JetBlue’s Acquisition of Spirit and the Anticompetitive Effects
BY: Alex Bonomo, RBFL Student Editor
The battle for Spirit began in February 2022, when Frontier made a cash-and-stock offer for Spirit, valued at $2.9 billion. Both companies’ boards of directors adopted their merger agreement on February 5, 2022. On February 7, 2022, Frontier and Spirit announced their agreement, leading to JetBlue’s announcement of its unsolicited, all-cash $3.6 billion offer to buy all of Spirit’s outstanding shares on March 29, 2022. JetBlue’s proposal valuing Spirit at $33 per share represented a 37% premium over Frontier’s offer. However, for the proposal to be considered “Superior” according to the terms of the Frontier merger agreement, “it must be ‘reasonably capable of being consummated . . . taking into account all financial, regulatory, legal and other aspects of such Acquisition Proposal.’”
The Spirit board of directors determined that JetBlue’s proposal was not Superior to Frontier’s on the basis that it wasn’t reasonably capable of being consummated. The Spirit board of directors remained headstrong that Frontier’s proposal “represented the best opportunity to maximize value for the Spirit stockholders.” Despite the attempted reassurance, the Spirit board’s dismissal of JetBlue’s bid was met with resistance, kicking off a months-long battle to obtain Spirit’s shareholders’ support.
The battle ended when Frontier recognized that it could not beat JetBlue’s offer. On July 27, 2022, Spirit terminated the Frontier merger agreement.  The bidding war led JetBlue to pay $1 billion more than Frontier’s initial offer.
The four largest carriers—American Airlines, United, Delta, and Southwest (collectively, the “Big Four”)—control more than 80% of the market. Given the current oligarchy over the airline industry, there has been strong opposition to the proposed JetBlue-Spirit merger, with law makers arguing that fewer airlines is the exact opposite of what the industry needs.  Regulatory approval will not come easy, and JetBlue will likely have to give up divestments to mitigate the anticompetitive effects of the deal. The Department of Justice (“DOJ”) will be vigilant in reviewing the proposal. Whether this combination can pressure the Big Four to lower airfares will be telling as to what’s to come for the airline industry.
 Frontier Groups Holdings Inc., Current Report (Form 8-K) (Feb. 7, 2022) https://www.sec.gov/Archives/edgar/data/1498710/000119312522029026/d285376d425.htm.
 Id. at 69.
 Press Release, Business Wire, JetBlue Submits Superior Proposal to Acquire Spirit, Positioning America’s Much-Loved Airline as the Most Compelling National Low-Fare Challenger to the ‘Big Four’ Airlines (Apr. 5, 2022), http://mediaroom.jetblue.com/investor-relations/press-releases/2022/04-05-2022-213908929
 Spirit Airlines, Inc., Proxy Statement (Form DEFMA14A) 61 (May 11, 2022) https://www.sec.gov/Archives/edgar/data/1498710/000119312522147242/d301774ddefm14a.htm#rom300541_26
 Id. at 71.
 Frontier Groups Holdings, Inc., The following press release is being filed in connection with the proposed business combination of Spirit Airlines, Inc. (“Spirit”) and Frontier Group Holdings, Inc. (“Frontier”): (Form 425) (June 27, 2022), https://www.sec.gov/Archives/edgar/data/1670076/000119312522182118/d348953d425.htm; Spirit Airlines, Investor Presentation (May 25, 2022), https://s24.q4cdn.com/507316502/files/doc_downloads/2022/05/Investor-Presentation-5.25.22.pdf.
 Dhierin Bechai, JetBlue And Spirit Airlines Write History, Frontier Airlines Stock Surges, Seeking Alpa (July 28, 2022, 1:45 PM), https://seekingalpha.com/article/4526954-jetblue-and-spirit-airlines-write-history-frontier-airlines-stock-surges.
 Dhierin Bechai, JetBlue And Spirit Airlines Write History, Frontier Airlines Stock Surges, Seeking Alpa (July 28, 2022, 1:45 PM), https://seekingalpha.com/article/4526954-jetblue-and-spirit-airlines-write-history-frontier-airlines-stock-surges.
 Chris Isidore, This is a great time to be an airline. It's the worst time to be a passenger, CNN Business, (Aug. 4, 2022), https://www.cnn.com/2022/08/04/business/airlines-gain-passengers-pain/index.html; Salas, Leading airlines in the U.S. by domestic market share 2021, Statista (July 27, 2022), https://www.statista.com/statistics/250577/domestic-market-share-of-leading-us-airlines/.
 Letter from Elizabeth Warren, U.S. State Senate, to the Honorable Pete Buttigieg, Secretary of U.S. Department of Transportation (“DOT”) 3 (Sep. 15, 2022) https://www.warren.senate.gov/imo/media/doc/2022.09.15%20Letter%20to%20DOT%20re%20merger%20authority%20and%20Spirit-JetBlue.pdf
Florida’s Climate-Fueled Insurance Crisis
BY: Jack Sanner, RBFL Editor
Americans are moving to Florida in droves. According to Redfin, Florida is home to five of the top ten U.S. metro areas with the highest rate of growth. Many of these new residents have flocked to sunny coastal cities like Miami and Fort Lauderdale, leading to skyrocketing real estate prices as demand for beachfront property outpaces supply. This influx of new homeowners is remarkable given that Florida faces some of the greatest climate-related risks in the country, with the future of many of its most popular destinations uncertain.
