Critique of SEC’s Proposed Custody Rule and Other Recent Legal Developments

SEC Under Fire: A Week Like No Other

Last week felt a bit like a middle school cafeteria food fight for the SEC. With allegations flying, industry experts and legislative leaders were not holding back their critiques. The deadline for feedback on the SEC’s proposed custody rule was May 8, and let’s just say the feedback resembled a piñata—colorful, chaotic, and noisy.

Crypto Confusion: War on Digital Assets?

One of the loudest voices came from Miles Jennings, the general counsel of Andreessen Horowitz, who didn’t mince words. He labeled the proposed custody rule a “misguided and transparent attempt to wage war on crypto.” Strong words, but not more surprising than finding a kale salad at a pizza party. Jennings argues the rule lacks clarity and could hurt investors instead of protecting them.

A Question of Authority

The Blockchain Association chimed in, contending that the SEC has overstepped its bounds. They claim this rule could cripple financial advisers’ ability to link with crypto exchanges. Even Representative Patrick McHenry, chair of the House Financial Services Committee, raised a red flag—claiming the SEC’s actions were beyond their mandate. Sounds like a classic case of “who’s the boss?” at the expense of innovation.

Legal Tensions: Coinbase vs. SEC

The SEC’s legal threats against Coinbase—as well as accusations of securities law violations—set the stage for more drama. In response, Coinbase filed a complaint with backing from the U.S. Chamber of Commerce, which isn’t just a bunch of folks with pocket squares; they’ve accused the SEC of fostering a “precarious landscape” for crypto business. Paradigm, led by former Coinbase head honcho Fred Ehrsam, also joined the fray, hinting that the SEC’s actions could lead to a “de facto ban” on some trading platforms. Cue the suspenseful music!

A Whistleblower’s Plea for Transparency

The plot thickened with EMPOWR (Empower Oversight Whistleblowers and Research), who are apparently not fans of smoke and mirrors. They filed a lawsuit against the SEC to gain access to communications involving former SEC officials and their potential conflicts of interest with the crypto sector. The documents specifically target former SEC dignitaries like Jay Clayton. Seems like someone is on a mission, and it’s not to bake cookies!

Texas Takes a Bold Step for Crypto

Turning our eyes from the East Coast to Texas, state legislators there have decided to add some crypto-loving vibes to their Bill of Rights. With Bill HJR 146, individuals can now claim their right to possess and use digital currencies. Representative Giovani Capriglione is pushing for this decision, arguing that folks ought to have the option to trade with whatever currency floats their boat—be it digital cash or golden nuggets!

International Drama: Do Kwon and the Courtroom Tango

Meanwhile, the saga of Terra Luna’s founder, Do Kwon, has taken a twist worthy of a soap opera. The Montenegrin court has agreed to bail him out for 400,000 euros, along with a cozy arrangement of house arrest instead of jail time. So, will Kwon enjoy Netflix under house arrest? We’ll find out when the criminal trial starts on June 16!

Sam Bankman-Fried: Seeking a Get Out of Jail Card

Finally, FTX founder Sam Bankman-Fried is in the spotlight as he works on his legal defense strategy. He’s attempting to dismiss up to 10 charges against him, focusing solely on three counts related to various forms of fraud. His legal team is leaning heavily on the “rule of specialty” in extradition law. Because who wouldn’t want to make legal acrobatics look like a dance-off in court?