A federal prosecutor appointed by George W. Bush has been hired by crypto exchange Kraken as regulatory challenges mount for the industry
- Mary Beth Buchanan, a former federal prosecutor appointed by President George W. Bush, has been hired by crypto exchange Kraken, according to people familiar with the matter.
- The regulatory environment has been murky for companies like Kraken given the nascent nature of the crypto market.
- Notably, the US has reportedly opened a criminal probe into market manipulation of bitcoin and other cryptocurrencies.
- Other exchanges have brought in top lawyers, including Bitfinex, to navigate the uncertain environment.
Kraken, the cryptocurrency exchange, has brought in a legal heavyweight to navigate the trading firm through the murky regulatory environment for bitcoin, people familiar with the hire tell Business Insider.
The San Francisco-based firm has hired Mary Beth Buchanan, a former federal prosecutor appointed by President George W. Bush, as its general counsel.
At Bryan Cave, Buchanan was a partner covering white collar and securities-related cases.
Buchanan is also featured in the Netflix four-part series "Evil Genius: The True Story of America's Most Diabolical Bank Heist," which explores a bank robbery case for which she served as prosecutor.
Buchanan will be based in New York, according to a person familiar with the hire.
Kraken made headlines recently for refusing to participate with the New York Attorney General's April inquiry into cryptocurrency exchanges. The AG's office asked 13 cryptocurrency exchanges, including Kraken, to share information regarding market manipulation and investor protections.
"Kraken is always willing to work with regulators and law enforcement," chief executive Jesse Powell said in a blog post responding to the AG's inquiry. "Whether you think you have us by the balls or not, approaching us with some basic respect and having a conversation is always going to make the interaction smoother and help you get what you want faster than storming in with your "or else" list of demands."
Outside of the AG's inquiry, a number of legal question hang over cryptocurrency exchanges, incuding how they should be regulated.
Peter Van Valkenburgh, the director of research at Coin Center, a policy research firm in Washinton DC, said the landscape for crypto exchanges is "complicated."
"The first question they have to think about is going to be 'what are we,'" Van Valkenburgh said in an interview. "And the possible answers you'll have range from commodity spot exchange, which is not regulated, but there is policing authority from the CFTC, to money transmitter, which requires licenses in all 50 states."
"Or maybe you might inadvertently be a securities exchange of some sort because maybe some of the tokens you are trading are thought to be securities by the SEC."
While it is widely agreed upon that bitcoin is a commodity, given its decentralized nature, it is not clear if other tokens fit into the same category, Van Valkenburgh said.
In addition, the US Justice Department has opened a criminal investigation into potential market manipulation of bitcoin prices, according to a Bloomberg report.
The investigation is said to focus on "spoofing" - in which false orders are placed on exchanges and then withdrawn to manipulate prices - in an attempt to lure other people into buying or selling and "wash trading," in which market participants trade with themselves to create the illusion of market activity.
To navigate these choppy waters, crypto companies have been plucking top legal talent.
Bitfinex, for instance, announced earlier this month that it hired Peter Warrack, a former anti-money laundering executive, as chief compliance officer. He joined from the Bank of Montreal.
Marco Santori also left Cooley LLP to become the chief legal officer of Blockchain, a crypto-wallet firm.