The US has charged an individual with insider trading in relation to non-fungible tokens (“NFT”s) in the first case of its kind.
Background
On 01 June 2022, it was reported that the US Department of Justice (“DoJ”) has charged a former NFT market place employee with insider trading. This is the first time that insider trading charges have been brought in relation to trading in digital assets (specifically NFTs).
New technologies and old criminal schemes
However, this is not the first time that criminal charges have been made against individuals alleged to have used new technologies to engage in old criminal schemes. Charges in relation to fraud and money laundering have previously been brought against individuals allegedly involved in crooked cryptoasset schemes.
Indeed, Gherson’s solicitors criminal litigation, regulation and investigatory team have previously written about new technology being used for old criminal schemes in an article for Finextra’s Tech and Crime Series: Cryptoassets and Financial Crime.
The article specifically focused on how new technologies (specifically digital assets) would enable criminals to commit old offences of fraud and money laundering, and looked at an allegedly fraudulent cryptocurrency scheme. The article then examined how cryptoassets could enable new ways to carry out old tricks, and whether regulatory agencies and prosecuting authorities are able to use old legal tricks to catch up.
The article concluded that although these new technologies could provide headaches, agencies and authorities have used tried-and-tested methods underpinned with a bit of common sense and understanding of this new technology to investigate and prosecute effectively, and then pondered if we were about to see new cases.
New cases – NFTs and insider trading
It was always inevitable that as cryptoassets move into the era of the NFT, it would only a matter of time before an allegation was made against an individual of using this latest manifestation of the technology to engage in an old criminal scheme.
In a 01 June 2022 release, the DoJ stated that “NFTs might be new, but this type of criminal scheme is not. ..[…].. Today’s charges demonstrate the commitment of this Office to stamping out insider trading – whether it occurs on the stock market or the blockchain.”.
This case will be interesting to watch, and what can be said with certainty is that regulating agencies and prosecuting authorities will be watching these new technologies with a keen eye and will be investigating any other situations where it is alleged that a criminal scheme is potentially operating.
Criminal investigations and litigation
Gherson’s solicitors criminal litigation, regulatory and investigatory team combine an expert knowledge of criminal and regulatory law underpinned with a firm understanding of digital assets and blockchain technology. As such, the team is able to provide expert strategic advice to anyone facing investigation in relation to any allegation of criminality involving cryptoassets.
Regulation and compliance
In these constantly changing times, firms that deal with cryptoassets, and additionally have exposure to firms that do, will need to carefully consider all their systems and controls to ensure that they are able to comply with all relevant AML and sanctions regulations. Gherson’s white-collar crime and regulatory team are able to provide advice and assistance with AML and sanctions compliance, including in situations involving cryptoassets.
Additionally, the team has recently started a series on the regulation of crypto, with the aim of advising those who work in the compliance of this sector. In addition, for those who would like advice on relevant issues, including those who have had issues with the FCA registration process, our specialist regulatory and compliance team can guide individuals and companies through the process.
Please do not hesitate to contact us for further advice, send us an e-mail, or, alternatively, follow us on Twitter or LinkedIn to stay up-to-date.
The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication, it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Gherson accepts no responsibility for loss which may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please do not hesitate to contact Gherson. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Gherson.
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