We have previously addressed the recent indictment against Nathaniel Chastain, a former executive of a major NFT marketplace, for insider trading involving NFTs. The indictment charges Chastain with one count of wire fraud and one count of money laundering. It does not allege that the NFT is a security. It does not allege violation of the insider trading laws under securities law. Since then, as we have reported, that SEC has been investigating lack of insider trading policies for NFT/crypto exchanges.
It is well known that insider trading—the practice of buying and selling stocks, bonds, or other securities based on material, non-public information—is unlawful. For that reason, many companies have compliance programs and policies that restrict trading by officers, directors, employees or other “insiders” with access to such information. …
For quite some time, we have been advising that marketplaces and NFT/crypto issuers consider developing an insider trading policy. The SEC is now investigating this issue. If you do not have a policy this is a good time to do so.…
The United States Attorney for the Southern District of New York and the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment charging Nathaniel Chastain with wire fraud and money laundering in connection with a scheme to commit insider trading in Non-Fungible Tokens, or “NFTs,” by using confidential information about what NFTs were going to be featured on [the marketplace] homepage for his personal financial gain. Chastain was arrested this morning in New York. …
As the world economy increasingly goes digital, innovators and existing market participants are finding new ways to tokenize assets and expand upon their uses, particularly with non-fungible tokens (NFTs). NFTs have commonly been used to represent digital art, photos, videos, audio files, collectibles, game items, tickets, and other digital assets, but can also represent virtually any digital or physical asset as well as entitlements (e.g., tickets, subscriptions, exclusive access, etc.).
Continue Reading Tokenization and the Law: Legal Issues with NFTs
Propy has announced that the second U.S. NFT-backed property (see our blog about the first NFT sale here in which we discussed blockchain technology, and specifically how the sale works) is set to be auctioned, with a starting price of 185,000 USDC. USDC is a stablecoin backed by the United States Dollar (we previously discussed stablecoins here).
Continue Reading The Second U.S. NFT Property Is Ready To be Auctioned
The U.S. Securities and Exchange Commission (“SEC”) has announced its examination priorities for the fiscal year 2022. Among them is crypto-assets. Specifically, the SEC is targeting robo-advisers, fractionalization, and other crypto-custody arrangement practices.
Continue Reading SEC Announces 2022 Examination Priorities, Includes Crypto-Assets
For some time now we have cautioned companies to seek legal advice for certain business models relating to NFTs. According to a recent report, the SEC is now targeting certain NFT uses. According to the report, the SEC is probing whether NFTs are being utilized to raise money like traditional securities. The SEC has reportedly sent subpoenas related to the investigation and is particularly interested in information about fractional NFTs. Fractionalization allows multiple people to hold (and trade) a share of an asset. Each share is represented by an NFT that represents a fraction of the ownership of or revenue rights associated with the asset. In some cases, this may meet the Howey test, which is one of the primary tests the SEC uses to assess whether a digital asset is a security.
Continue Reading SEC Targets NFTs
With the advent of blockchain technology, vendors are increasingly accepting payments of goods, including artwork, with digital currency. The decentralized nature of digital currency makes it attractive for a lot of reasons, but it also makes legal oversight a challenge. Add to that the emerging (or already emerged) high-value market for digital art. For example, Beeple’s Non-Fungible Token (“NFT”) collection sold for more than $69 million at an auction, and a CryptoPunk NFT sold for $23 million.
Continue Reading Money Laundering and High-Value Art: Treasury’s Study Discusses Financial Crimes and NFTs
The next evolution of the internet is quickly taking the world by storm. Web3.0 technologies, including NFTs and metaverses, will see increasing adoption by businesses, governments, and all types of…
Continue Reading Are You Ready for Web3.0 and the Legal Issues it Will Bring?
On February 10, 2022, the first NFT-based property was bought through an auction on Propy, a blockchain-focused real estate company. The Florida home was sold for $653,163 worth of Ether, and the home’s property rights were minted as an NFT on the blockchain as a digital representation of ownership over the physical real estate. (See our previous blogs about NFTs here and here). This is significant for many reasons and has the potential to significantly disrupt the way that the real estate industry has historically functioned. As mentioned below, while other real estate transactions have already occurred utilizing blockchain technology, this is the first US transaction where the ownership of the real estate asset was minted as an NFT and then sold on the blockchain. …
Continue Reading Blockchain Technology Is Changing The Real Estate Industry