Climate change is already significantly impacting Florida homeowners, with floods and hurricanes increasingly causing significant damage in the state. Just last year, Hurricane Ian caused an estimated $65 billion in property damage alone. The fallout from these natural disasters has had a particularly pronounced impact on the state’s property insurance market. Property insurers paid over $100 billion in claims in 2022 – an increase of 50% over the average yearly payout in the 2010s – and fifteen property insurers have declared insolvency since 2020. Those property insurers who have remained in the market have been forced to increase rates, further fueling the rise in home prices.
Without a robust regulatory response, Florida’s insurance market will continue to suffer, and homeowners will be left with unaffordable, inadequate coverage. Florida’s legislature passed Senate Bill 2-A in December 2022 to address excessive insurance claim litigation, but true change will only come from addressing the root causes of the crisis. Those causes include excessive development in areas at high risk of damage from storms and flooding, inadequate flood risk disclosure laws, and a general failure to implement sound climate policy. Making matters worse, the National Flood Insurance Program (“NFIP”), which provides the majority of flood insurance policies in the U.S., is also in desperate need of reform. In an effort to keep flood insurance affordable, the NFIP has long received Treasury Department subsidies. These subsidies allow the Federal Emergency Management Agency (“FEMA”) to set NFIP rates as low as thirty-five percent of what they would be under standard risk assessment practices. As a result, the actual risk associated with owning a home in an area susceptible to frequent flooding is hidden from the homeowner. This encourages further development in high-risk locales, like coastal cities in Florida.
Recent updates to the NFIP’s methodology for determining flood risk provide some grounds for optimism, and the program is committed to ultimately eliminating policy subsidies for high-risk properties. Florida has a clear opportunity to take advantage of the momentum provided by these updates and enact change of its own. Senate Bill 2-A is likely only the first of many reforms in Florida’s future, as insolvencies and retreats from the property insurance market threaten the state’s homeowners. With climate change fueling more and more property damage, creating a healthier insurance market will likely become a top priority for Florida lawmakers.
Redfin, https://www.redfin.com/state/Florida/housing-market#overview (last visited Mar. 3, 2023).
Natalie Barefoot, et al., There Will Be Floods: Armoring the People of Florida To Make Informed Decisions on Flood Risk, 94 Bar J. 28, 28 (2020).
Akshat Rathi, Climate is Forcing the Most Risk-Averse Industry to Reinvent Itself, Bloomberg Green Newsletter, Jan. 24, 2023.
Siddhartha Jha, Closing the Insurance Coverage Gap in Risky Coastal Areas, PropertyCasualty360, Jan. 12, 2023, https://www.propertycasualty360.com/2023/01/12/closing-the-insurance-coverage-gap-in-risky-coastal-areas/.
Steve Dickson & Dan Reichl, Florida Lawmakers Pass Bill to Tame Soaring Insurance Costs, Bloomberg, December 14, 2022 (commenting on passage and goals of Florida Senate Bill 2-A).
Jennifer Wriggins, Flood Money: The Challenge of U.S. Flood Insurance Reform in a Warming World, 119 Penn St. L. Rev. 361 (2014).
Diane P. Horn, Cong. Rsch. Serv., R45999, National Flood Insurance Program: The Current Rating Structure and Risk Rating 2.0 1 (2022).
FTX Creditor Litigation Parallels to Enron/WorldCom
BY: Evan Paul, RBFL Editor
The collapse of cryptocurrency exchange FTX Trading Ltd. (“FTX”) due to its co-mingling of assets with Alameda Research LLC (“Alameda”) has resulted in a plethora of litigation by those seeking recovery of lost assets. On the more traditional end, this includes bankruptcy proceedings, civil actions by the Securities and Exchange Commission, the Commodities Futures Trading Commission, and creditor lawsuits against FTX executives individually. Additionally, a number of lawsuits have been filed by FTX creditors against third parties who are alleged to have perpetuated or facilitated the ongoing fraud at FTX. These include claims by crypto investors against Alameda, FTX’s two auditors, and a bank the two companies had a relationship with. These latter sorts of suits have been characterized as reminiscent of those after the collapses of Enron and WorldCom in that recovery is sought from third parties who enabled the fraud—there also auditors and banks. In the case of FTX, this group of alleged enablers also includes celebrity endorsers and corporate sponsors.
A handful of lawsuits in the Southern District of Florida have targeted not only FTX executives individually but also celebrities or corporate sponsors who endorsed the cryptocurrency exchange, including the Golden State Warriors and a number of professional athletes. These cases allege civil conspiracy as well as violations of the Florida Securities and Investor Protection Act and the Florida Deceptive and Unfair Trade Practices Act.
Two lawsuits in the Northern District of California name as defendants—in addition to FTX and Alameda executives individually, and in one case endorsers like the Golden State Warriors—FTX’s auditors, Armanino LLP (“Armanino”) and Prager Metis CPAs, LLC (“Prager Metis”). The plaintiffs allege that the auditors facilitated and covered up the ongoing fraud at FTX in the face of obvious red flags. These suits are similar to claims against Arthur Andersen LLP in the wake of the collapses of Enron and WorldCom. Arthur Andersen was the auditor for both companies and in both cases was alleged to have facilitated the underlying fraud. The accounting firm entered into substantial settlements with shareholder plaintiffs in both cases.
A final set of cases in the Southern District of California have also been filed against Silvergate Bank and Silvergate Capital Corporation (“Silvergate”), which are alleged to have aided and abetted FTX’s fraud by assisting in the commingling of funds with Alameda. These suits are reminiscent of the lawsuits against various banks involved in the Enron and WorldCom scandals, many of which ended up settling—in the case of Citigroup and J.P. Morgan, to the tune of billions of dollars.
