s share price has collapsed this year; its deposit credit rating has been cut to junk; and earlier this month it accepted an emergency equity infusion from an investor group led by the former U.S. Treasury Secretary in the Trump administration, Steve Mnuchin. See our report: Steve Mnuchin, Trump’s Treasury Secretary/Foreclosure Kingpin, Joins with Hedge Fund Guys to Grab a Teetering, Federally-Insured Bank for $2 a Share. Another bailout program initiated during the banking panic of 2023 is the Federal Reserve’s Bank Term Funding Program (BTFP). The BTFP was announced by the Fed on March 12, 2023 and was to provide emergency loans to banks of up to one-year in duration – an unprecedented action for the Fed as its emergency loans programs are required under statute to be short-term in nature and adequately collateralized. But instead of imposing a haircut on collateral posted by the banks as is the custom, the Fed said it would accept the collateral at par – meaning at the face amount of the collateral at maturity, rather than at the deeply depressed market value. The Fed announced it was ceasing to make new loans under the BTFP as of March 11 of this year. But because banks may have made new loans of one year recently, loan balances for this program may not come down dramatically for some time. As of Wednesday, March 13, the BTFP has total loan balances of $167.46 billion, which was $3.4 billion more than the prior week. For context on what is going on here, see our report: Former New York Fed Pres Bill Dudley Calls This the First Banking Crisis Since 2008; Charts Show It’s the Third.

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2 Investment Firms To Pay SEC $400K For 'AI Washing'
by Gunnar Larson 19 Mar '24

19 Mar '24

2 Investment Firms To Pay SEC $400K For 'AI Washing' <https://www.law360.com/technology/articles/1814677?nl_pk=2bd720dd-746c-4744…> By Katryna Perera The U.S. Securities and Exchange Commission on Monday said it had reached settlements totaling $400,000 with a pair of investment advisers over claims that they made false and misleading statements about their use of artificial intelligence. 2 documents attached | Read full article » <https://www.law360.com/technology/articles/1814677?nl_pk=2bd720dd-746c-4744…> | Save to favorites » <https://www.law360.com/technology/articles/1814677?nl_pk=2bd720dd-746c-4744…>

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Biz Groups Back Yale Win In 2nd Circ. ERISA Battle
by Gunnar Larson 19 Mar '24

19 Mar '24

Biz Groups Back Yale Win In 2nd Circ. ERISA Battle <https://www.law360.com/newyork/articles/1814111?nl_pk=ac5a3855-e47c-4403-be…> By Emmy Freedman The U.S. Chamber of Commerce told the Second Circuit that Yale University employees are trying to set a "wildly impractical" standard in their request for a new jury trial after they were awarded zero damages in their suit accusing the school of saddling their retirement plan with high fees. Brief attached | Read full article » <https://www.law360.com/newyork/articles/1814111?nl_pk=ac5a3855-e47c-4403-be…> | Save to favorites » <https://www.law360.com/newyork/articles/1814111?nl_pk=ac5a3855-e47c-4403-be…>

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