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CRYPTO CURRENCY Technical Competence & Rules of Professional Responsibility

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CRYPTO CURRENCY Technical Competence & Rules of Professional Responsibility Marc J. Randazza Rule 1.1 Comment 8 To maintain the requisite knowledge and skill, a lawyer should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology, engage in continuing study and education and comply with all continuing legal education requirements to which the lawyer is subject. Crypto Currency 1. What is Crypto Currency? 2. How does it work? 3. How could you screw this up? Blockchain •Decentralized •Transparent •Immutable Blockchain Blockchain • Time-stamped series of immutable records of data • Managed by a cluster of de-centralized computers • Each block is secured and bound to another, cryptographically • Shared • Immutable • Open for all to see – how you keep it honest Blockchain Blockchain • Transparent but also pseudonymous • If you look on the ledger, you will not see “Darren sent 1 BTC to Trixie” • Instead you will see “1MF1bhsFLkBzzz9vpFYEmvwT2TbyCt7NZJ sent 1 BTC” • But, if you know someone’s wallet ID, you could trace their transactions Crypto Roller Coaster – 5 years Crypto Roller Coaster – 1 day How can you screw this up? Quadriga You can lose it & Bankruptcy Your mind • C$190 million turned to digital dust • Thrown away with no back up • Death of CEO turned death of • $127 million in the trash – gone business • 7,500 BTC – Fluctuates WILDLY Ethical Considerations You might be surprised at what violates Rule 1.8 Which Rules? Rule 1.2 (d) – Criminal or Fraudulent Activity Rule 1.5 (a) – Reasonable Fee Rule 1.6 – Confidentiality Rule 1.8 (a) – Business Dealings With Clients Rule 1.8(f) – Compensation From Other Than Your Client Rule 1.15 (a) – Safekeeping Property Rule 1.15 (c) – Trust Accounts Rule 1.2(d) – Criminal or Fraudulent Activity • Crypto *can* be used for criminal activity • Tends to be difficult, but not A lawyer shall not ... assist a impossible, to trace client, in conduct that the lawyer knows is criminal or fraudulent... • If it came from a criminal source, the Bar won't believe you • A lot of people use it to try and avoid taxation • Know your client Rule 1.5(a) – Reasonable Fee • Major flux • If you bill in BTC, you could make nothing one day and a fortune the next A lawyer shall not make an • To avoid fluctuation problems, bill agreement for, charge, or in stable currency collect an unreasonable fee • Why do you think the Bars are concerned about this? • Schedule payments when you can immediately convert – preferably while client is on the phone or nearby Rule 1.6(a)(c) – Confidentiality • Given the transparency, it is • (a) A lawyer shall not reveal information relating to the at least possible to have representation of a client unless blockchain transactions the client gives informed traceable consent, • Warn the client, in writing, of • (c) A lawyer shall make this potential reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client. Rule 1.8(a) – Business Dealing With Client A lawyer shall not enter into a business transaction with a client or knowingly acquire • Chances are, your client knows an ownership, possessory, security or other more than you pecuniary interest adverse to a client unless: 1. the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully • Nevertheless, this is property, disclosed and transmitted in writing in a with fluctuating value manner that can be reasonably understood by the client; 2. the client is advised in writing of the desirability of seeking and is given a • Bars consider this to be a reasonable opportunity to seek the advice "business dealing with a client" of independent legal counsel on the transaction; and 3. the client gives informed consent, in a • Provide written disclosure and writing signed by the client, to the essential terms of the transaction and the lawyer's advice to get advice from a role in the transaction, including whether second lawyer the lawyer is representing the client in the transaction. Rule 1.8(f) – Who Paid You A lawyer shall not accept • Again, know your client compensation for representing a client from one other than the client unless: • Payment could be 1. the client gives informed coming from third parties consent; 2. there is no interference with the lawyer's independence of • Difficult to know professional judgment or with the client-lawyer relationship; and 3. information relating to representation of a client is protected as required by Rule 1.6 Rule 1.15 (a) – Safekeeping Property 1. A lawyer shall hold property of • Crypto is property, not currency clients or third persons that is in a lawyer's possession in connection • You will screw this up with a representation separate from