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  • Writer's pictureNicolas Morgan

The Ticker Tape: Issue 3

Winter 2024


Our Third Issue: Big Updates for 2024

The board of Investor Choice Advocates Network and I are pleased to share this third installment of The Ticker Tape with you. It includes some of the latest happenings in the effort to fight SEC overreach and fantastic news about advancements for our organization in 2024. 

You can catch up on previous issues of our newsletter here. Let’s begin by sharing our plans for this year. 

ICAN’s Next Stage

We had a productive 2023, filing 12 amicus briefs in courts across the country and submitting rule comment letters and FOIA requests to the SEC, PCAOB, and IRS on issues important to investors. In response to one of ICAN's amicus briefs filed with the United States Supreme Court, the Washington Times editorial board commented:

"Through a nonprofit group called the Investor Choice Advocates Network, or ICAN, Mr. Cuban and Mr. Musk filed a friend-of-the-court brief bashing the SEC for sometimes allowing jury trials while denying them at other times, depending on what the SEC thinks will lead to the better outcome for the agency."

But, as we move into 2024, ICAN is hitting two important milestones that will help significantly increase our capacity for impact. I’m happy to announce that, as of February 1, I will be devoting myself full-time to ICAN as Executive Director after closing out over seven fulfilling years as a partner at Paul Hastings. The transition will, in turn, allow ICAN to take on its first client. Directly representing clients who cannot afford counsel in precedent-setting SEC matters is a critical part of ICAN’s strategy. Our case presents important principles about whether and when the SEC can obtain disgorgement and penalties without allegations of fraud or investor harm. I look forward to sharing more details about it with you soon.

In the meantime, I’d like to express my deep appreciation to Paul Hastings for their support of ICAN over the past year and a half. It was a case that ICAN co-founder Tom Zaccaro and I took on pro bono during our tenure there that inspired us to establish ICAN. You can read more about that case, SEC v PacWest, here.

SEC v PacWest illustrates a troubling pattern: the high cost of litigation with the SEC forces defendants into settlements even if they have done nothing wrong. When settlements are all but guaranteed, regulation through enforcement becomes the norm, and precedent is set. Sometimes, these settlements even result in harm to investors or reduce access to markets. 

Tom and I co-founded ICAN to fill this need for a critical means of pushing back against SEC overreach because for-profit law firms are not set up to handle these cases pro bono.

We thank you for your support in getting us to this point, and if you’d like to donate to our fundraising efforts for pro bono representation, click here or reply to this email. 

Amicus Victory - Grayscale Opens the Doors for Bitcoin ETFs

The SEC’s January 10th approval to uplist Grayscale’s Bitcoin Trust to NYSE Arca as Spot Bitcoin ETF only came about after a hard-fought court battle. Congratulations to Grayscale Investments and Craig Salm for their litigation victory over the SEC's arbitrary actions, which denied investors the ability to make their own investment decisions.

Grayscale CEO Michael Sonnenshein says in their press release

“I joined Grayscale Investments in 2014, when the idea of investing in an intangible, digitally-native, non-sovereign asset was inconceivable to most people. But, like many of Grayscale’s future-forward investors, we believed that Bitcoin could change the world, and we were and remain excited at the prospect of democratizing access to this asset through a U.S. regulated investment vehicle.”

ICAN is proud to have played a part in this win with one of its first amicus briefs in 2022 in support of Grayscale’s case. We are also grateful to many academics and former regulators who joined us in this brief, including the late Harvey Pitt, James J. Angel, Carol Goforth, Hashem Dezhbakhsh, Joseph Grundfest, Campbell Harvey, Narasimhan Jegadeesh, David Noble, Brian Brooks, Brian Quintenz, Juan Rubio-Ramirez, and Robert Whaley.

Two Years Lost to Regulatory Hurdles: Silicon Prairie Online

“They are not well equipped to deal with young, disruptive digital-based businesses” is how David Duccini, the CEO and founder of Silicon Prairie Online, described FINRA when he appeared on our Capital Ideas series

David’s business is revolutionizing the world of secondary sales in investment crowdfunding through blockchain-based solutions and an Alternative Trading System. In his interview with us, David shared that transactions can be tracked in real-time with his platform, allowing investors to know instantly when a major transaction has occurred rather than waiting for the SEC 8-K filing.  

While Silicon Prairie was ready to bring their transformative technology to market and benefit investors, the regulators were not ready to facilitate their required approvals. Working through hurdles with FINRA took 23 months and involved extensive effort on David’s end, including a threat of legal action against the regulator. 

ICAN board member Dara Albright and I began the Capital Ideas video series to bring stories like David’s to you. Most entrepreneurs would not have the time and money to invest in this battle, all the while trying to keep their company running without being able to go to market. We think his story, and the others we present on Capital Ideas, show the crucial need for regulators to evolve to accommodate disruptive technology. 

At the end of the episode, David says that “firms have a right to due process.” He mentions the cases currently asking whether regulators like FINRA, the SEC, and others are constitutionally organized. 

