The Georgetown Law Journal Online

This Note posits that the Second Circuit's new definition of friendship for insider trading cases, as set forth in United States v. Martoma, is incorrect. Rather, United States v. Newman’s close standard is the correct definition of friendship. The paper is divided into two parts. Part I addresses the antecedent issue of whether Salman v. United States rejected the close standard, concluding that Salman neither expressly nor impliedly rejected the close standard. Part II establishes that prior cases and the underlying policy rationale of the prohibition against insider trading compel the conclusion that the close standard is the proper definition of friendship under the gift theory.

Part I of this Note provides a brief background of cryptocurrencies and ICOs. Part II examines historical speculative bubbles and argues that the ICO market is a speculative bubble. Part III explores characteristics of those who invest in bubbles as well as the psychological biases that those investors may encounter. It presents psychological arguments for market behavior in an effort to counter the neoclassical economic claims for why a bubble cannot occur and identifies two distinct types of investors in ICOs—the smart money investors and noise traders. Part IV discusses the limited regulations currently governing the ICO market. Finally, Part V argues that an asymmetrically paternalistic regulatory scheme is the most fitting way to regulate the ICO market. Part V does not provide a comprehensive regulatory framework; rather, it argues for light-touch regulation of ICOs and offers examples for how to implement such regulation.