Compliance Building

The One with the Crypto Paying for a Mega-Shilling Package

Doug Cornelius — Wed, 22 Apr 2026 12:00:00 +0000

It caught my by surprise that the Securities and Exchange Commission brought a case against a crypto-crap company this week. After the SEC published its “clarification” on the application of federal securities laws to crypto assets I thought we wouldn’t see a crypto case for a long time.

I guess the SEC found the actions of Bitcoin Latinum to be too egregious even for the SEC’s now relaxed view on crypto. From my headline, if you are hiring a marketing company for its “Mega-Shilling” marketing package with “500-700 original posts/conversation daily” on Telegram and Twitter I think your product is all marketing.

The first mistake according to the SEC in its complaint is that the Bitcoin Latinum platform said that its offering was a security offering in its “Simple Agreement for Future Tokens” offering documents. It called itself an “issuer” and its purchasers were “investors.”

What was this crypto-crap supposed to do?

Bitcoin Latinum is a fully insured asset-backed cryptocurrency based on the Bitcoin ecosystem. Developed by Monsoon Blockchain Corporation on behalf of Bitcoin Latinum Foundation, LTNM is a greener, faster, and more secure version of Bitcoin, capable of managing massive crypto transactions while being highly efficient in terms of cost and scalability. As a revolutionary new Bitcoin blockchain-based token, LTNM focuses on disrupting high-growth industries like Media, Gaming, Telecommunications, and Cloud Computing.

According to the SEC, it didn’t do any of that.

Perhaps the final reason for bringing the case is that the sponsors looted the funds raised for the platform for personal uses: $4 million Miami condo, $2.8 million Park City house, $1.4 million in personal credit card charges, and a $160,000 horse.

The SEC has apparently not completely abandoned its enforcement against crypto scams.

Sources:

The Performance of the SEC in 2025

Doug Cornelius — Tue, 14 Apr 2026 12:00:00 +0000

The other half of the Securities and Exchange Commission budget request for 2027 is a report on its performance in fiscal year 2025.

How did the SEC perform in enforcement actions?

The SEC was off its game. The 85% metric was the lowest in years. I believe this number might dip some more with the voluntary dismissal of so many crypto-related enforcement actions this year.

How about examinations?

FY2025 exceeded the plan for examinations of investment advisers. I was kind of stunned to see FY2026 and FY2027 planning to reduce the percentage of examinations.

Lots of other metrics to be found in second half of the report.

Sources:

More on the Downsizing of the SEC

Doug Cornelius — Mon, 13 Apr 2026 12:00:00 +0000

I wrote last week how the Securities and Exchange Commission had 18% of its staff depart in fiscal year 2025 thanks to the DOGE efforts to reduce the size of the federal workforce. For Fiscal Year 2027, the SEC is proposing to reduce its budget by another 11%. However, the SEC is proposing to add another 153 FTE over 2026 staffing levels.

At the same time the SEC notes:

As markets evolve, the SEC’s responsibilities continue to grow and become more complex. The agency now oversees more than 33,000 entities, including more than 13,500 registered funds, more than 16,300 investment advisers, more than 3,200 broker-dealers, 29 national securities exchanges, 111 alternative trading systems, more than 400 municipal advisors, 319 transfer agents, 3 security-based swap data repositories, 10 credit rating agencies, 38 self-regulatory organizations, and 6 active registered clearing agencies.

A big chunk in the proposed reduction comes from $145 million of balances credited to 2027. The actual obligations from 2026 are $2.031 billion to $2.078 billion in 2027.

You can see in the FTEs by Program below that the SEC is trying to recover from the losses in 2025.

Sources:

SEC Enforcement Results for FY 2025

Doug Cornelius — Thu, 09 Apr 2026 12:00:00 +0000

This is press release that would not have been written by judge Margaret Ryan if she was still serving as the Director of Enforcement. She only lasted six months with the rapid down-sizing and lack of enforcement at the Securities and Exchange Commission.

I was stunned to see the SEC attack its prior stewardship in its Report on Enforcement Results for Fiscal Year 2025.

“Central to an effective enforcement program is determining which cases to bring and responsibly stewarding Commission resources. Regrettably, such resources have been misapplied in prior years to pursue media headlines and run up numbers, and in turn, led to misguided expectations on what constitutes effective enforcement.”

and

“FY 2025 was a unique period of transition for the enforcement division never experienced before in modern SEC history. It was characterized by an unprecedented rush to bring a significant number of cases in advance of the presidential inauguration[1] and the aggressive pursuit of novel legal theories under the prior Commission.”

It should come as no surprise that enforcement results are down. During fiscal year 2025, the SEC filed 456 enforcement actions, including 303 standalone actions. During fiscal year 2024, the SEC had filed 583 enforcement actions of which 432 were standalone actions.

The SEC touts $17.9 billion in recovery. But $14.9 billion of that was from the Stanford case that was filed more than 15 years ago. If a registrant used that kind of misleading language it would end up with an SEC action against it.

This release comes as the SEC announces the new Director of Enforcement: David Woodcock.