While many of these cases against third parties are still in the early stages, the settlements by auditors and banks in the wake of the Enron and WorldCom scandals likely bode well for claims by FTX creditors against Armanino, Prager Metis, and Silvergate.
Justin Wise, FTX Customers Take Enron, WorldCom Path in Legal Fight for Cash, Bloomberg Law, January 6, 2023, https://news.bloomberglaw.com/business-and-practice/ftx-customers-take-enron-worldcom-path-in-legal-fight-for-cash.
Petitioner’s Motion for Transfer of Related Actions to the Southern District of Florida, ECF No. 1, at 2 n.1, In re: FTX Cryptocurrency Exchange Collapse Litigation, No. 3076 (J.P.M.L. Feb. 10, 2023).
Carolina Bolado, FTX Leader, Sports Stars Hit With Investor Suit Over Collapse, Law360, Nov. 16, 2022, https://www.law360.com/articles/1550002?scroll=1&related=1.
Complaint, ECF No. 1, v. Bankman-Fried et al., No. 3:22-cv-07444-JSC (N.D. Cal. Nov. 3, 2022).
Complaint, ECF No. 1, Gonzalez et al. v. Silvergate Bank et. al., No. 3:22-cv-1981 (S.D. Cal. Dec 14, 2022).
Scott Siamas, Primary Securities Fraud Liability for Secondary Actors: Revisiting Central Bank of Denver in the Wake of Enron, Worldcom, and Arthur Andersen, 37 C. Davis L. Rev. 895, 921 (2004).
Vaughn K. Reynolds, The Citigroup and J.P. Morgan Chase Enron Settlements: The Impact on the Financial Industry, 8 N.C. Banking Inst. 247 (2004), http://scholarship.law.unc.edu/ncbi/vol8/iss1/12.
Jeffrey A. Barrack, Auditor Responsibility Under the Federal Securities Laws: A Note from the Worldcom Securities Litigation, 29 J. Trial Advoc. 1 (2005)
Nicola White, FTX Collapse Puts Auditors in Crosshairs of Clients, Regulators, Bloomberg Tax, Nov. 30, 2022, https://news.bloombergtax.com/financial-accounting/ftx-collapse-puts-auditors-in-crosshairs-of-clients-regulator
Did the Bored Ape Yacht Club set sail? What happened to the NFT Craze?
BY: Emily West, RBFL Student Editor
In 2020 and 2021, non-fungible tokens (“NFTs”) took the internet and pop culture by storm; Yuga Labs launched the Bored Ape Yacht Club, Mike Winkelmann (aka “Beeple”) sold a single NFT digital artwork for $69M, and NBA Top Shot launched their NFT marketplace for basketball video clips. Early on, NFTs were known for being little more than digital art and social media profile pictures that had no other practical or tangible value. Today, however, it appears that the market expects much more from NFT creators, extending far beyond these digital art origins. Although the characteristic of digital art is still an essential element of the value of many NFTs on the market, they generally have adapted to include access to digital communities and have other value-driven assets.
Today, the Bored Ape Yacht Club is still a blue chip NFT and they continue to mint new iterations of their traditional ape profile picture. However, they are also a leader in developing these utility driven creations. For example, Bored Ape launched the recent Dookey Dash extravaganza where hopeful minters competed in an online game for weeks to compete for their minting order. The event brought in 25,000 individuals who competed for the mint.
The technology behind NFTs also has potential to reach far beyond its profile picture starting place. For example, NFTs can of course be one-of-a-kind art as well as in game experiences, a method to sell exclusive musical content, a way to buy/sell/trade virtual real estate, and can revolutionize the way that individuals store and verify personal information.
Before NFTs and the technology behind them can reach their full use and possibilities, there will likely need to be some sort of federal regulation. Given the vast range of ways NFTs and the blockchain can impact everyday life, such regulation could come from the SEC or another regulatory agency. There are certainly tax implications as well as privacy and security implications, family law and estate planning implications and countless others. Thus, regardless of the future regulations or developments in the technology, we can expect to continue hearing about NFTs and the blockchain into the future.
 Daryl Loh, From 0.08 To 769 ETH: Exploring The History And Rise Of The Bored Apes, Chain Debrief (March 12, 2022), https://chaindebrief.com/bored-ape-yacht-club-history-rise-of-bayc/.
 Jason Nelson, What Is a Blue Chip NFT, Decrypt (Nov 25, 2022), https://decrypt.co/resources/what-is-a-blue-chip-nft.
AI Revenue Management and Antitrust Implications
BY: Rob Stigile
Following the publication of a blockbuster report detailing the use of apartment rent pricing software by some of the nation’s largest multifamily landlords, dozens of plaintiffs have filed suit alleging that use of the software violates section of the Sherman Act. These lawsuits may serve as an invitation for judicial reconsideration of certain antitrust concepts to better align with issues emerging from the 21st Century economy.
Although several of the complaints draw comparisons to pricing software used by the airline industry in the 1990s, the current litigation perhaps better resembles more recent litigation involving the ride-sharing app developer Uber Technologies, Inc. The plaintiffs in the Uber action failed to demonstrate how the app’s services constituted an agreement between competitors that violated antitrust regulations – a challenge that may sink these new lawsuits alleging landlord price fixing.
