Recently, Pastore LLC perfected its appeal in New York’s First Department Appellate Division. Pastore LLC represents a celebrity chef in the matter, which involves a contract dispute dealing with election of remedies issues. The chef is well known and has high-end restaurants in New York and Las Vegas, and the issue in the case involves some of his historical publicity. Ultimately, the matter involves sophisticated contractual provisions, and thus the chef hired Pastore LLC to handle these contractual agreements.
Tag: Joseph Pastore
Weighing the Carbon Footprint of Cryptocurrency
Cryptocurrency (“Crypto”) is a virtual form of currency that functions through a decentralized system to record transactions and uses encryption, rather than an entity such as a bank, to verify transactions.[1] Crypto’s first mark on the digital world was in 2009 through Bitcoin, which remains the best-known form of Crypto today.[2] Crypto is created through a process known as mining, which involves downloading a unique software that contains all transactions that have taken place through that specific network.[3]
Crypto has had a profound effect on the global economy and has altered our world’s view of currency and financial transactions in general. Any investor with access to the internet can purchase cryptocurrency.[4] Additionally, over 15,000 businesses worldwide now accept Crypto as a form of payment, which has altered the availability of transactions to interested purchasers.[5] A study conducted by Forester Consulting on Crypto using the Total Economic Impact methodology demonstrated that 40% of customers that used Crypto as their form of currency were new customers to the merchant, evidencing intriguing information that Crypto is affording access to new transactions to new demographic groups.[6]
Despite the numerous advantages that Crypto has offered globally, Crypto’s high demand comes at the cost of an impact on our environment, which is currently being addressed at a federal executive level. The process of mining all Crypto was initially designed to be capped at 21 million units; however, the number of units available to mine has caused an increase in computation power exerted in order to mint new units of Crypto.[7] The estimated carbon footprint stemming from a single crypto transaction is estimated to burn 2,292.5 kilowatt hours of electricity, which equates to the amount of power the average U.S. household uses over the course of 78 days.[8] No payment system is foolproof in completely abolishing its carbon footprint and CO2 emissions. However, compared to VISA, which is another payment system, the average Crypto transaction requires 200,000 times more energy consumption.[9]
The substantial footprint of Crypto is acknowledged by the current administration, which has prioritized climate change mitigation. [10] In an Executive Order on “Ensuring Responsible Development of Digital Assets” which took place on March 9, 2022, United States President Joe Biden addresses the resulting environmental pollution from Crypto and Crypto mining and implements a plan alongside many federal agencies such as the Environmental Protection Agency.[11] The Executive Order recognizes the benefits of Crypto financial markets for consumers, investors, and businesses, however addresses the responsibility the United States has to mitigate contributions to climate change and pollution.[12]
To reach these goals and assure that Crypto’s harms to not outweigh its benefits, and to learn more about how to stray away from harms, the Executive Order calls on the Director of the Office of Science and Technology Policy to prepare a report to the President within 180 days, specifically addressing “the connections between distributed ledger technology and short-, medium-, and long-term economic and energy transitions; the potential for these technologies to impede or advance efforts to tackle climate change at home and abroad; and the impacts these technologies have on the environment…The report should also address the effect of cryptocurrencies’ consensus mechanisms on energy usage, including research into potential mitigating measures and alternative mechanisms of consensus and the design tradeoffs those may entail.[13]
The damages Crypto could potentially have large effects on climate change and the state of our environmental crisis. However, mitigating Crypto pollution is not an impossible feat. Government encouragement in developing sustainable technologies can have social and economic benefits to the Crypto market and remove the serious threat that Crypto can pose to the emission of greenhouse gases and its carbon footprint.[14]
[1]What is Cryptocurrency and How Does it Work?, Kaspersky, “https://www.kaspersky.com/resource-center/definitions/what-is-cryptocurrency”>https://www.kaspersky.com/resource-center/definitions/what-is-cryptocurrency (Last visited March 17, 2022)
[2]Id.