the lawyer's own property. • How to safely handle it? • Immediate conversion 2. Funds shall be kept in a separate account maintained in the state • IF you must hold it: where the lawyer's office is situated, • Use an external drive “cold or elsewhere with the consent of the wallet” client or third person. • Deactivate the ability to delete 3. Other property shall be identified • Put in a safe as such and appropriately • Log the property safeguarded. • Back it up (is this possible?) • Separate digital Wallet for 4. Complete records of such each client – Multi-Factor account funds and other property authentication shall be kept by the lawyer and shall be preserved for a period of • Better rule – convert it [five years] after termination of the representation. Rule 1.15(c) – Trust Accounts • There are no blockchain or crypto trust accounts A lawyer shall deposit into a client trust account legal fees and • Fluctuation in value will create expenses that have been paid in problems advance, to be withdrawn by the lawyer only as fees are earned or • If you must hold it, hold it in expenses incurred. cold storage [ CRYPTO CURRENCY ] Competence & Ethics [email protected] @MarcoRandazza Cryptocurrency: Competence and Ethics Table of Contents Man accidentally threw away $127 million in bitcoin and 2 officials won’t allow a search - Shawn Carter Quadriga bankruptcy: C$190 million may have turned into 7 digital dust - Hugo Margoc The Lawyer’s Cryptionary: A Resource for Talking to Clients 10 About Crypto-Transactions - Carol Goforth American Bar Association Rule 1.2 (d) 87 American Bar Association Rule 1.5 (a) 88 American Bar Association Rule 1.6 89 American Bar Association Rule 1.8 (a) 90 American Bar Association Rule 1.8 (f) 91 American Bar Association Rule 1.15 (a) 92 American Bar Association Rule 1.15 (c) 93 Nebraska Ethics Advisory Opinion for Lawyers NO. 17-03 94 North Carolina 2019 Formal Ethics Opinion 5 104 New York City Formal Opinion 2019-5: Requiring 107 Cryptocurrency in Payment for Legal Services Americans are struggling, even with a strong 4 things this millionaire CEO wishes more Michael J economy—Janet Yellen explains why employees knew before asking for a... million ho Help protect all devices with Comcast Business SecurityEdgeTM MONEY Man accidentally threw away $127 million in bitcoin and officials won’t allow a search Published Wed, Dec 20 2017•12:30 PM EST Updated Wed, Dec 20 2017•3:24 PM EST Shawn M. Carter @SHAWNCARTERM Share Discover the best credits cards to use for streaming services FIND OUT A bulldozer pushes trash into piles at the Miramar Landfill in San Diego, California. Sam Hodgson | Bloomberg | Getty Images James Howells, an IT worker living in the United Kingdom, knows exactly where his misplaced 7,500 bitcoins are but the city council where he lives won’t let him retrieve them. They say it’s against the law. According to a report published in The Telegraph, Howells began mining bitcoin on his personal laptop in 2009. In 2013, though, “after I had stopped mining, the laptop I had used was broken into parts and sold on eBay,” Howells tells The Telegraph. He kept the drive he used to collect the bitcoins, “so if bitcoin did become valuable one day, I would still have the coins I mined.” But, while cleaning his home in 2013, he mistakenly put it into a waste bin at his local landfill site in Newport, SouthDiscover Wales, wthehe bestre it credits got b ucardsried. to use for streaming services Now, with bitcoin’s value hovering just above $17,000 Wednesday, according to FIND OUT digital-currency website CoinDesk, Howells’ 7,500 lost bitcoins are worth more than g y , , $127 million. CoinDesk’s Bitcoin Price Index tracks prices from digital currency exchanges Bitfinex, Bitstamp, Coinbase and itBit. More than four years’ worth of garbage have poured into the dump since his mistake, which would make any recovery effort a significant undertaking. “A modern landfill is a complex engineering project and digging one up brings up all sorts of environmental issues, such as dangerous gasses and potential landfill fires,” Howells says. “It’s a big, expensive and risky project.” 1:10 Tony Robbins shares the mindset you need to invest in bitcoin He wants to try, regardless, but the Newport City Council won’t allow it. In an interview with tech website Wired, a council spokesperson said their offices have been “contacted in the past about the possibility of retrieving a piece of IT hardware said to contain bitcoins,” but digging up, storing and treating the waste could cause a “huge environmental impact on the surrounding area.” Discover the best credits cards to use for streaming services The landfill reportedly contains about 350,000 tons of waste and 50,000 more tons FIND OUT are added every year.
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