The software at the heart of this litigation – originally called YieldStar and later rebranded as AI Revenue Management – was developed by property management service provider RealPage, Inc. As detailed in extensive reporting by ProPublica, YieldStar collects a raft of information from its clients detailing real-time apartment leasing activity. It then calculates suggested asking rents and other lease conditions for individual apartments at properties that use the YieldStar service. As a result, property managers have described how the YieldStar recommendations led them to aggressively push asking rents and absorb higher-than-usual vacancy rates, resulting in dramatic increases in revenue.
The plaintiffs in the pending lawsuits claim, in some form or another, that this scheme amounts to unlawful collusion between ostensible market competitors to fix prices and otherwise distort the market for rental apartments. For their part, RealPage maintains that YieldStar “uses aggregated market data from a variety of sources in a legally compliant manner.”
Before being hired as RealPage’s principal scientist in 2004 to develop YieldStar, Jeffrey Roper helped write the price-fixing software that landed several large airlines in trouble. This program allowed airlines to communicate with one another about potential changes to their airfares and service schedules, which may have led to billions in inflated ticket prices.
Despite having the same architect, it does not yet appear that the YieldStar platform facilitates this sort of competitor communication, a potential infirmity that might sink the RealPage litigation in the same way the Uber lawsuit was tossed. As with the Uber lawsuit, the RealPage plaintiffs essentially argue the defendants’ actions constitute a hub-and-spoke conspiracy, by which the landlords (the “spokes”) feed information to RealPage (the “hub”), which then fixes prices for all participants in the cartel. However, without direct communication between the spokes (the “rim” of the wheel), courts have declined to find any violation of antitrust laws.
As highlighted by the failed Uber lawsuit and these current complaints against RealPage, the 21st Century data and algorithm-driven service economy falls into an antitrust void that has been recent source of concern among legal scholars. Non-public market information can be accumulated by a third-party service provider and used to benefit participating competitors, who can insulate themselves by not directly coordinating business activity. Without new legislation, consumers will need to rely on the courts to reconsider their definition of collusive activity in this new economy.
Heather Vogell, Rent Going Up? One Company’s Algorithm Could Be Why, ProPublica (Oct. 15, 2022), https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent.
See Complaint, Alvarez et al. v. RealPage, Inc. et al., No. 22-cv-01617 (W.D. Wash. Nov. 10, 2022) for an example of the lawsuits pending against RealPage.
Organisation for Economic Co-operation and Development, Hub-and-Spoke Arrangements – Note by the United States 2 (2019) (describing hub-and-spoke collusion under United States antitrust law).
Cary Coglianese & Alicia Lai, Antitrust by Algorithm, 2 Stanford Computational Antitrust J., 2022, at 5 (describing how the Uber lawsuit failed for lack of a “rim” to the hub-and-spoke conspiracy).
“30 Under 30” Pipeline to Prison
BY: Katie Negron, RBFL Student Editor
The Forbes 30 Under 30 List has grown to showcase and introduce people making substantial differences and innovations in their given community. Broken into several categories including tech, finance, medical, entertainment, and more, the list has evolved to become a notable achievement for many younger entrepreneurs. Over the course of the list’s development, an interesting pattern has surfaced that shows the connection between alumni of the list and their propensity to commit white collar crimes.
Elizabeth Holmes, Sam Bankman-Fried, Carline Ellison, and Martin Shkreli are some of the most infamous examples of this pattern. Each is a young, successful entrepreneur who experienced radical success and inevitable downfall. Why is there this “pipeline to prison” phenomenon stemming from the list? Perhaps it is attributable to the founders’ personalities, the industries they occupy, or most likely, the nature of their large, private companies that provide ample opportunities for fraud. The list also showcases a different trend from years past where infamous white collar criminals tended to be older, white men. Many of the notable names today are younger entrepreneurs of different backgrounds.
When creating their businesses, many of the common issues began and grew in the early stage of the company while they were raising funds and building their brands. Given that companies are staying private longer, rather than aspiring to IPOs early on, that provides ample time and opportunity for many of the young and eager entrepreneurs to take advantage of the circumstances. The private nature means a minimal amount of oversight as compared to public companies.
Private equity and startups have grown together to create a peculiar relationship. There is an interesting distinction, or lack thereof, in this realm of business where it is difficult to determine lying versus selling an idea. To get investors and funding, many entrepreneurs sell their idea with the hopes of generating funding to make them come to fruition. The major question is, where is the line drawn between lying to investors about unfeasible goals and truly just needing funding for their idea to become fruitful for them and investors?
While it is never the intention to stop the flow of innovation and creation of companies, steps should be taken to try and deter this kind of fraud from taking place while companies are in this private stage. This phenomenon is on the radar of regulatory agencies as they try to find the best solutions going forward to avoid the next possible Elizabeth Holmes.
Lisa Myers, A Brief History of White-Collar Crime, Northwest Career College Blog (Oct. 5. 2020),
Parmida Enkeshafi, Universalizing Fraud, 18 Duke J. of Const. L. & Pub. Pol’y Sidebar 47 (2022).
Stonks.com (@Stonks_dot_com), Twitter (Nov. 29, 2022, 2:09 PM), https://twitter.com/Stonks_dot_com/status/1597669014246785024.
Timothy Smith, FTX: An Overview of the Exchange and Its Collapse, Investopedia (Jan. 5, 2023),
White - Collar Crime, Cornell Law School, https://www.law.cornell.edu/wex/white-collar_crime#:~:text=The%20Commerce%20Clause%20of%20the,to%20regulate%20white%2Dcollar%20crime (last visited Feb. 9, 2023).
