By Eric Olson

Tsoma Nakamoto speaking at Georgetown University Law Center on 10 November 2017

On 10 November 2017, an eager crowd packed into Georgetown University Law Center to hear from experts in one of the hottest technology fields, cryptocurrency. Friday’s event, the first in an ongoing Cryptocurrency Speaker Series, featured Tsoma Nakamoto, Bitcoin venture capitalist, and Ryan Lester, founder and CEO of Cyph, an encrypted messaging platform. Sponsored by the Cyberlaw Society, Georgetown International Law Society, and Society for the Cessation of Tobacco Death, last week’s event drew a strong crowd, indicating significant public interest in this developing technology.

Mr. Nakamoto - who shares a last name, but apparently no relation, to the rumored inventor of Bitcoin, Satoshi Nakamoto - began the evening with an overview of cryptocurrency technology. Framing new currencies such as Bitcoin as the next evolution of ledger technology, Mr. Nakamato suggested currencies like bitcoin are merely a more technologically advanced solution than the double spend problem of recording transactions that humans historically solved through seashells or stone tablets. Now, currencies such as Bitcoin, Ethereum, and Polkadot, include the complete transaction history of a currency unit in a distributed ledger, preventing both forged currency and currency double use.

His comments, however, alluded to the sometimes volatile nature of cryptocurrency technology. In addition to market volatility (evidenced by this past weekend’s sharp drop in Bitcoin prices), Mr. Nakamoto expounded on the new currencies’ technological volatility. Obstacles to a stable currency include technological mishaps, such as the bug that locked up $300 million worth of cryptocurrency last month, and targeted attacks on the markets such as the Mt. Gox hack, which Mr. Nakamoto said wiped out half his holdings. Cryptocurrencies also may soon face legal obstacles to ensure compliance with SEC regulations, and Mr. Nakamato believes assets bought in future ICOs (initial coin offerings, the cryptocurrency equivalent of an IPO) will be subject to the capital gains tax. Mr. Nakamato’s view regarding SEC enforcement is supported by the July 2017 Investor Bulletin issued by the SEC, which alerted investors that currencies issued through ICOs may be securities, falling within the purview of SEC regulation. The September 2017 arrest of Maksim Zaslavsky for selling unregistered securities in ICOs further suggests increased regulation of cryptocurrencies.

Looking forward, Mr. Nakamoto believes that the future of blockchain technology will move towards eco-friendly algorithms due to the severe environmental costs of these transactions. In fact, a recent report indicated that a single bitcoin transaction uses as much energy as a house uses in a week. Mr. Nakamoto posited ‘holochains,’ which contain data stored on a holographic image, as a possible solution to environmental concerns.

Ryan Lester continued the evening with an overview of his new secure messaging program, Cyph. Growing out of his use of ‘off-the-record’ encrypted chat to communicate with his friend and co-founder, Josh Boehm, Cyph aims to provide users with the security of encrypted chat and the easy user experience of popular messaging applications such as Gchat or iMessage. After the Snowden leaks, Mr. Lester realized encrypted chat services could have broader appeal beyond niche tech-sector users. 

Mr. Lester is poised to scale Cyph for greater public use in the near future. In addition to presenting his work on Cyph at prominent conferences such as Defcon and Blackhat, Mr. Lester will release the full version of Cyph in the near future. He evaded questions about any IPO, stating he wanted to retain control over the company for at least the next few years. Mr. Lester ended his lecture with a call for sensible encryption regulations, telling his law school audience to work towards a future with greater privacy protections for consumers.

The large turnout for this event indicates strong interest among the legal and greater Washington community for information on these developing technologies. For those interested, keep an eye out for announcements regarding the next event in the Cryptocurrency Speaker Series.

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November 20, 2017

By Alec Diamond

Novartis AG, a Swiss pharmaceutical company, recently settled an SEC investigation for $25 million. Novartis was under investigation for violations of the books and records and internal accounting provisions of the Foreign Corrupt Practices Act. Two of the company’s subsidiaries doing business in China used third party vendors like Chinese travel agencies to set up “educational events” for local healthcare providers in order to increase generic pharmaceuticals sales. However, there was little-to-no evidence that many of the educational conferences ever occurred, while travel fare for officials’ spouses and recreational trips (such as trips to Niagara Falls) were expensed. This SEC investigation is the twenty-second action brought against a pharmaceutical company doing business abroad. Companies with Chinese subsidiaries be warned: rigorous internal accounting procedures may be necessary to avoid costly settlements.

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May 03, 2016

By Clifford Hwang

Want to drink coffee and play with a cat in DC?  You can do that at Crumbs & Whiskers, thanks to a successful fundraising campaign on Kickstarter.  People can “invest” in all sorts of campaigns ranging from technological inventions to personal travel trips on a wide variety of platforms including Kickstarter, Indiegogo, or Go Fund Me.  Although some campaign starters will promise something in return for investments, these donation-based investments do not allow investors to share in the projects financial success.  In other words, investors cannot buy equity in the project or company, which can lead to serious outrage in certain instances. 

Often considered a new method of fundraising for small businesses and entrepreneurs, crowdfunding has great potential because it fills the financing gap that bank will not fill.  On the other hand, crowdfunding and other internet based financing is susceptible to fraud, especially if the majority of investors are not financially savvy. Cognizant of this potential, many countries around the world have enacted legislation to regulate crowdfunding and give opportunities to investors to buy shares in smaller companies.  For example, in the United States, under the SEC’s final crowdfunding rules that will take effect on May 19, 2016, investors will have the ability to buy equity through crowdfunding.  In Asia, China will also be regulating crowdfunding platforms.  In a few days, Belgium will be one of the first countries to allow crowdfunded securities to trade.  

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March 03, 2016

By Matthew Richardson

DOJ Headquarters, Washington D.C.

The average person has an instinctive understanding of the fact that when an act of corruption occurs, some individual somewhere, an actual human being, must be responsible. If a company pays bribes to get contracts, or submits false documents and an official looks the other way, or does shoddy work and is never held to account, we recognize that there must have been somebody, somewhere, who was aware or should have been aware of the misconduct and did the wrong thing. This is part of why so many continue to be upset that the financial institutions that helped bring about the 2009 financial crisis are widely recognized to have behaved improperly, but individuals were never really held to account.

It’s in this context that so many people concerned about corruption in US international commercial transactions have expressed such interest in the Yates Memo, so called because of Deputy Attorney General Sally Yates’ authorship. The Yates Memo is an example of messaging by the Department of Justice, broadcasting for all intents and purposes, that they get it – it’s not good enough to fine large institutions and publicize evidence of institutional misconduct. No, the Yates Memo is an effort by the DOJ to put large multinational corporations and the FCPA defense bar on notice that the DOJ wants to start coming after you, and they want to put an individual’s name next to a fined corporation and say “we got the one who did it!”

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February 22, 2016

By Sam Willie

The Wall Street Journal reports on an announcement that the FBI will triple the number of agents it devotes to Foreign Corrupt Practices Act (FCPA) Enforcement from 10 to 30 agents. Joseph Campbell, Assistant Director of the FBI’s Criminal Division justifies this move by arguing that “the growing global economy and the growing nature of international commerce with globalization of more companies and economies, … creat[es] more opportunities for the potential of FCPA and corruption.” The Bureau’s colleagues at the Securities and Exchange Commission and the U.S. Department of Justice will likely welcome this news as they often utilize the FBI to conduct investigations of potential FCPA violations. FBI Agents will also be expected to play a role in assisting other nations claw back funds paid to corrupt officials.

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March 26, 2015