Top Lawyers Are Buying Crypto Despite Lack Of Firm Advice

Big Law attorneys feel free to buy cryptocurrencies — and some do — because most firms don’t have policies that restrict investments in digital assets.

Lawyers including Joshua Ashley Klayman of Linklaters and Joe Cutler of Perkins Coie confirm they purchased Bitcoin, and in Cutler’s case also Ethereum, and others say they opened crypto wallets to familiarize themselves with the technology.

“I’ve known more than a couple of lawyers who made a ton of money” investing in crypto, said Stephen Palley, co-chairman of Brown Rudnick’s digital trading group in Washington. “I’ve also known others who bet big and lost it all.”

Lawyers are going their own way when it comes to investing in crypto in the absence of clear, firm guidelines and a dearth of federal regulations. Some make calls based on general caveats from companies to avoid mixing their own finances with clients’ business interests.

Crypto investing is “not allowed or prohibited” at Hogan Lovells, said Liz Boison, a Washington-based partner at the firm. “There are no instructions.”

She opened several digital wallets to help improve her advice to clients, she said, adding, “I don’t know how lawyers could do that without knowing how this all works.”

Klayman, US head of fintech, blockchain and digital assets for Linklaters in New York, said she limits her investments because “I don’t want to be a speculator in the market.”

The key is to avoid even the possibility of insider trading scrutiny by being careful and doing the right thing, Klayman said. This is especially important when small crypto clients share material, non-public information about their growth plans, she said.

Kirkland, Rock

Kirkland & Ellis, the world’s largest law firm by revenue, admitted in a July court filing that some of its attorneys are clients of crypto broker Voyager Digital Holdings Inc.” These lawyers have not and will not do “work related to representing Voyager in its bankruptcy, according to the filing.

Roche Freedman, a boutique launched in 2019, said some of its lawyers own AVAX tokens or hold a personal stake in Ava Labs, the issuer of the tokens. The company has denied allegations, fueled by the August leak of secret recordings from a company founder, that it used class action lawsuits to target Ava Labs competitors.

Several firms, including Goodwin Procter, Davis Polk & Wardwell, and Sidley Austin, declined to answer questions about their crypto investment policies.

Two firms mentioned in a news article last year as having policies limiting their attorneys’ ability to trade cryptocurrencies — Sullivan & Cromwell and Latham & Watkins — also declined to respond.

Kari Larsen, co-head of digital practice at Willkie Farr & Gallagher, said her current and previous firm required attorney approval to trade publicly held securities “when a client might be involved.” She previously practiced at Perkins Coie.

There’s no “significant evidence” that crypto-specific policies are needed in law firms, said Penn State Dickinson Law professor Tonya M. Evans.

Still, companies should consider updating their policies to ensure they apply to all capital assets that may trigger insider trading rules, Evans said in a statement.

Federal confusion

Companies seeking federal guidance to set their crypto policies will find little clarity. The law hasn’t fully caught up with technology, and getting there will likely take years of litigation in the courts, in Congress, and with regulators.

For now, the Securities and Exchange Commission defines many crypto tokens as securities, with Bitcoin being a notable exception. This means that the SEC would have jurisdiction and that issuers would have to follow the same registration and disclosure laws as any company issuing stocks and bonds.

But the crypto industry, many members of Congress, and the Commodity Futures Trading Commission tend to think of tokens as commodities. This would subject the tokens to the lighter regulations of the CFTC.

There are federal guidelines that businesses can work from.

In July, the U.S. Office of Government Ethics issued a legal notice stating that federal officials who have invested in cryptocurrencies or stablecoins are barred from working on regulations that could have “an effect direct and predictable” on the value of these digital assets.

fixed assets

After booming in recent years, the digital asset market has faded. By some estimates, some $2 trillion in market value has evaporated and 12,100 crypto tokens have effectively ceased trading this year, Bloomberg News reported on October 3.

On October 4, Bitcoin sold for around $20,400, less than half of what it was worth a year earlier when it sold for over $49,000.

Market dissatisfaction has helped spark litigation against crypto firms, which have been accused of everything from money laundering to pump-and-dump schemes to trading against their own customers.

On October 3, reality TV celebrity Kim Kardashian agreed to pay around $1.3 million to promote EMAX crypto tokens without noting that she was being paid to do so.

And that leads to a key point, several lawyers said. While they feel free to trade cryptos, and some do, their primary focus in the space is still to advise clients.

“My personal preference is to focus more on legal advice and not on whether or not to buy one of these tokens,” said Cutler, co-chairman of the fintech industry group at Perkins Coie in Seattle.

Lawyers can best avoid crypto pitfalls by following longstanding advice from bar authorities, he said: “It’s more about the ethical duty not to get tangled up in your clients’ affairs. “

—Justin Wise contributed to this story.

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