The success of B Corps: Funding, Profitability, and Public Perception
BY: Aster Cheng, RBFL Editor
The priorities of consumers are changing––as consumers place more weight on the environmental and social impacts of companies in their decision making, more companies are choosing to become B Corporations (“B Corps”). B Corps are for-profit companies who have met a standard of ESG factors established by B Lab, a nonprofit organization.
To be considered a B Corp, companies must (1) pass an initial assessment to demonstrate “high social and environmental performance”; (2) alter its corporate governance structure to be accountable to all stakeholders, not merely shareholders; and (3) allow their performance evaluations to be publicly available on B Lab’s website. 
B Corps’ costs include the certification fee, annual membership fees, and administrative costs for B Lab requirements like preparing social impact reports. However, some B Corps view these costs to be necessary, citing the community as a benefit of being certified due to additional business opportunities and discounts through B Lab partnerships.
B Corps are still new and whether they are more profitable than companies who are not certified B Corps remains unanswered. However, trends have shown that consumers favor companies and investments within the ESG space. McKinsey researchers have found that companies in the top quartile for gender diversity are 15 percent more likely to perform above medians, and those that rank in the top quartile for racial and ethnic diversity are 35 percent more likely to perform above medians.
Consumers are also increasingly mindful of whether a company’s values align with their own before spending their money. Ben & Jerry’s, a subsidiary of a Certified B Corp (Unilever), claims their own company’s research shows that consumers are 2.5 times more loyal to companies that integrate values-driven action throughout their supply chains.
Corporations are increasingly taking on the persona of a responsible citizen, while performing practices that prioritize maximizing their profits. Several certified B Corps have been exposed for predatory practices within their supply chain, yet none of their certifications have been revoked. Nespresso, a certified B Corp despite being a subsidiary of Nestlé, has been involved in a string of human rights violations like wage theft and child labor. Another B Corp, Danone, dropped the contracts of 89 small organic farms across New York and New England. B Lab reviewed the situation and found that this was not in violation of B Corp standards.
While B Lab is the first to take on this level of a project, there are still obvious improvements needed. As the trend of conscious consumerism grows, companies have realized there is an upside to being a B Corp. It is up to B Lab to enforce and revise the standards they have set to ensure that companies are focused on their ethical mission rather than what the façade of prioritizing ethics can do for its profits. Without enforcement or regulation, these standards mean little and the B Corp label is nothing more than a greenwashed marketing ploy.
 B Corp, https://www.bcorporation.net/en-us/ (last visited Nov. 29, 2022) [https://perma.cc/7TXA-LWT3].
 Id. (explaining the goals and nature of B Corps).
B Lab, B Impact Assessment, https://www.bcorporation.net/en-us/programs-and-tools/b-impact-assessment (last visited Oct. 16, 2022) (displaying B Lab’s impact assessment which is filled out by all prospective B Corporations during initial certification and for all recertification every two years) [https://perma.cc/N4VV-6KRZ].
 Melanie Broome, “I Want to be a B Corp”: What This Means and What to Consider Before Stepping Into the World of Benefit Corporations, Davis Wright Tremaine LLP (Jul. 6, 2020), https://www.dwt.com/blogs/startup-law-blog/2020/07/i-want-to-be-a-b-corp. (“There are additional costs and (potentially significant) administrative burdens associated with PBCs and Certified B Corps. PBCs and Certified B Corps have to prepare social purpose reports. This will likely take time to create, thereby adding costs to the company’s bottom line. Additionally, Certified B Corps are required to pay annual membership fees based on the B Corp’s annual sales.”) [https://perma.cc/W6AD-87ZL].
 See Alex Buerkle, Kylee Chang, and Max Storto, Just Good Business: An Investor’s Guide to B Corp, Yale Ctr. for Bus. and the Env’t, (Sept. 14, 2022) https://cbey.yale.edu/sites/default/files/Just%20Good%20Business_An%20Investor%27s%20Guide%20to%20B%20Corps_March%202018.pdf (“Many Certified B Corps cite the B Corp community as a primary benefit of becoming certified.”).
 See, e.g., Press Release, Brewbound, New Belgium Brewing to Release Second Ben & Jerry’s Ice Cream-Inspired Beer, (Jun. 20, 2016), https://www.brewbound.com/news/new-belgium-brewing-release-second-ben-jerrys-ice-cream-inspired-beer/ [https://perma.cc/2BB5-RD4W] (elaborating on the release of new ice cream flavors); see also Press Release, Newswise, B-Corporations Unite: Green Home Store New Living Partners with Savvy Rest Organic, (Oct. 30, 2013), https://www.newswise.com/articles/b-corporations-unite [https://perma.cc/F9RV-4WN9] (explaining new partnership between Green Home Store and Savvy Rest Organic, as well as its implications for B Corps).
 See Buerkle et al., supra note 9, at 33 (“In addition, Certified B Corps gain access to discounts through B Lab-cultivated partnerships. These savings can support cash-strapped entrepreneurs and often exceed B Corp licensing fees in value. For example, Salesforce offers up to 20 percent off its Client Relationship Manager (CRM), Intuit offers free Quickbooks licenses, and Inspire Commerce and NetSuite offer discounts on their credit card processing and enterprise software, respectively.”).
 See id. at 22 (elaborating on current feelings in public and legal society about trajectory of B Corps).
 See Hale, infra note 30 (displaying growth in ESG investments).
