Insights | Kobre & Kim — Disputes and Investigations

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. Commodity Futures Trading Commission (CFTC) has quietly increased scrutiny of digital currency markets, focusing on spoofing.
Successful traders normally do not run from risk in their trading activities, yet they often do exactly that in the face of unfamiliar regulatory risks, leading to worse outcomes.
Targets of regulatory enforcement should therefore consider a range of aggressive measures before responding to inquiries from enforcement authorities.

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.