Litigation and Decisions

This week, at the tail-end of the legislative session, California legislators have introduced a bill (amended from a bill originally introduced in April 2015) that statutorily addresses the increasingly topical question of how to regulate the emerging crypto-currency market.

The amendment, introduced on August 8, 2016, is a vast departure from the earlier iterations of

Despite much hype over the ruling by a Florida court that bitcoin is not money, the likeliest outcome of Monday’s decision will be legislative amendments to Florida’s money transmitter laws, rather than the sweeping impact envisioned by some.

Florida state Judge Teresa Pooler dismissed charges on Monday against a man accused of  money laundering and

On June 2nd, the U.S. Commodity Futures Trading Commission (the “CFTC”) announced an enforcement order and settlement with BFXNA Inc. d/b/a Bitfinex, an online platform for exchanging and trading cryptocurrencies (the “Platform”).  This posting will summarize that order with the goal of helping our readers make sense of the current state of the law with respect to the CFTC’s regulation of bitcoin and other cryptocurrencies.

KEY REGULATORY PRINCIPLES

Before turning to the facts of this particular enforcement order and settlement (the “Order”), it is helpful to review the current state of the law with respect to the the CFTC’s regulation of bitcoin and other cryptocurrencies.  The following are the key regulatory principles, as excerpted from the Order (detailed citations have been omitted in the interest of readability).
Continue Reading Making Sense of the CFTC’s Enforcement Order and Settlement with Bitfinex

Federal authorities announced this week a settlement with Ripple Labs Inc. and its subsidiary, XRP Fund II, resolving an investigation by FinCEN and the Department of Justice into violations of the Bank Secrecy Act.  The settlement generally calls for the company to pay $700,000 in fines and forfeitures, to move Ripple Trade (a version of the open source wallet software operated by Ripple Labs) to a registered Money Services Business, and to make changes to the AML compliance programs at Ripple Labs and its subsidiaries.
Continue Reading Federal Authorities Announce Settlement with Ripple Labs Inc. Resolving Investigation

Mt. Gox filed a motion requesting the U.S. Bankruptcy Court’s approval of the form of the official notification of the May 6 recognition hearing as well as approving the service via email.  The motion also seeks to establish a deadline of seven days before that hearing for any party to object to the request for recognition of the Japanese insolvency case.  Additional notice would be provided by posting an approved form of notification on the Mt. Gox web site as well as at the Reddit.com site.
Continue Reading Mt. Gox’s Request for Email Notification of Its Chapter 15 Case

Tuesday evening, the Plaintiffs in the Illinois Class Action litigation filed motions with the U.S. Bankruptcy Court in Dallas asking that court to terminate the temporary stay it recently granted to Mt. Gox. They also asked that Robert Marie Mark Karpeles (the Foreign Representative for Mt. Gox) be ordered to provide testimony under oath in the United States regarding the Chapter 15 filing. The motion will present the first chance for the Bankruptcy Court to consider the balance between Chapter 15 relief and the ability of the Illinois Class Action Plaintiffs to use the fact of Chapter 15 relief to obtain testimony to buttress their pending action.
Continue Reading Mt. Gox – Bankruptcy Hearings Next Week Should be Interesting

Introduction

Mt. Gox has filed a civil rehabilitation proceeding under Japanese law, and subsequently filed a companion case in Dallas, Texas under Chapter 15 of the U.S. Bankruptcy Code. The U.S. Bankruptcy Court issued an initial stay (injunction) to protect Mt. Gox and its U.S. assets from actions by creditors and set a hearing for April 1 and 2 to consider whether Mt. Gox would receive the full protections allowed to foreign companies by Chapter 15. If the U.S. court allows the Chapter 15 case to be maintained, certain provisions of the U.S. Bankruptcy Code will apply to parties in interest. What are the implications of these cases for Mt. Gox’s creditors?
Continue Reading Mt. Gox’s Japanese Bankruptcy and U.S. Chapter 15 Case – Implications For Creditors

Two users of Localbitcoins.com, Pascal Reid and Michell Espinoza, were arrested last week in what appears to be the first case where bitcoin sellers have been prosecuted under state anti-money laundering and money transmission laws.  These arrests illustrate that under some state money transmitter laws, the direct sale of bitcoin can constitute money transmission—and that selling bitcoin without a money transmitter license can result in criminal charges.  Where a seller of bitcoin knows (or has reason to believe) that the transaction involves proceeds derived from or to be used in furtherance of illegal activity, this could separately result in charges under state anti-money laundering laws. 
Continue Reading Two Florida Users of Localbitcoins.com Arrested for Money Laundering and Unlicensed Money Transmission

On November 19, the New Jersey Attorney General entered into a $1,000,000 settlement with E-Sports, a website that had allegedly deployed malicious software onto its own users’ computers, creating a virtual network to mine bitcoins. The AG asserted claims for deceptive and unconscionable commercial practices under the New Jersey Consumer Fraud Act, N.J. Stat. §