Blockchain Legal Resource

On June 8, 2023, Judge William H. Orrick of the U.S. District Court for the Northern District of California granted a default judgment in favor of the CFTC against Ooki DAO, a cryptocurrency decentralized autonomous exchange. The court also permanently enjoined Ooki DAO from operating its website and awarded the CTFC $643,542 in monetary damages. The court found that Ooki DAO’s lack of participation in the litigation and refusal to appear in court contributed to the default judgment. This decision brings to a close the closely-watched case that establishes new precedents for the legal liability of decentralized autonomous exchanges.

As we previously reported, the US Treasury Department recently announced its 2020 National Strategy for Combating Terrorist and Other Illicit Financing (the 2020 Strategy). The 2020 Strategy identifies the US government’s top anti-money laundering and countering the financing of terrorism (AML/CFT) priorities and serves as a roadmap of Treasury’s plan to stay ahead of evolving illicit finance threats. Additionally, the 2020 Strategy provides private sector financial institutions a window into upcoming legislative efforts and enforcement trends, which should in turn inform compliance efforts through the coming years. Digital assets feature heavily in the 2020 Strategy.

Today the CFTC, SEC and FinCEN issued a joint statement on digital assets. In particular, the joint statement reminds persons engaged in activities involving digital assets of their anti-money laundering and countering the financing of terrorism (AML/CFT) obligations under the Bank Secrecy Act (BSA). The entire joint statement is available here.

On May 2, 2019 US Department of Treasury’s Office of Foreign Assets Control (OFAC) published “A Framework for OFAC Compliance Commitments” (the Framework), which provides a specific outline of what OFAC considers to be essential elements of an effective sanctions compliance program.  Crypto businesses should consider the applicability of the Framework to their products.

Read our full alert here.

On April 18, 2019, the Financial Crimes Enforcement Network (“FinCEN”) announced its first enforcement action against a peer-to-peer virtual currency exchanger, which also included its first civil monetary penalty against a virtual currency exchanger, for failure to file Currency Transaction Reports (“CTRs”). According to FinCEN’s order, the respondent’s virtual currency exchange operated as an unregistered money service business (“MSB”), had no written policies or procedures for ensuring compliance with the Bank Secrecy Act (“BSA”), and failed to report both suspicious transactions and currency transactions. To settle the enforcement action, the respondent paid a $35,000 civil monetary penalty and agreed to an industry bar that would prohibit him from providing money transmission services or engaging in any other activity that would make him a “money services business” under FinCEN regulations.

The Commodity Futures Trading Commission (“CFTC”) recently published a detailed primer on smart contracts. The Primer discusses their functionality, use cases, regulatory environment and potential risks. It describes a “smart contract” as a set of coded computer functions that (1) may incorporate the elements of a binding contract (e.g., offer, acceptance, and consideration), or (2) may execute certain terms of a legal contract, or (3) allows self-executing computer code to take actions at specified times or based on reference to the occurrence or non-occurrence of an action or event (e.g., delivery of an asset, weather conditions, or change in a reference rate). The Primer also observes that a smart contract may not be a legally binding contract, which is a critical distinction for developers and entrepreneurs (and their counsel) in the digital economy.