[3] Jake Frankenfield, Cryptocurrency, Investopedia (Jan. 11, 2022) https://www.investopedia.com/terms/c/cryptocurrency.asp#:~:text=Cryptocurrencies%20are%20generated%20by%20mining,have%20occurred%20in%20its%20network.
[4] Jim Probasco, What to Know About Investing in Crypto Exchanges, Investopedia (Nov. 30, 2021) https://www.investopedia.com/buying-and-selling-4689764
[5]Who Accepts Bitcoin and Ether Cryptocurrencies, Currency Exchange International (May 12, 2021) https://www.ceifx.com/news/who-accepts-bitcoin-and-ether-cryptocurrencies#:~:text=More%20than%2015%2C000%20businesses%20worldwide,Microsoft%2C%20AT%26T%2C%20and%20Wikipedia.
[6]Forrester Study Shows Accepting Crypto Attracts New Customers and Boosts AOV, Forrester (Aug. 6, 2020) https://bitpay.com/resources/forrester-report-says-bitpay-adds-new-sales-and-2x-aov/
[7] John Bogna, What is the Environmental Impact of Cryptocurrency? PCMag (Jan. 8, 2022) https://www.pcmag.com/how-to/what-is-the-environmental-impact-of-cryptocurrency#:~:text=The%20environmental%20concern%20comes%20from,household%20for%20over%2078%20days.
[8]Id.
[9]Bitcoin Energy Consumption Index, Digiconomist (2022) https://digiconomist.net/bitcoin-energy-consumption
[10] Executive Order on Ensuring Responsible Development of Digital Assets (Mar. 9, 2022), https://www.whitehouse.gov/briefing-room/presidential-actions/2022/03/09/executive-order-on-ensuring-responsible-development-of-digital-assets/.
[11] Executive Order, § 5(b)(vi)
[12] Executive Order, § 1
[13] Executive Order, § 5(b)(vii)
[14] Jon Truby, Decarbonizing Bitcoin: Law and Policy Choices for Reducing the Energy Consumption of Blockchain Technologies and Digital Currencies, 44 Energy Rsch. Soc. Sci. 399 (2018) (Discussing the benefits of Crypto and how the harms can be avoided through commitment to positive government intervention choices).
International, Alternative Methods of Service in a Modern, Mid-Pandemic Society
The Federal Rules of Civil Procedure (the “FRCP”) provide the common process in which an individual may serve another party. The FRCP provides means to achieve proper service of process of an individual located outside of the United States, which differs from serving a national defendant. The FRCP allows a party, in serving an international party, to take measures such as “any internationally agreed means of service that is reasonably calculated to give notice,” “as prescribed by the foreign country’s law for service in that country in an action in its courts of general jurisdiction,” “as the foreign authority directs in response to a letter rogatory or letter of request,” and more.[1] Rule 4(h) provides further for service of process of an international corporation.[2] The Hague Convention has been widely regarded as the as a primary organization to utilize to serve an international party.[3]
While the FRCP rule dictating service of process appears to list a wide range of methods to serve an international party, serving an individual in a different country can raise difficulty in practice, and challenges in doing so have increased. Delays in services of process are common as a result of the COVID-19 pandemic, fashioning conditions where serving a party in another country is nearly impossible. It can be ambiguous on how to conduct international service where the methods listed in FRCP Rule 4 have been exhausted.
