When Crypto Asset Management and its founder, Timothy Enneking, were censured and fined by the SEC in 2018, he acknowledged that he was not a securities lawyer. But do you know who were? The securities lawyers at Faegre Baker Daniels Enneking and CAM hired to be their securities lawyers. Given how things turned out—CAM’s Crypto Asset Fund got shut down by the SEC and the company and Enneking hit with a $200,000 fine—it’s safe to say they didn’t go a great job. How not great a job will now be up to a court to decide.
The law firm had reportedly told the company that crypto assets are not securities and that the business needed to be structured differently. It also suggested that the funds should be registered “under [SEC] Regulation D Rule 506(b) and not Rule 506(c)….”
However, soon after the fund launched, the SEC reached out to CAM to inform it that an investigation had been initiated. When CAM turned to the law firm once again for guidance, the lawyers took control of the situation, but things continued to go downhill and they “provided inaccurate analysis and advice….”
Now as DCM, the company wants the law firm to be held accountable for legal malpractice and is requesting a jury trial. It is seeking an unspecified amount in compensation for compensatory damages, reputational damage, lost profits, consequential damages and all associated fees related to the court proceedings.
In fairness to Faegre Baker, no one really knew what, exactly, cryptocurrencies were in 2017, and in fact no one really knows what they are now, other than a really great thing to lose loads of money on both legitimately and otherwise. Indeed, not long before the SEC rapped CAM and Enneking for their failure to register as a securities operator, an SEC official said at least one cryptocurrency was not a security, and years earlier the CFTC had stake its claim that cryptos were commodities, and therefore not securities. The only thing that seems certain is that it’s not a currency in anything but the most theoretical and inconvenient sense.