 Vivian Hunt, Dennis Layton, and Sara Prince, Why Diversity Matters, McKinsey & Company (Jan. 2015), https://www.mckinsey.com/business-functions/organization/our-insights/why-diversity-matters (“Companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians. Companies in the top quartile for gender diversity are 15 percent more likely to have financial returns above their respective national industry medians”).
 Tara Gallagher, Letting Your Mission Drive Success: Lessons from Ben & Jerry’s and Seventh Generation, Sustainable Brands (2014), https://sustainablebrands.com/read/organizational-change/letting-your-mission-drive-success-lessons-from-ben-jerry-s-and-seventh-generation (“In fact, consumers that are aware of Ben & Jerry’s values are 2.5 times more loyal. To account for this, Miller states: “Ben & Jerry’s is authentic. Standing for something in a world where people so often stand for nothing is incredibly powerful.”) [https://perma.cc/2V8M-4Q8F].
 Suntae Kim, Matthew J. Karlesky, Christopher G. Myers, and Todd Schifeling, Why Companies Are Becoming B Corporations, Harvard Business Review (Jun. 17, 2016), https://hbr.org/2016/06/why-companies-are-becoming-b-corporations [https://perma.cc/R745-89VG] (proclaiming that corporations are starting to change their attitude and public image, elaborating on the effects of this change).
 See Daniel Camargos, Labor inspectors fine leader of cooperative that supplies coffee to Nespresso and Starbucks, Repórter Brasil, (Sep. 9, 2021), https://reporterbrasil.org.br/2021/09/labour-inspectors-fine-leader-of-cooperative-that-supplies-coffee-to-nespresso-and-starbucks/ (explaining the issues and human rights violations found with the sourcing of coffee to Starbuck and Nespresso); see also Jamie Doward, Children as young as eight picked coffee beans on farms supplying Starbucks, The Guardian, (Mar. 1, 2020), https://www.theguardian.com/business/2020/mar/01/children-work-for-pittance-to-pick-coffee-beans-used-by-starbucks-and-nespresso. [https://perma.cc/5FK5-W5D6] (elaborating on the potential human rights violations undertaken by coffee producers who also happen to be B Corps).
 Lisa Held, Losing Danone Contracts Compounds the Dairy Crisis for Small Farms in the Northeast, Civil Eats, (Nov. 8, 2021), https://civileats.com/2021/11/08/losing-danone-contract-compounds-dairy-crisis-small-farms-northeast/. [https://perma.cc/Y2D8-V933] (explaining the impact of Danone’s decision to cut ties with many dairy farmers).
 Max Goldberg, With Danone Cutting the Contracts of 89 Small Organic Dairy Farmers, B Corp has Made a Decisions About the Company’s Certification Status, (Oct 27, 2021), https://organicinsider.com/newsletter/b-corp-danone-certification-status-cut-contracts-89-organic-dairy-farmers-new-york-new-england-your-weekly-organic-insider/. [https://perma.cc/WN42-59MU] (elaborating on the decision-making process of B lab and their application of that process to the issue of dairy farmers cut off by Danone).
The Use of Cryptocurrency to evade OFAC Sanctions
By: Ryan Connolly, RBFL Student Editor
On August 8, 2022, OFAC sanctioned the cryptocurrency mixer Tornado Cash. OFAC alleges that Tornado Cash has been used, through its transaction anonymizing services, to launder over $7 billion worth of cryptocurrency since 2019. Among the most notable launderers was Lazarus Group, a North Korean state-sponsored hacking group who had recently committed the largest known virtual currency heist to date. As OFAC steps up its sanctions regime against Russia, Treasury officials are keenly focused on cryptocurrency mixers and how they might be used to evade sanctions and support the Russian war effort. At the same time, cryptocurrency advocates, such as Coinbase, argue that the sanctioning of mixers like Tornado Cash is equivalent to banning highways because criminals might use them to flee law enforcement.
Recently, OFAC’s sanctioning of individuals and entities that utilize cryptocurrency to launder money has been blessed by the judiciary. In affirming the DOJ’s move to prosecute an individual accused of using cryptocurrency to evade OFAC sanctions, Magistrate Judge for the District of Columbia, Zia Faruqui, bluntly stated: “Issue One: virtual currency is untraceable? WRONG” and “Issue Two: sanctions do not apply to virtual currency? WRONG.” Thus, OFAC appears to have the go ahead to continue their crackdown on the usage of cryptocurrency to evade sanctions.
As of March 30, 2023, there are over 23,000 different cryptocurrencies in circulation. With established financial institutions like JPMorgan Chase providing their customers access to cryptocurrency funds, and cryptocurrency exchange Coinbase boasting a $15 billion dollar market cap as of March 2023, there is clearly market demand for licit cryptocurrency services.
With no outright ban on cryptocurrency around the corner, OFAC has opted to provide guidance for entities that transact in cryptocurrency or provide crypto related services. Although there is strict liability for the violation of OFAC sanctions, penalties may be reduced based on mitigating factors, such as adherence to OFAC recommendations.
OFAC published guidance in October of 2021 that focuses on five key principles: (1) management commitment, (2) risk assessment, (3) internal controls, (4) testing and auditing, and (5) training. Safety measures that go to these principles include the use of geolocation tools and the implementation of know-your-customer procedures to prevent facilitating transactions involving sanctioned countries or persons. Entities or individuals that touch cryptocurrency would be wise to ensure they have a compliance program in place that adequately addresses cryptocurrency specific risks, such as its use for sanctions evasion. As such, an entity’s investment in their compliance program should scale proportionately with the riskiness of the activities they engage in, with cryptocurrency mixing certainly qualifying as a high-risk activity. With neither OFAC sanctions nor cryptocurrency likely to diminish in importance, organizations who touch cryptocurrency should prioritize beefing up their compliance programs such that they meet OFAC’s recommendations, lest they incur civil and or criminal penalties for violating sanctions.