We know the Division of Enforcement is understaffed. DOGE opened the door for 18% of the staff to depart. Enforcement is key to weed out bad actors. We’ve got looming crises in private credit markets and the AI bubble.

Is the SEC enforcement doing enough to stop bad actors?

Sources:

Proposed Fundamental Reforms to AML Programs

Doug Cornelius — Wed, 08 Apr 2026 12:00:00 +0000

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network issued a proposed rule intended to “fundamentally reform” financial institutions’ anti-money laundering and countering the financing of terrorism programs under the Bank Secrecy Act. The three key changes according to FinCEN:

Reduce unnecessary regulatory burden by allowing financial institutions to focus their resources on higher risk areas in their AML/CFT programs.
Elevate FinCEN’s role in the AML/CFT supervision process for banks to promote consistent, risk-focused supervision by bank examiners.
Refocus financial institutions’ AML/CFT programs on effectiveness in combatting and preventing illicit finance activity, rather than mere technical compliance.

Those all sound more like goals than changes. It doesn’t tell us what the changes are. So it’ll take a deep diver into the notice of proposed rulemaking.

The first change is the name. It would officially change from Anti-money laundering program requirements” to “Anti-money laundering/countering the financing of terrorism program requirements”. Okay.

The second change is toward a principle-based approach. An institution is required to have an “effective” AML/CFT program. The proposed rule would provide that a financial institution has an “effective” program if it
“(1) is established in accordance with the proposed rule’s establishment requirements; and
(2) is maintained, meaning that a properly established program is implemented in all material respects.”

The establishment of a program as four elements

internal policies, procedures, and controls (including risk assessment processes);
independent program testing;
an individual, located in the United States and accessible to FinCEN and the Agencies, responsible for establishing and maintaining the program, and coordinating and monitoring day-to-day compliance; and
ongoing employee training.

That all seems standard.

Then you have to “implement” the program. Do the things you say you’re supposed to do in the policies and procedures. Run risk assessments. Etc.

The proposed rule-making does lean into Artificial Intelligence (see page 32)

It’s too early to dive deep into the details for a compliance program. Who knows if this will move forward and if it does, what changes will happen.

If you’re a commentor, you’ve got 60 days to submit comments.

Sources:

Is It a Truck or a Security?

Doug Cornelius — Tue, 07 Apr 2026 12:00:00 +0000

A trucking company is looking for capital. It needs trailers and trucks. You give the company money to buy the truck on your behalf and the trucking company leases it back to you. The truck company will arrange the purchase and financing. It will find a driver. It will take care of licensing, registration, insurance, and maintenance. Is the trucking company selling you a security?

That leads back to some derivation of the Howey case to determine if there is an investment contract, and look at whether there is

an investment of money,
a common enterprise,
a reasonable expectation of profits, and
a reliance on the entrepreneurial or managerial efforts of others.

If the investor has some right to end the lease and do something else with the truck, then this might be a leasing(ish) transaction and not a securities transaction.

This all comes back to the Securities and Exchange action against Ricardi Celicourt and Brisly Guillaume, and their company, Royal Bengal Logistics, Inc.. They raised raised approximately $112 million from 1,500 investors to finance their trucking company.

One investment option was RBL”s Trailer Sponsorship Program. The Trailer Program was a six-month program that offered investors the opportunity to sponsor the building and purchase of a tractor-trailer on behalf of RBL. Funds were supposed be used to build trailers in India, which were then disassembled and shipped to the United States. The trailers would be reassembled in the US and added to RBL’s fleet or sold for a profit. At the end of the period, RBL was obligated to repay investors their principal investment plus 30% interest.

A second investment option was RBL’s Equipment Management Investment Program that offered the highest returns. The Truck Program required a minimum investment of $55,000 that RBL was supposed to use for the purchase of a semi-truck on behalf of the investor. RBL would take all steps to purchase and operate the truck on behalf of the investor, including identifying and purchasing the truck, arranging financing for the investor to purchase the truck, assigning a driver, obtaining licensing, registration and insurance, and maintaining the truck. Investors were required to make the investment through a new or existing corporation or limited liability company created by the investor, which RBL claimed would be the legal owner of the truck. The investor agreed to lease the truck to RBL for a five-year term. RBL paid the investor monthly lease payments in the amount of $3,000, beginning on the third month for 58 months. At the end of the five-year term, an investor in the Truck Program would have received $174,000 in lease payments alone, representing at least a 216% return on investment. The investor also purportedly owned the truck outright, which the investor could keep, sell to RBL, or sell to a third party.

The scheme also had two note sale programs that were clearly securities offerings. From a quick look at the docket, Celicourt and Guillaume did not spend time arguing the securities point. It will stay academic for now.

Sources:

The One with Low IQ from Pet IQ

Doug Cornelius — Mon, 06 Apr 2026 12:00:00 +0000

You’re senior management of a public company. You just made a million dollar bonus for performance. You get paid $735,000 if the company is sold. You’ve got 150,000 shares of company stock that’ll be worth over $4 million. You’re in the process of selling the company.

Do you tell your wife and best friend about the transaction and tell them to buy the company stock?

You would not. But the President and COO of Pet IQ did.

