Compliance

When’s It a Violation of the Law?

September 13, 2021

When’s it a violation of the law?

For example, when is a payment or a lease or some service a kickback?

Depending on how you look at it, it’s when and administrative agency says it is (if you view it from the frame of spending hundreds of thousands of dollars on defense costs) and certainly when a judge says it is. That’s the case, for all practical purposes even if the statute or the regs “say” it’s not. Sorry for the tough love.

Take, for example, a current news story outside of healthcare, from securities law in this case.

The crypto platform, Coinbase, revealed last week that the SEC informed it that it would sue if the company carried through with the launch of a new crypto lending platform. The SEC issued a subpoena for information from the company.

Wait, how can arranging a platform for loans (the company is proposing to maintain loan accounts for users who will then lend out, and borrow, crypto currency from one another) be a security?

The answer, for practical purposes, is that if the SEC says it’s a security and sues, then it will be one for Coinbase, that is, unless it spends hundreds of thousands of dollars or more to defend its position and wins.

But how deep are your pockets?

The story highlights what’s wrong with a regulatory state, but we’re not going to fix that this week, are we? But what we can fix underscores how important it is to make doubly, even triply, sure what you’re doing, or better yet, what you’re planning to do, stands a highly likely chance of passing regulatory muster.



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