In Group One Ltd. V. GTE GmbH et al.[4],a recent decision in the Second Circuit, the court weighed in on the issue of international service and reaffirmed prior decisions that the Hague Convention is not the only means one can pursue to successfully serve a foreign party.[5] The court agrees that FRCP Rule 4 controls service of process, however it does not create a hierarchy on the best or most preferable means to serve a foreign defendant.[6] Additionally, it is established that means listed in Rule 4(f) need not be exhausted prior to seeking permission allowing alternative service from the court.[7]
This decision also deliberates E-mail as an alternate means for service under FRCP Rule 4, and the court authorizes this method to serve foreign defendants. [8] It is required that the service is likely to reach the defendant in order to comport with due process, and E-mail service is valid in order to satisfy this requirement. [9] More surprisingly, the court decides that E-mail service may be the most reliable and efficient method to accomplish service, as “[a]lthough emails may get lost in a defendant’s spam folder, compared to postal mail, emails are more reliable.[10]
The pandemic and its global effect has contributed to widespread delays in service of process. While ordinary and anticipated delays will arise while serving a foreign party even in the absence of a global pandemic, the courts do not aim to make serving a foreign party impossible by restricting alternative means to precedent or the plain language of FRCP Rule 4. Today, we are observing courts strive to put plaintiffs serving foreign parties at ease by interpreting service of process rules in a way that takes into account the current state of the world today.
During a time where the pandemic is triggering delays in all realms of everyday life, and the growing age of technology and communication via E-mail, the courts in many jurisdictions have encouraged plaintiffs to use E-mail as an alternative method of service.
[1]Fed. R. Civ. P. 4(f)
[2]Fed. R. Civ. P. 4(h)
[3]Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, art. 1, Nov. 15 1965, 20 U.S.T. 361, The Hauge Convention
[4]523 F.Supp 3d 323 (E.D.N.Y., 2021)
[5]Id. at 341
[6]Id.
[7]Id. at 341
[8]Id.
[9]Id. at 344
[10]Id. at 345
Congratulations to Joseph M. Pastore III, Recipient of the 2022 AV Preeminent Rating Award
Pastore LLC proudly announces that for the 12th consecutive year, Martindale-Avvo has awarded the 2022 AV Preeminent Rating to Managing Partner, Joseph M. Pastore III. This honor is the highest possible rating in both legal ability, and ethical standards a practicing attorney can receive. Mr. Pastore has received this honorable award resulting from his dedication to ethical practices, work ethic, and legal abilities he commits to each day as a practicing attorney.
Tokenized Assets: What are They and how are They Regulated?
As the decentralized world of blockchain continues to grow, tokenized assets have caught the eye of investors and regulators alike. Tokenized assets may be fungible or non-fungible. Fungible tokenized assets are interchangeable and indistinguishable such as Bitcoin and other cryptocurrencies (“Crypto”). Non-fungible tokens (“NFTs”) are unique tokens that are non-divisible and cannot be replaced because each token has a unique value.[1] Tokenized assets result from taking a tangible asset (such as real estate, paintings, and precious metals) or an intangible asset (such as a digital picture or a YouTube video) and converting the asset ownership into a digital token on a blockchain.[2] This process is known as tokenization.[3] By taking a real-world asset and making a digital representation, it creates a broader investor base, geographic reach, and a reduction in transaction times.[4] Moreover, placing the digital token on a blockchain ensures no single authority can erase your ownership in the tokenized asset.[5]
While tokenized assets can allow for a broader base of investors, like the Crypto market, the NFT market lacks clear regulations from the regulatory agencies such as the U.S. Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”).[6] Moreover, state regulatory bodies have yet to issue guidance on the tokenized asset market.[7]
The current legal framework was not designed to regulate and guide the creation and trade of digital assets.[8] Moreover, the question of what category an NFT falls into depends on the particular asset that was tokenized.[9] For example, the CFTC has stated that renewable energy credits and emission allowances are commodities as defined by the Commodity Exchange Act.[10] However, the SEC has stated that depending on the facts and circumstances of a given NFT, it might be considered an investment contract under the Howey test, which would cause the NFT to be regulated under the Securities Act of 1933 and Securities Exchange Act of 1934.[11] The legal uncertainty within the NFT market led SEC Commissioner Hester Peirce to recently state that guidelines would help provide the public with an understanding of how the SEC is approaching these issues.[12] The lack of a clear regulatory framework has made investors susceptible to fraud, and it allows for bad actors to avoid domestic and international anti-money laundering laws.[13]
Additionally, there is no standardized set of rights that accompanies an NFT since the seller determines what rights follow the NFT.[14] Therefore, sellers and buyers alike should understand the limitations that a transfer, assignment, or license may have on the NFT.
