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Former banker slapped on the wrist for crypto mining, while still employed


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UK FCA fines Henderson Investment Funds Limited £1,867,900

The regulatory wheels of justice may move slowly, but it appears that the long arm of the law of the self-regulatory body, the Financial Industry Regulatory Authority (FINRA), got their man. Rules are rules, and Kyung Soo Kim, an ex-employee of Bank of America-owned broker-dealer Merrill Lynch, Pierce, Fenner & Smith Inc., recently met his fate, a small fine and a brief FINRA suspension, for trying to “moonlight” his own crypto mining operation, while still under the employ of BofA.

In a day and age where the SEC is clamping down on Initial Coin Offerings, assessing enormous fines and refunding millions to “duped” investors, FINRA has found it necessary to enforce one of its longstanding rules for its members: “No Moonlighting [Including Bitcoin Mining] under Any Circumstances”. The rules actually “prohibit members from serving as an employee, independent contractor, sole proprietor, officer, director or partner of another person outside of their employer”. The rule has to do with ethical issues of advising clients in an unbiased fashion without outside influences or the potential of remuneration outside of your direct employment relationship.

The ethical issues do not stop with just crossing the above line. There is more:

Members are prohibited from being compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of the relationship’ with their employer.

For whatever reason, Merrill Lynch found it necessary to terminate Kim in 2018, after he had already set up his proprietary “S Corporation”, whose sole purpose was to mine Bitcoin and other cryptocurrencies. What was the penalty for such transgressions? As reported:

Kim will serve a one-month suspension that will see him barred from associating with any FINRA member firms during that period. He will also pay a fine amounting to $5,000.

Since Kim did not start his sole venture until the latter part of 2017, it seems that Crypto Winter may have already meted out its harsh consequences for his ill-timed excursion into Crypto-Land. Why he would choose to join the bubble-mania of the time, when he was well trained in the financial analytical arts, is a question that remains unanswered in this storyline, but, at the same time, the mere “slap-on-the-wrist” style of punishment seems almost nonsensical and the fact that FINRA chose to make a public spectacle of this case is even more mind blowing.

This case, however, reflects how inconsistently the rule of law is being administered about the globe. We are in uncharted territory, where regulatory bodies are caught between varying degrees of absolute repulsion to moderated accommodation, when it comes to cases in the cryptocurrency arena. There was a case in Australia where an unfortunate soul was caught using government computers to mine cryptos, a more visible approach than the more heinous version of hijacking a network of computers to perform the same task. He was only able to mine $9,000 worth of crypto tokens in his questionable activity, but he was given a 10-year prison sentence, just the same.

Perhaps, Qiuping Tang, a 61-year-old woman who stole “electricity with a view of mining bitcoin”, was lucky enough to find a more accommodating judge, when she had her day in court. The local utility company filed a lawsuit to punish this poor woman, who was given a $1,500 fine and told to serve out a four-month sentence behind bars.

Criminal acts are often said to be the extension of the sort of behavior that is often considered perfectly respectable in legitimate business, but in our early days of crypto law enforcement, justice can mean many different things, whether consistent or otherwise, and several regulatory and government officials across the globe have never considered the Crypto-sphere as being a “legitimate business”. Proceed accordingly.

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Former banker slapped on the wrist for crypto mining, while still employed

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