Insights | Kobre & Kim — Disputes and Investigations

The U.S. Securities and Exchange Commission (SEC) has recently shifted its approach to regulating the digital asset industry.
This change has resulted in the dismissal or suspension of several high-profile cases against major cryptocurrency businesses.
However, this regulatory retreat does not preclude private plaintiffs from pursuing legal action.

Under Korea’s 2024 Virtual Asset User Protection Act (the “Act”), crypto investors and traders active in Korea face significant regulatory risk.
While many applaud its proactive effort to combat market manipulation in virtual asset trading, others express concerns over its broad definitions and potential impact on common market-making activities legitimately used in other financial markets.
We explain how potential targets can prepare for arising risks during this period of transition and uncertainty.

When large-scale cryptocurrency fraud or cyber-attacks hit, the stolen assets can quickly be dispersed across the globe, with perpetrators hard to find. In these cases, the initial hours and days can be critical.
However, a recent victory shows that even after considerable time has passed since a hack, victims can trace stolen assets and react quickly to recover them due to the public nature of blockchain transactions and the powers of the English and US Courts to order injunctive relief.

Speed is critical for targets of large-scale cryptocurrency fraud or cyber-attacks.
The borderless and pseudonymous nature of cryptocurrencies means stolen assets can be quickly dispersed around the world.
Targets should deploy a speedy, global response, combined with non-traditional approaches, to increase the chances of a substantial recovery.

U.S. regulators are aggressively stretching the bounds of their jurisdiction over the cryptocurrency and digital asset space.
This puts exchanges, founders, investors and other parties at risk of increased uncertainty and risk of investigation and enforcement.
Deference may not earn targets leniency – instead, as a recent Kobre & Kim settlement shows, standing up to the regulators can pay dividends.

The global crypto industry may have celebrated prematurely at a reported win by LBRY amici against the U.S. Securities and Exchange Commission.
In fact, enforcement threats are at an all-time high, and the SEC and other regulators are emboldened.
Only by matching the regulator’s aggressiveness with equally aggressive strategies can industry players see success.

When crypto and blockchain companies, funds or exchanges find themselves the target of a sophisticated, large-scale fraud or cyber attack, speed through global reach is key.
Companies often make impulsive decisions that imperil their recovery chances and business interests.
The pseudonymous and borderless nature of cryptocurrency means companies need to take a cross-border and nontraditional approach to maximize success.

The U.S. Department of Justice (DOJ) and Commodity Futures Trading Commission (CFTC) are aggressively directing their enforcement resources to combat against digital currency traders in the UK and greater EMEA.
Counsel located in the UK and greater EMEA region needs to be aware of the risks involved with this new-found aggression and how to prepare for any U.S.-driven regulatory inquiries or subpoenas.
Firms representing European entities and individuals involved in cryptocurrency should be more comprehensive in their preparation.