SEC Lied, Court Threatens Sanctions

Regarding the question of due process with regulators, the administrative courts have gotten much attention (deservedly), but the SEC’s routine practice of obtaining asset freeze temporary restraining orders (TROs) without notice to defendants in federal courts is equally troublesome. No notice asset freeze TROs are a profoundly powerful tool the SEC should use only in extreme cases.

In Episode 55 of our video series “SEC Roundup,” we get to take an in-depth look at the TRO process with Brent Baker, the attorney for one of the defendants in a pending case, SEC v Debt Box. This is a must-watch for those curious about the details behind the remarkable situation, where the agency now faces sanctions over material misrepresentations that led the judge to dissolve the TRO. 

As Brent mentions in our conversation, the SEC gets “extreme deference” when seeking a TRO. While the agency does have to appear before a federal judge, the SEC routinely requests TROs, including asset freezes, without defendants being aware or being able to defend themselves.

These orders often mean the abrupt end of a business, as assets are frozen and wind-down receivers are often appointed. Vendors and banks close accounts, employees often cannot be paid, and customers cannot be served. In Debt Box's case, although the court dissolved the TRO, its business has suffered incredible damage. 

The TRO is an extreme measure at the SEC’s disposal. Tom Zaccaro notes in this episode, “A TRO is (to be used) for a threat of imminent harm, and it’s hard to reconcile that with a year-long investigation.”

SEC v Debt Box has highlighted the issues with the TRO process and the enormous potential for ethical violations when the SEC provides no notice to defendants. We thank Brent for his time in giving our viewers an inside look at this situation, and we will report back on significant developments in the case.

Introducing Our Advisory Board

Before we wrap up this installment of The Ticker Tape, I wanted to share more exciting news about our growth at ICAN in 2024. 

We’re pleased to announce our new Advisory Board. These individuals have extensive experience and networks that will help our organization advocate for policies and practices in the investment landscape that promote investor choice, transparency, and fairness. 

Let me introduce you to our new Advisors.

Keri Axel is a partner at the law firm Waymaker focusing on government investigations, white collar criminal defense, and complex civil litigation.  She previously served as an Assistant United States Attorney and an SEC Enforcement Attorney and is a graduate of Harvard Law School.

Sarah Heaton Concannon is a trial and appellate lawyer who serves as Co-Chair of Quinn Emanuel’s SEC Enforcement Defense practice and is resident in the firm’s Washington, D.C. and New York, N.Y. offices. She previously held senior-level positions in the SEC’s Division of Enforcement and is a graduate of Harvard Law School.

Phillip Goldstein is a co-founder of Bulldog Investors, a 31-year-old investment management firm that has used activist strategies to enhance the value of its investments.  He gained notoriety for successfully suing the SEC to invalidate a rule requiring managers of private investment vehicles to register with the agency.

Nick Pujji is a partner at the law firm Dentons and a member of its Litigation and Dispute Resolution group and of the firm's Venture Technology and Emerging Growth Companies practice.  He serves as the outside, in-house counsel to numerous startup companies across the United States and internationally.

Jennifer Schulp is the Director of Financial Regulation Studies at the Cato Institute's Center for Monetary and Financial Alternatives.  Previously, she served as a Director in FINRA's Department of Enforcement after beginning her legal career at the law firm Gibson, Dunn & Crutcher.  She is a graduate of the University of Chicago Law School.

Rodrigo Seira is Special Counsel at Paradigm. Prior to joining Paradigm, he was outside counsel to crypto investors and entrepreneurs at Cooley LLP. Before that, Rodrigo was a founding member of DLX Law, a blockchain and crypto-focused boutique. Rodrigo earned a J.D. from Harvard Law School and a B.A. in Philosophy and Political Science from Middlebury College.

Lisa Troe is an independent director of multiple public companies and a former SEC regional chief enforcement accountant.

Art Zwickel is a partner in the Investment Funds & Private Capital practice at Paul Hastings who assists asset management firms in all facets of their organization.  Prior to law school, Mr. Zwickel worked for an accounting firm concentrating in the audits of investment funds and commodities and securities brokers and dealers.  He is a director of California Alternative Investments Association (CalALTs).

Our board is thankful for such a talented group supporting our efforts. 

Wrapping Up

We’re hopeful about affecting real change for entrepreneurs and investors this year with the support of our network. It is our belief that a more just system will increase market participation, spark innovation, and improve the economy. 

If you’d like to help our efforts, please consider:

  • Sharing all or a part of this newsletter on social media, or

  • Sending this newsletter to someone who might be interested in any of these topics, or

  • If you’re a member of the press and are covering a story where ICAN could contribute a comment or information, please reply to this email.

  • And last but certainly not least, consider donating to help us bolster our legal advocacy fund for small businesses and investors. Please reply to this email to discuss a donation, or click here

With thanks, 

Nick Morgan

Founder and President of ICAN

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