While tokenized assets allow for quick cross-border investment and increased liquidity of real-world assets, investors are left without a clear regulatory framework and, at times, not knowing what rights follow the purchase of an NFT. As the decentralized world of blockchain continues to grow, it is imperative that investors and businesses use common sense, sound legal advice, and diligence to navigate this market. Given the lack of legal certainty, attorney legal opinions on these assets will likely immunize any reasonable use.
[1] Tokenization: Opening Illiquid Assets to Investors, BNY Mellon (June 2019), https://www.bnymellon.com/us/en/insights/all-insights/tokenization-opening-illiquid-assets-to-investors.html.
[2]Id.
[3]Id.
[4]Id.
[5] What is asset tokenization?, Hedera, https://hedera.com/learning/what-is-asset-tokenization#:~:text=Asset%20tokenization%20is%20the%20process,either%20digital%20or%20physical%20assets.&text=Asset%20tokenization%20could%20convert%20ownership,0.0002%25)%20of%20the%20property (last visited Feb. 3, 2022).
[6] William de Sierra-Pambley, Tokenization: Opportunity and Regulation, Finding a Balance, Sheppard Mullin (Oct. 18, 2021), https://www.jdsupra.com/legalnews/tokenization-opportunity-and-regulation-5158893/.
[7]Id.
[8]NFTs: Key U.S. Legal Considerations for an Emerging Asset Class, Jones Day (April 2021), https://www.jonesday.com/en/insights/2021/04/nfts-key-us-legal-considerations-for-an-emerging-asset-class.
[9]Id.
[10]Id.
[11]Id.
[12] Sarah Wynn, SEC’s Peirce says agency guidance on nonfungible tokens needed, Roll Call (Jan. 25, 2022), https://rollcall.com/2022/01/25/secs-peirce-says-agency-guidance-on-nonfungible-tokens-needed/.
[13]NFTs: Key U.S. Legal Considerations for an Emerging Asset Class, supra note 11.
[14]Id.
Examiner’s Report Supports Pastore’s Client’s Claims Involving a High-End Westchester Development
Pastore LLC represents a large creditor and owner of a construction management company in a bankruptcy matter in the Southern District of New York where a billionaire filed bankruptcy to avoid liability to his business partner, Pastore LLC’s client, concerning high-end developments in Westchester and Connecticut. Pastore LLC with co-counsel made a motion to have an examiner review the company’s finances. The examiner’s report indicated that he owes millions back to the bankruptcy estate.
Pastore Brings Claims to Thwart Violations of Securities Laws by Broker-Dealers
Pastore LLC has brought claims to thwart violations of securities laws by broker-dealers to funnel money away from a rightful beneficiary to a wrongdoer. The scheme, as alleged in the federal complaint, conducted by the broker-dealers led to violations of their supervisory responsibilities under the Securities Exchange Act of 1934 (the “Exchange Act”) and the Investment Advisers Act of 1940 (the “Advisers Act”) as well as multiple FINRA rules. Moreover, FINRA and the SEC have previously fined these broker-dealers for conducting similar schemes. A recent article regarding this matter can be found here.
S.D.N.Y. Grants Pastore’s Motion for Alternative Service Against International Cryptocurrency Corporation
Pastore LLC represents a financial services company in a cryptocurrency contract dispute with a Uruguay joint-stock company with its principal place of business in Sao Paulo, Brazil. In an effort to effectuate service of process against the Uruguayan company, Pastore LLC filed a Motion for Alternative Service with the United States District Court for the Southern District of New York (the “S.D.N.Y.”). In an order that recognized the steps Pastore LLC had taken to comply with the standards of service of process on an international corporation, the S.D.N.Y. granted the Motion for Alternative Service and has allowed Pastore LLC to effectuate service of process via e-mail. The matter involves the trading of a carbon credit crypto coin on the Gemini exchange, as a result of Pastore’s client’s relationship with the well-known founders of the exchange. A recent article regarding this matter can be found here.
