Cory Kirchert & Adriaen Morse Of Arnall Golden Gregory: “Do not spend more than you can easily afford to lose”

Conduct due diligence on all purchases of substantial amounts and recognize that it is part of the purchase price. Do not spend more than you can easily afford to lose. Over the past few years, the Cryptocurrency industry has been making headlines nearly every week. Many people have gotten very wealthy investing or leading the cryptocurrency […]

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Conduct due diligence on all purchases of substantial amounts and recognize that it is part of the purchase price. Do not spend more than you can easily afford to lose.

Over the past few years, the Cryptocurrency industry has been making headlines nearly every week. Many people have gotten very wealthy investing or leading the cryptocurrency industry. At the same time, many people have lost a lot investing in the industry. In addition, more people have been scrutinizing the ecological impact of crypto mining, as well as its potential facilitation of illegal activity. What is being done and what can be done to address these concerns?

In this interview series called “5 Things You Need To Understand In Order To Successfully Invest In Cryptocurrency” we are talking to leaders in the cryptocurrency industry, as well as successful investors, who share insights from their experience about how to successfully invest in Cryptocurrency.

As a part of this series, I had the pleasure of interviewing Cory C. Kirchert and Adriaen M. Morse Jr., partners at the law firm Arnall Golden Gregory.

Cory is a securities attorney and certified public accountant who represents individuals in securities and alleged accounting fraud matters. He worked with the Securities and Exchange Commission’s Division of Enforcement for more than 20 years where he investigated and was responsible for bringing various financial fraud and other cases. Currently, Cory is working with his long-time friend and colleague, Adriaen M. Morse Jr., writing about and representing organizations in the digital asset and cryptocurrency area.

Adriaen is also a securities attorney at Arnall Golden Gregory and co-lead of its Securities Enforcement and Litigation practice group. He spent several years in the SEC’s Division of Enforcement before moving to the defense side in private law firms in Washington DC. He has also been a chief litigation counsel and chief ethics and compliance officer at a couple of large public companies. Adriaen and Cory have been developing AGG’s practice in the digital asset and cryptocurrency space.

Thank you so much for doing this with us! Before we dig in, our readers would like to get to know you a bit. Can you tell us a little about your backstory and how you grew up?

CORY: I grew up in the Saratoga County area of upstate New York, just south of the Adirondack Mountains and north of Albany. I attended high school in Clifton Park, New York, college in West Point and Albany, and law school at Albany Law School. Upon graduating from law school, I taught and did appellate work mostly in New York State Courts, after which I came to Northern Virginia to work in the SEC’s headquarters in Washington, D.C. Interested in finance and investment, I attended the University of Virginia for a masters in laws, obtained an M.S. in business administration, and taught accounting and business courses at UVA’s satellite campus in West Falls Church for several years.

ADRIAEN: I grew up in different countries around the world as the son of a U.S. Foreign Service Officer. With my family, I moved to the DC area in 10th grade. I attended the U.S. Naval Academy and then served in the U.S. Marine Corps for 10 years. I fought in the first Gulf War as part of an infantry battalion and later attended law school and became a Marine judge advocate. After leaving the Marine Corps, I joined the SEC and embarked on a career in the securities field. I’m married with two children: my daughter is in her third year of law school at USC and my son, who graduated from Cal-Berkeley last year, is currently working as a medical technician with plans to apply to medical school. My wife, Maha, is originally from Iraq and we maintain close ties with both our families who are scattered across Europe, the Middle East, and the United States.

Is there a particular book, film, or podcast that made a significant impact on you? Can you share a story or explain why it resonated with you so much?

CORY: The book, From Religion to Philosophy: A Study in the Origins of Western Speculation (1912), written by one of the Cambridge Ritualists, F. M. Cornford, had a very important impact on me. The book discusses how Greek religion, including mystery cults, gave rise to the invention of Greek philosophy around 600 BCE. After reading it, I came to realize that new doctrines, apologies of existing doctrines, and clashes of the two can disguise implicit ethical struggles against entrenched economic interests. These kinds of struggles get excised from the popular narrative.