Treas. Dep’t, U.S. Treasury Sanctions Notorious Virtual Currency Mixer Tornado Cash, Treas. Dep’t (Aug. 8, 2022), https://home.treasury.gov/news/press-releases/jy0916 [https://perma.cc/JRK5-96D5].
Treas. Dep’t, U.S. Treasury Issues First-Ever Sanctions on a Virtual Currency Mixer, Targets DPRK Cyber Threats, Treas. Dep’t (May 6, 2022), https://home.treasury.gov/news/press-releases/jy0768 [https://perma.cc/BDY5-NJ2K].
Kate Rooney, Coinbase bankrolls lawsuit against Treasury Department following Tornado Cash sanctions, CNBC, https://www.cnbc.com/2022/09/08/coinbase-bankrolls-suit-against-treasury-department-following-tornado-cash-sanctions.html (Sep. 8, 2022) [https://perma.cc/EFE4-UZFP].
Treas. Dep’t, BASIC INFORMATION ON OFAC AND SANCTIONS, https://home.treasury.gov/policy-issues/financial-sanctions/faqs/topic/1501, (Sep. 10, 2002) [https://perma.cc/8CQH-NY25].
Sohini Podder et al., JPMorgan to give all wealth clients access to crypto funds - Business Insider, Reuters (July 22, 2022), https://www.reuters.com/business/finance/jpmorgan-give-all-wealth-clients-access-crypto-funds-business-insider-2021-07-22/#:~:text=July%2022%20(Reuters)%20%2D%20JPMorgan,reported%20on%20Thursday%2C%20citing%20sources [https://perma.cc/7N2P-3GQN].
In re: Criminal Complaint, No. 22-mj-0067, 2022 WL 1573361 (D.D.C. May 12, 2022).
OFAC, Sanctions Compliance Guidance for Virtual Currency, OFAC, https://home.treasury.gov/system/files/126/virtual_currency_guidance_brochure.pdf, (Oct. 2021) [https://perma.cc/Z7BU-6HTY].
DAOs: The Future of Business Organization?
BY: Marina Phillips, RBFL Editor
Decentralized Autonomous Organizations (“DAOs”) are becoming an increasingly popular means of organizing people from around the world for a common purpose. For those who are unfamiliar with the term, DAOs are essentially organizations or entities formed in blockchain and can be formed for both for-profit or not-for-profit purposes. DAOs are governed by smart contracts which are self-executing codes written into the blockchain where the DAO is formed and which represent the operating agreement between the members of the DAO. Once the members agree on how the DAO will operate, the smart contract executes the governance actions coded within it automatically. One reason DAOs have increased exponentially in popularity is the decentralized nature of the entity. This essentially contributes to more transparency and collaboration among members. Without a central governing group like those in traditional organizational entities, the members collectively make governance decisions so that they all can benefit as a group and individually. However, DAOs come with many questions about liability and who bears the responsibility should something go wrong, taxes, and regulations.
As DAOs become a go-to organizational structure for many, legislatures and regulatory agencies around the world are scrambling to figure out how to bring legal certainty to DAOs and their members. Outside of the U.S., countries like Switzerland, the Cayman Islands, Bulgaria, and Malta are passing their own DAO-friendly legislation that encourages DAOs to form in their respective countries. Malta stands out in particular due to its unique approach in creating a new type of business entity called a “Technology Arrangement” that operates similarly to a limited company in Malta. Additionally, Malta has created a new agency, the Digital Innovation Authority, to specifically regulate blockchain businesses. This novel approach does not try to fit DAOs into existing legal frameworks but instead considers the unique features of DAOs that don’t necessarily correlate with traditional entities. By creating a new regulatory agency to focus exclusively on blockchain businesses and organizations, Malta is setting itself up to better adjust to new innovations and pass regulations that fit not only DAOs but any new blockchain businesses that may evolve in the future.
In the U.S., Wyoming became the first state to pass legislation designating legal entity status to DAOs by creating a DAO LLC statute. Many states are following in Wyoming’s footsteps and passing statutes of their own that would give LLC status to DAOs. However, by trying to fit a DAO into an LLC framework, states are ignoring the unique features of DAOs like decentralization and anonymity of members that give rise to issues not contemplated by traditional statutes. Instead, states should focus on creating task forces, departments, or agencies that specifically focus on blockchain organizations and can suggest ways to tweak the existing entity structures to better fit the make-up of a DAO while also bringing it within a legal framework where states can better protect the members of DAOs from liability. In giving DAOs a way to form as a legal entity and creating regulations that are DAO-friendly, legislatures can establish hubs for technological innovation within their states that will bolster that state’s economy overall.
David Gogel, Bianca Kremer, Aiden Slavin & Kevin Werbach, Decentralized Autonomous Organizations: Beyond the Hype 7 (World Econ. F. 2022).
Geoffrey See et al., Are ‘Decentralized Autonomous Organizations’ the business structure of the future?, World Econ. F. (June 23, 2022), https://www.weforum.org/agenda/2022/06/are-dao-the-business-structures-of-the-future/.