The company had an insider trading policy that prohibits disclosure of material non-public information about the company and trading company stock if you have MNPI. The company had just imposed a blackout on trading company stock.

The now former President and COO went to see his ex-wife and purchased almost $400,000 shares in Pet IQ in her brokerage account. He also told his best friend, Mr. Dalton, who went and purchased call options on Pet IQ and made over $100,000 in trading profits.

Mr. Dalton sent this message to an unnamed person:

“Just in case we don’t get to run into each other again. Pull your available cash together and buy PETQ it’s at 23 dollars getting bought out in the next couple of days at 31 dollars a piece. If you have or know options do a call on them. It’s my best friend telling me this that’s a VP in the company.”

Back to Mr. Smith, some information got to the feds. Law enforcement showed up at his house and asked about the trades in his ex-wife’s account. According to the plea agreement, he denied making the trades in his talk with law enforcement. Also not smart. Lying to the feds is also a criminal offense. That’s how they got Martha Stewart. He thought better and called them back and told the feds that he had not been truthful.

No sentencing yet, but the maximum penalty is 20 years in prison.

Sources:

The Downsizing of the SEC

Doug Cornelius — Thu, 02 Apr 2026 16:00:00 +0000

In fiscal year 2025, the Securities and Exchange Commission had a departure of 18% of its employees. The SEC’s Division of Investment Management lost 24% of its staff during fiscal year 2025.

What is the effect of the departure? The GAO had interviews with several dozen SEC employees.

About half (33 of 61) said the employees who left SEC had either unique knowledge from many years of experience or specific subject-matter expertise.
They noted that the departures led to a loss of institutional knowledge.
A few employees (5 of 61) expressed that the limited time some employees had before leaving was not adequate to pass on their knowledge.
One employee noted that individuals who accepted the deferred resignation program left within 7 days.
A few employees (8 of 61) stated that they believed SEC has not yet experienced the full effects of these departures, including potential knowledge or expertise gaps. For example, one employee said SEC has many “single points of failure” in key areas of expertise and that it would take time to determine what expertise the agency had lost.

We’ll see how this affects the SEC.

Sources:

Securities And Exchange Commission: Recent Workforce Reductions and Other Personnel Management Changes GAO Report Published March 27, 2026
Full Report
SEC Division Overseeing Private Credit Firms Lost 24% of Staff by Lydia Beyoud

When “Today” Is Not all of “Today”

Doug Cornelius — Wed, 01 Apr 2026 12:00:00 +0000

“BREAKING NEWS THE [Politician] PORTFOLIO ON DUB SOARED +7.77% TODAY, HITTING A NEW ALL TIME HIGH OF +120%”

This proposed marketing blurb was submitted at 2:31 pm., before the markets has closed for the day. As the Massachusetts Secretary of State pointed out, that is not performance for the day. It’s only performance for part of “today.”

This blurb was pushed out through social media, so there was limited ability to clarify the meaning and add disclosures. It also doesn’t say which day “today” is referring to.

Sources:

Compliance Bricks and Mortar for March 27

Doug Cornelius — Fri, 27 Mar 2026 12:00:00 +0000

These are some compliance-related stories that recently caught my attention.

She Was Invisible for Six Months. Then She Found Out She Was Even More Invisible Than She Thought.

By John Reed Stark in LinkedIn

And here is the darkest irony embedded in that transcript: the SEC enforcement division Ryan helped hollow out — the one that lost its most experienced senior staff, the institutional memory, the trial-scarred veterans who actually know how to build and win cases — that division wasn’t just bypassed in the Musk negotiations. It was treated as irrelevant.

Shakespeare Was Right About the Lawyers

By Rick Jones in Crunched Credit

Offering documents have grown from 100 pages to 400 pages over the past 25 years while loan agreements and mortgage documents similarly have grown from dozens of pages to hundreds of pages. Did the world get more complex? Did the fundamental structure of the universe change so much that it required that many more words to describe what is fundamentally the same transaction? Are our transactions so much more sophisticated and complex today than they were 20 years ago, such that the language of 20 years ago is simply inadequate for purpose? I don’t think so. Are we better for it?

Remarks by Commissioner Uyeda on Investor Choice and the Limits of SEC Regulation

Harvard Law School Forum on Corporate Governance

But public markets do not thrive in isolation. The public and private markets co-exist in a symbiotic relationship. Private markets have always been the seedbed where ideas become businesses, from which public markets draw their most dynamic companies. For much of modern history, private markets have incubated companies that were not yet ready for the public markets, which at some point in the future when they were at a more mature stage, went public. The question is not how to choose between them; it is how to allow everyday Americans to have exposure to the opportunities that exist in both markets.

Top Ten Regulatory and Litigation Risks for Private Funds in 2026

in Proskauer’s The Capital Commitment

If we had to define the mood for 2026 in three words, we would choose alert, intentional and institutional. After several years of normalizing longer hold periods and navigating evolving regulatory frameworks, 2026 will see managers permanently vigilant – vigilant in pursuing value creation theses, identifying exit opportunities and embedding robust governance structures to mitigate litigation and regulatory risks.