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MarginFi has doubled its user base in two weeks after unveiling a loyalty points program that some believe will lead to a token airdrop.

Coinbase and Binance have a new precedent to cite in court – if the decision survives potential appeal. That’s no sure thing, lawyers said.

The Securities and Exchange Commission says a court should deny a motion to stamp out an investigative subpoena to probe whether a conservative memecoin is a security.

The agency subpoenaed Miami-based hedge fund manager James Koutoulas, who is also a trustee of the LGBcoin Foundation, in January. After the agency issued the subpoena earlier this year, Koutoulas sued the SEC, arguing that LGBcoin isn’t a security and so doesn’t violate securities laws. But the SEC argued that Koutoulas’s challenge to its investigation lacked enough merit to quash the subpoena.

“Koutoulas’s only legal argument – that the Commission lacks jurisdiction because LGBcoin ‘is not a security’ – is so premature as to be irrelevant to the Commission’s authority – at this early stage – to investigate possible securities law violations via an administrative subpoena,” the SEC said. 

If the investigation were to lead to charges against Koutoulas or LGBcoin, then he could make his argument, the agency said. 

“But he is not entitled to ignore the Commission’s subpoena simply because he believes LGBCoin does not qualify, nor is he entitled to a mini-trial at this preliminary juncture, wasting time and resources to litigate a determination that the Commission has not yet made,” the agency said. 

Koutoulas did not immediately respond to a request for comment. 

Communications with high-profile conservatives sought

Among other information sought in the subpoena, the SEC said it wanted communications between Koutoulas and promoters of the token, including conservative media personality Candace Owens and former North Carolina congressman Madison Cawthorn.

Cawthorn, who lost the Republican nomination for re-election to a second term, received a sharp reprimand from the House Ethics Committee last year for his part in promoting the token, and was ordered to pay fines and donate proceeds to charity.

The SEC has a history of enforcement actions against celebrities who endorse unregistered securities, including in crypto. Last October the regulatory agency settled with Kim Kardashian, with the reality TV star and mogul paying a $1 million fine and gave up $260,000 from the promotion without admitting or denying the findings.

But Koutoulas claims the SEC has targeted LGBcoin due to its ties to conservative politics, arguing in his lawsuit against the SEC that, “LGBcoin DeFi community is politically opposed to the administration.”

“If the Commission has its way in this case, it can give LGBcoins a death sentence merely by classifying it as an unregistered security,” Koutoulas said in the lawsuit. 

The token gets its name from a 2021 political meme that started after “F*** you, Biden” chants broke out during a televised interview with NASCAR driver Brandon Brown in 2021. A reporter suggested they were saying “Let’s Go Brandon.”

The SEC also sought communications between the LGBcoin Foundation and Brown, who signed a sponsorship deal with the token issuer only for NASCAR to nix the deal.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

A summary judgment partially in favor of payments network Ripple represents a milestone win for the crypto industry and provides legal clarity as to what does and doesn’t represent a security, J.P. Morgan wrote in a research note Friday.

The spike in trading activity came after a partial win in a lawsuit against the SEC.

FTX founder and former CEO Sam Bankman-Fried, through his attorney, asked a federal judge to allow a sealed list of people to visit his parents’ house, where the criminally indicted crypto mogul remains under house arrest.

On July 13, lawyers for Bankman-Fried requested pre-approval of a sealed list of visitors that would not require the normal court-ordered security procedures for visitors to the household, part of an effort to ensure Bankman-Fried does not shift assets or attempt to contact potential witnesses.

Bankman-Fried’s attorney, Christian Everdell, told the court that the list “includes close friends and colleagues of Mr. Bankman-Fried’s parents and household help that regularly visit the house.” The request sought to keep the list out of public record.

“Here, even assuming that the list of people can be considered a ‘judicial document,’ the individuals’ privacy and safety interests greatly outweigh any presumption of access to the list and justify protecting their identities from public disclosure,” Everdell continued.

Under current terms of Bankman-Fried’s house arrest, a security guard must be present to screen visitors for any electronic devices, and visitors have to sign an electronic log.

If granted by the judge presiding over the case, Judge Lewis Kaplan of the District Court for the Southern District of New York, people on the list filed by Everdell on Bankman-Fried’s behalf would not be subject to those rules, though he said they have agreed to abide by the bail conditions, including a prohibition on sharing electronic devices with the disgraced FTX and Alameda Research owner.

Everdell added that prosecutors in the case reviewed the list and had no objection to pre-approving people on it, though they did not take a position on his request to keep the list of proposed visitors secret.

Challenge to the secret list

Inner City Press, a small digital media outlet that covers the district court, challenged the request to keep those names sealed on Friday. Matthew Lee, ICP’s executive director, cited the fact that Bankman-Fried has violated terms of his bail before in using a virtual private network and encrypted messaging apps to contact former FTX colleagues.

Lee also noted that the people who helped pay Bankman-Fried’s bond were unveiled over the objections of Bankman-Fried and his defense attorneys.

“As with Bankman-Fried’s suretors, the defense makes vague claim about privacy and even safety. This Court requested those arguments as to the suretors, and the defense never appealed as it had implied it would,” Lee wrote. “They can be seen entering the house. It is no burden to sign the log; the burden on them of the security guard is unclear. Their main interest seems in wanting to not be named. But this is a judicial document and should be unsealed.”

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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