Stablecoins: What are They?
A little-known area of the growing cryptocurrency market is stablecoins. Stablecoins, a type of cryptocurrency, are not mined through an open network like Bitcoin and Ethereum.[1] Instead, stablecoins derive their value from another asset.[2] Most stablecoins are pegged to a national currency.[3] For example, the USD Coin is a stablecoin that is pegged to the U.S. dollar.[4] Therefore, one USD Coin is always worth one U.S. dollar.[5] By deriving their value from a national currency, stablecoins avoid the volatility that is usually associated with cryptocurrencies.[6] Like other cryptocurrencies, stablecoins are stored in digital wallets.[7]
While Treasury Secretary Janet Yellen has recognized the potential benefits of stablecoins such as “supporting beneficial payment options,” there are no regulations in place to monitor stablecoin reserves. [8] Government regulators are concerned about the implications of a relatively stable cryptocurrency that allows investors to avoid anti-money laundering (“AML”) regulations. [9] Recently, the President’s Working Group on Financial Markets (“PWG”), consisting of Treasury Secretary Janet Yellen, the chairpersons of the Board of Governors of the Federal Reserve, Securities and Exchange Commission, and Commodity Futures Trading Commission, issued a report recommending Congress to pass legislation to regulate the stablecoin market.[10]
The legislation recommended by the PWG report would limit the issuance of stablecoins to insured depository institutions and establish a federal framework to regulate other parties in stablecoin arrangements, such as the party that facilitates the transfer of stablecoins between individuals and the entity that stores the stablecoins.[11] While the PWG believes the proposed legislation should be passed urgently, it recommends in the meantime that agencies use their current authority to address the risks posed by the unregulated stablecoin market.[12] Moreover, the PWG recommends that international AML standards should be implemented to prevent the use of stablecoins by illicit actors.[13]
While stablecoins are still operating in an unregulated environment, one thing is clear: the market is only continuing to grow, and the SEC and other government agencies are taking notice of the unregulated area. Common sense, sound legal advice, and diligence will help any business or investor navigate this market despite the uncertainty surrounding stablecoins.
[1] Julian Dossett, Stablecoins: What they are, how they work and how to buy them, CNET (Dec. 6, 2021), https://www.cnet.com/personal-finance/crypto/stablecoins-what-they-are-how-they-work-and-how-to-buy-them/.
[2]Id.
[3] Kathryn G. Wellman; Neil T. Bloomfield, President’s working group report calls for stablecoin regulation, Reuters (Dec. 2, 2021), https://www.reuters.com/legal/transactional/presidents-working-group-report-calls-stablecoin-regulation-2021-12-02/.
[4] What is USD Coin? Coinbase, https://www.coinbase.com/usdc (last visited Dec. 28, 2021).
[5]Id.
[6] Wellman; Bloomfield, note 3.
[7] Dossett, note 1.
[8] Felicia Hou, Stablecoins are taking over the crypto world hot topic for Congress—here’s what they are and the fastest-rising ones to keep an eye on, Fortune (Dec. 8, 2021), https://fortune.com/2021/12/08/stablecoins-cryptocurrency-congress/ (quoting Janet Yellen.
[9] Wellman & Bloomfield, note 3.
[10] Id.
[11] President’s Working Grp. on Fin. Mkts., the Fed. Deposit Ins. Corp., & the Off. of the Comptroller of the Currency, Report on Stablecoins (Nov. 2021).
[12] Id.
[13] Id.
Bankruptcy Court Holds the Plain Meaning of a Security Agreement Dictates
AMERINATIONAL COMMUNITY SERVICES, LLC V. AMBAC ASSURANCE CORP.: PUERTO RICO BANKRUPTCY COURT RULES THAT THE PLAIN LANGUAGE OF A SECURITY AGREEMENT DICTATES
A civil action was recently disputed in which Government Development Bank for Puerto Rico (“GDB”) sought to have the obligations owed to it prioritized over the bond agreements previously executed by the Puerto Rico Highway and Transportation Authority (“HTA”). The court in this case held that the “waterfall provisions” contained within the bond agreements were sufficiently specific to uphold the seniority of the bond obligations owed by HTA over the more recent obligations owed by the HTA to the GDB.
