U.S. SECURITIES AND EXCHANGE COMMISSION

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A federal court in California refused to grant a judgment or a new trial to a defendant who was found to have engaged in insider trading when he purchased securities of one company based on material nonpublic information (“MNPI”) about a different company.  The September 9, 2024 decision in SEC v. Panuwat (N.D. Cal.) leaves intact a jury verdict that could embolden the SEC to pursue more claims of “shadow trading,” which involves trading the securities of a public company that was not the direct subject of the MNPI but whose stock price allegedly was affected by a “spillover” impact from that information.

On February 23, the U.S. Court of Appeals for the Fourth Circuit reversed a mid-trial grant of judgment as a matter of law against the Securities and Exchange Commission in a jury trial for insider trading.  The decision in SEC v. Clark is a reminder that the SEC can meet its burden of proof by presenting merely circumstantial, rather than direct, evidence of insider trading and that a trial court must not weigh evidence, determine witnesses’ credibility, or substitute its judgment for the jury’s in deciding whether to grant a motion for judgment as a matter of law.

SEC Chair Gary Gensler appears to be readying the SEC for increasing oversight of cryptocurrency exchanges, the latest in a series of regulatory actions targeting the growing industry.

In prepared remarks at PLI’s recent SEC Speaks conference, Gensler called on cryptocurrency platforms to register each function they perform with the SEC – for example, requiring crypto dealers, brokers, and lenders to separately register those functions with the SEC. Such a move could result in a dramatic shakeup in the crypto market, where there are currently several cryptocurrency platforms that perform all of these functions. This is in stark contrast to the traditional securities markets, in which such services are separated from each other.

In late-July, the U.S. Securities and Exchange Commission brought insider trading charges against a former manager at Coinbase—the largest crypto asset trading platform in the United States. The charges are the latest move in the agency’s efforts to regulate cryptocurrency, and could spur an increase in cryptocurrency-related securities litigation.

The Securities and Exchange Commission’s Division of Examinations recently announced its examination priorities for fiscal year 2022: Private Funds; Environmental, Social, and Governance (“ESG”) Investing; Standards of Conduct; Information Security and Operational Resiliency; and Emerging Technologies and Crypto-Assets.  The Division seeks to provide investors and registrants with transparency into these…