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Digital Assets in Distress

Contacts

Andrew M. Troop
Partner, New York
T: +1.212.858.1660
Richard P. Donoghue
Partner, New York
T: +1.212.858.1161
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Areas of Focus

Tumbling cryptocurrency prices and a string of collapses among cryptocurrency exchanges have erased billions of dollars in investment value and have brought increased regulatory scrutiny and enforcement action in the digital assets sector.

In addition to enforcement activities, federal and state regulators also have heightened their focus on the responsible development, operation and trading of digital assets. Following a March 2022 executive order from President Biden, the DOJ has established both a Digital Asset Coordinator Network of prosecutors and a National Cryptocurrency Enforcement Team.

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Across our practices, Pillsbury’s multidisciplinary digital assets team provides creative and practical compliance-conscious advice that enables market participants to work within these emerging challenges and manage related risks. We have advised token issuers, token purchasers, centralized and decentralized crypto exchanges, digital assets investment funds, advisers, and other financial service providers engaged in the industry in areas including:

  • regulatory compliance and government enforcement actions
  • the creation and offering of various types of digital assets, including cryptocurrencies, stablecoins and securities tokens
  • direct or pooled investments in digital assets
  • structuring of trading platforms for digital assets
  • addressing securities law requirements when issuing tokens potentially deemed to be securities
  • structuring decentralized autonomous organizations (DAOs)
  • decentralized finance (DeFi) projects and non-fungible tokens (NFTs)
  • distressed companies and transactions
  • lending platforms secured by cryptocurrencies

As an early entrant in the field, our firm has represented industry clients in a broad array of litigation and corporate investigations matters and has helped them navigate restructurings and workouts in the sector’s current crisis. In addition, we have worked on a wide range of legal issues relating to digital assets, including securities, commodity and banking laws; intellectual property and data protection matters; anti-money laundering and money transmitter regulations; tax and private wealth considerations and investment strategies; corporate formations and other strategic planning; and more. We have worked with federal and state regulators to devise and implement industry standards.

Representative Experience

Disputes & Investigations

  • Act as counsel to an executive of a cryptocurrency brokerage/trading platform in an internal investigation relating to a bankruptcy and restructuring and advise on concurrent regulatory inquiries.
  • Represented a former executive of a digital asset exchange in connection with an SEC and DOJ investigation regarding allegations of fraud and registration violations.
  • Represented an NFT company in responding to a grand jury subpoena and a related DOJ criminal inquiry.
  • Led internal investigation for fintech unicorn on various books and records issues.
  • Represented a former employee of a cryptocurrency exchange platform in criminal (U.S. Attorney’s Office for the Southern District of New York) and SEC investigations into insider trading/front-running in digital assets listed on the platform.
  • Represent a Decentralized Autonomous Organization (DAO) in preparation for potential regulatory and enforcement inquiries.
  • Advise various NFT issuers on securities law and enforcement matters.
  • Work with Tokyo-based counsel to advise Japanese financial regulatory authorities regarding regulation of Stablecoins under securities and banking laws.

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Emerging Companies & VC

  • Represented Fold, a bitcoin rewards app providing a gift card platform for spending bitcoin in the real world, in a $13 million Series A funding round led by Craft Ventures.
  • Represented Thesis in a $21 million Series A funding round co-led by ParaFi Capital and Nascent. Thesis is a venture builder behind some of the most impactful projects in crypto with a portfolio including Fold, Keep, Saddle and open-source initiatives like tBTC that serve millions of users.
  • Represented SuperTeam Games, an online game developer designed to provide blockchain-based sports games, in a $10 million Series Seed funding round led by Griffin Gaming Partners.
  • Represented Concept Art House, the creator of art for video games and NFT collectibles, in a $25 million Series A funding round and related strategic deals.
  • Represented Liberty City Ventures, a VC fund investing in companies building blockchain technology solutions and companies implementing blockchain technology with a focus on fintech, Web3, gaming, metaverse, and supply chain logistics, in several investments with an aggregate value in excess of $100 million.
  • Represented StakerDAO, a platform for governing financial assets in a decentralized, secure, and compliant manner, in a Series A funding round co-led by Polychain Capital and Lemniscap.
  • Represented Tlon, the corporate vehicle of the open-source Urbit software stack (urbit.org), a network operating system designed to run its own servers and digital identifiers, in various corporate matters.

M&A

  • Represented Blockchain Coinvestors Acquisition Corp. I, a special purpose acquisition company, in its pending deal to acquire Qenta Inc., a financial technology company created to digitize the world’s assets and transactions.
  • Represented Larva Labs in the sale of the IP of the CryptoPunks and Meebits NFT collections and 423 CryptoPunks and 1711 Meebits to Yuga Labs.
  • Represented Support.com in a merger with private equity-backed bitcoin mining company Greenidge Generation Holdings, expected to be the first publicly traded bitcoin mining company with a wholly owned power plant.
  • Developed regulatory compliance standards and processes for application, supervision and examination of New York-regulated BitLicensees, digital asset companies and other fintech non-depository financial institutions; prepared BitLicense applications in concert with nationwide state money transmission licensing rollouts.
  • Played a critical role in the development of the Delaware Blockchain Initiative—an unprecedented effort to expand business usage of distributed ledger and smart contract technologies.

Practice Highlights

  • Recognized as a nationally ranked practice in the 2023 Chambers Fintech Guide (Fintech, Payments & Blockchain practice).
  • Recognized by Financial Times for Innovation in Changing and Influencing Regulation and as one of the top 10 most innovative law firms in North America for our blockchain industry work.
  • Included by Financial Times on the first-ever “Most Digital Law Firms” list in connection with its 2020 Innovative Lawyers Awards Program.

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