A.J. Zottola, Channing D. Gatewood and Sydney M. West, Venable LLP, Smart Contracts, LexisNexis (Oct. 3, 2022), https://plus.lexis.com/document/?pdmfid=1530671&crid=664800f4-3052-4344-b355-d4278121383b&pddocfullpath=%2Fshared%2Fdocument%2Fanalytical-materials%2Furn%3AcontentItem%3A6691-6BB1-JF1Y-B49C-00000-00&pdworkfolderid=dac7bddd-8318-42d4-b95f-990fbdec4239&pdopendocfromfolder=true&prid=2cb69f13-b06e-4c57-85ed-6760bc758a24&ecomp=mfgg&earg=dac7bddd-8318-42d4-b95f-990fbdec4239.
Miles Jennings & David Kerr, A Legal Framework for Decentralized Autonomous Organizations, Andreessen Horowitz DAO 1, 12-13 (2022), https://a16zcrypto.com/wp-content/uploads/2022/06/dao-legal-framework-part-1.pdf.
Marlene Ronstedt & Andre Eggert, Among Blockchain-Friendly Jurisdictions, Malta Stands Out, CoinDesk (July 4, 2018, 4:00 AM, updated Sept. 13, 2021, 4:08 AM), https://www.coindesk.com/markets/2018/07/04/among-blockchain-friendly-jurisdictions-malta-stands-out/.
Michael Tabone et al., DAO: The Evolution of Organization, CoIntelegraph Research 1, 16 (2022), https://research.cointelegraph.com/reports/detail/dao-the-evolution-of-organization.
Critical Liftoff Failure: NewSpace’s Mission Derailed
BY: Will Jagiello, RBFL Student Editor
Even with the greatest of efforts, progress towards solving a complex problem may be inexorably damaged by events completely out of the most skilled actor’s control. The budding NewSpace sector that took the market by storm in 2020 (and continued astronomically through 2021) learned this lesson when Silicon Valley Bank (“SVB”) collapsed. While the ensuing 2023 Bank Run had widespread consequences across myriad industries, especially those primarily funded by Venture Capital (“VC”) investments, precariously-positioned NewSpace startups and SVB were intimately linked.
SVB’s first forays into aerospace investments were with launch and satellite startups, and over time, they became hailed as “the [NewSpace] industry’s ultimate market leader and growth champion.” As such, they were uniquely positioned to provide lines of credit to the emerging leaders of the pandemic’s valuation craze – and were willing to provide such loans on non-standard, startup-friendly terms. Essentially, SVB served as an alternative to the traditional VCs that financed nearly the entire sector. Thus, NewSpace’s largest industry players (and critically, their cash-flows) were reliant upon SVB’s unique business practices.
Unfortunately, the FDIC’s depositor reassurances are too little, too late for these high-flying startups, which have been struggling to maintain a foothold since the markets began to cool. Space ventures of any sort involve significant initial and long-term expenditures, extensive timelines, and a much lower chance of success than other scientific industries. The entire industry’s investment interest is highly speculative, driven by decades-out projections and collapsed SPAC listings. When economic woes cause these investors to prefer safer investments or hold cash back for the moment, NewSpace researchers are among the first to feel the pullback. For instance, Astra Space went public at a whopping $2.1 billion valuation in 2021 – only to find itself now worth barely over $125 million and facing imminent NASDAQ de-listing. Plagued by runaway cash burn, as well as the slower-than-projected scientific progress that is so inherent in all attempted space ventures, even the most-hyped prospects were barely staying afloat prior to SVB’s collapse.
Today, as most businesses flee for the safety of megabanks and VCs opt to sit on their war chests, NewSpace leaders find themselves without their most reliable go-to liquidity source. The prevailing megabanks are largely unwilling to extend the short-term types of credit that high-burn-rate startups require to conduct primary research activities, so without an existing revenue stream or cash coffers, these promising companies will be unable to progress at all. If the players wish to survive and hold out for more advantageous future conditions, they must seek alternative courses to both financing and their business models to ensure survival through suboptimal conditions. Near-term growth opportunities were already dubious because of general market conditions, but this latest economic comet has left an impact crater the size of the NewSpace industry, and revitalizing small, private participation in the sector will take reforms of atmospheric proportion.
 NewSpace refers to the emergence of the private space industry. NewSpace ventures are becoming more common, spanning areas such as private launch companies, small satellite constellations, or sub-orbital tourism. See SpaceTec Partners, NewSpace, https://www.spacetec.partners/markets/newspace/#:~:text=NewSpace%20refers%20to%20the%20emergence,traditional%20space%20industry%20supply%20chain.
 Anne-Wainscott Sargent, Silicon Valley Bank: The Ultimate Advocate of NewSpace Investment, Via Satellite (June 27, 2019) https://www.satellitetoday.com/innovation/2019/06/27/silicon-valley-bank-the-ultimate-advocate-of-newspace-investment/.
 Mateo Anelli, The Best and Worst Funds and Trusts in August, Trustnet.com (Sep. 1, 2022) https://www.trustnet.com/news/13324689/the-best-and-worst-funds-and-trusts-in-august (showcasing Seraphim’s 24.6% quarterly loss as the third worst of any individual trust in the UK).
 See generally Catherine Amirfar et al., Funding the New Space Race: Risks and Opportunities for Sponsors and Investors, DEBEVOISE & PLIMPTON LLP (May 2022).
 Joey Roulette, Rocket maker Astra seeks more time to avert Nasdaq delisting, Reuters (March 17, 2023) https://www.reuters.com/markets/us/rocket-maker-astra-seeks-more-time-avert-nasdaq-delisting-2023-03-17/.