Puerto Rico (the “Commonwealth”), together with HTA began restructuring proceedings as a part of the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”). At the time, HTA had roughly $4 billion in outstanding bond claims, and $2 billion in outstanding loan claims. HTA issued bonds in two parts and under bond resolutions dated 1968 and 1998. These resolutions stated that the bonds issued in 1968 had payment priority over the bonds issued in 1998, and any subsequent debt obligations undertaken by the HTA would be subordinated to both tranches of bonds.
Beginning in 2008, GDB entered into a series of intragovernmental agreements through which they loaned $2 billion to the HTA to continue their complete restructuring under PROMESA. These loans were evidenced by a series of loan agreements. Additionally, as a part of these transactions, GDB and the HTA executed an assignment and security agreement (collectively, the “Security Agreement”), pursuant to which HTA purported to assign certain excise taxes to GDB and granted a security interest in those taxes to secure GDB’s loan claims. These loan claims were later transferred to the GDB Debt Recovery Authority (“DRA”) as part of a consensual restructuring proceeding for GDB under Title VI of PROMESA. The Security Agreement was subject to Puerto Rico Acts 30 and 31 of 2012, which stated that taxed imposed must be used for the payment of principal and interest on any obligations or bonds of HTA.
In 2021, the Commonwealth filed an adjustment plan which provided that HTA bondholder’s payments were subordinate to the DRA’s payments. The collateral monitor and servicer for DRA debt filed a suit against the bondholders, stating that under Acts 30 and 31, the payments owed to them as HTA bondholders were subordinate to any payments owed to GDB under the GDB loans to the HTA.
The United States Bankruptcy Court (the “Court”) held that DRA’s claims did not subordinate HTA bonds, and the waterfall provisions dictated, despite Acts 30 and 31. The Court’s reasoning was that the Security Agreement “unambiguously prioritize[d] Bond payments by establishing a waterfall (or ‘turnover’) mechanism.” In making this observation, the Court further opined that “the plain text of the subordination provisions referred only to “outstanding bonds” issued under the bond resolutions, not to future bonds,” and thus, any debts or bonds incurred or issued subsequent to the 1968 and 1998 agreements was junior to those two initial encumbrances. The Court concluded with: “whatever distinctions may be evident or reasonably inferred in other contexts are precluded here by the plain language of the Security Agreement.”
In this case, having found that the contractual language of the 1968 and the 1998 agreements unambiguously and affirmatively subordinated DRA’s loans to all of the bonds issued by the HTA, the Court dismissed all the counts of DRA’s complaint that sought declaratory relief to prioritize their loans over HTA’s bond obligations.
Id. at *6.
Id. Puerto Rico Oversight, Management, and Economic Stability Act, Pub. L. No. 114-187 (2016).
What’s in a Name? Court Holds that Despite it’s Title, a Security Agreement Also Subordinated Junior Creditor’s Rights to Payment, Cadwalader, Wickersham & Taft LLP (Dec. 1, 2021) https://www.jdsupra.com/legalnews/what-s-in-a-name-court-holds-that-2869667/.
AmeriNational Community Services, LLC v. Ambac Assurance Corp. (in re Fin. Oversight & Mgmt Bd. For P.R.), Adv. Proc. No. 21-00068-LTS, 2021 WL 5121892, at *2 (Bankr. P.R. Oct. 29, 2021).
Id. at *2.
Id. at *3.
Id. at *4.
Id. at *3.
Id. at *4.
Id. at *3.
Id. at *5.
Id.
Id. at *10.
Id. at *9.
Id.
Id. at *10.
Id. at *8.