Experts in US securities laws say that some of Barry Silbert’s many tweets on ETC prices, as well as a recent “pro tip” he shared with a shorter, may raise red flags for market regulators in charge of preventing price manipulation.
Barry Silbert or Barry Shillbert
The continuing efforts by Barry Silbert to promote Ethereum Classic (ETC) are again coming into the public focus. We first reported about his problematic behavior and its potential regulatory implications over a year ago. Now a couple of American securities lawyers tell Reuters that they believe Silbert’s ETC cheerleading on social media may soon capture the watchful eyes of U.S. regulators.
“It is risky,” said Trace Schmeltz, a partner at the Barnes & Thornburg law firm. “I think if I were advising Mr. Silbert, I would suggest that he is better off as a cryptocurrency expert at large rather than making specific comments on one particular cryptocurrency in which he has a heavy concentration of holdings.”
Robert Long, a former senior attorney with the Securities and Exchange Commission (SEC) and currently a partner at the law firm Bell Nunnally, said that the U.S. Commodity Futures Trading Commission (CFTC) considers cryptocurrencies as commodities and can “police the virtual currency markets for manipulation and other misconduct.” Long, a former federal prosecutor himself, added that the commission “could take an interest given the nature and timing of some of the statements.”
Besides Twitter, Silbert recently started using another social media platform, Discord. Publicly talking with a follower about attending a DCG ethereum classic event in Hong Kong, Silbert wrote: “pro tip: close out your ETC short before the Summit…”. This exchange specifically might be considered a form of trading advice.
Regarding Silbert’s Discord message Schmeltz commented: “If you have a fund that is issuing a security and the value of the security rises and falls with the price of a cryptocurrency and you are telling people to close their shorts in that cryptocurrency, that is a problem.” He also warned it could be “market manipulation.”
Silbert is CEO of Grayscale, a subsidiary of Digital Currency Group (DCG). In April the company launched the Ethereum Classic Investment Trust whose “shares are the first securities solely invested in and deriving value from the price of” ethereum classic. It isn’t registered with the SEC, in accordance with a regulatory exemption, but is still subject to US securities laws.