ADRIAEN: I’m an avid reader. I hesitate to point to a single book as having made an impact because I feel that almost anything I read impacts my thinking in some way or provides a new bit of perspective or information. I will say that I’ve started to see a number of works, both fiction and nonfiction, that deal with the looming climate change catastrophe. I recently read New York 2140 by Kim Stanley Robinson, which is set in a swamped and flooded New York struggling in the aftermath of global warming. Robinson speaks there to the impending climate disaster that’s certain to worsen if we don’t address the myriad of ways in which we negatively impact the earth and our environment. Coupled with another recent book, Bill Gates’ How to Avoid a Climate Disaster: The Solutions We Have and the Breakthroughs We Need, these works help illustrate the fact that it is at this point unavoidable that humanity as a whole has to alter its behavior significantly or we will all suffer the consequences of inaction.

Is there a particular story that inspired you to pursue your particular career path? We’d love to hear it.

CORY: I originally wanted to study and teach political philosophy. The unfair outcome of a small landlord-tenant matter in which I was an unrepresented defendant, however, motivated me to attend law school. I believed that I could study philosophy after becoming an attorney, which I did.

ADRIAEN: I basically stumbled into securities law as a focus — when I was looking for an attorney position when I left the Marine Corps, I responded to an advertisement for a litigation associate position which matched my background. The ad had been placed in Virginia Lawyers’ Weekly, a paper publication, that didn’t even list a firm name, instructing applicants to mail their resume to a P.O. Box. When I was invited to interview, the partner with whom I met asked me, “So what makes you want to be a securities litigator?” Fortunately my response, “Oh, is that what the position is?” didn’t sink my chances. That job led directly to my decision to join the SEC and to securities and government investigations as a focus for my legal career.

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?

CORY: I clerked for one of the judges on the New York Court of Appeals, and among the many criminal (and civil) appeals that we had to review and analyze, was a very complex, inconsistent verdict / double jeopardy case that was, frankly, unresolvable. I gave the judge the pros and cons without a definite resolution, making him as irritated at me as he was at the case. My mistake: being indecisive when facing an impossible problem. The lesson: be decisive anyway.

ADRIAEN: As a young associate in private practice, the first filing for which I was wholly responsible was an application for a temporary restraining order on behalf of one of the firm’s long-standing clients. I pulled an all-nighter, drafting a complaint and a motion with a supporting memorandum of law and an affidavit. The next morning, all ready to head to the federal courthouse and file my papers, my legal assistant (who had printed everything out for me) asked, “Where’s your civil cover sheet?” I responded, in a bit of a daze, “What’s a civil cover sheet?” She chuckled and noted, “You don’t have a check for the filing fee either, do you?” I admitted that I didn’t. She smiled at me as she told me, “Oh honey, I’ll take care of you — just give me a minute.” Ten minutes later, with a complete package for filing, I was on my way to the courthouse. What I learned from this was that I didn’t know everything and that an experienced (and kind) legal assistant or paralegal can be worth their weight in gold.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?

CORY: While working for a law firm and living in a small apartment building in Albany, New York, I befriended a woman who clerked at my firm and later befriended her boyfriend who was a student at Albany Law School. He lived in the same apartment building as I did, and, at his request, I recommended him for the SEC’s honors program in Washington, D.C. He got the position, and encouraged me to apply, and so I did. I was offered positions in different divisions, and I opted for Enforcement.

ADRIAEN: When I left the SEC, I joined a practice group at a large law firm and began working with a partner who was a former Associate Director in the SEC’s Enforcement Division. He mentored me for a number of years, giving me a lot of responsibility and making sure that I had plenty of exposure to clients and other senior lawyers at our firm and at other firms. I owe much of what I know about how to deal with difficult issues and thorny legal problems from his wisdom and guidance over the years. I still speak with him when I have a particularly challenging situation to work through.

Are you working on any exciting new projects now? How do you think that will help people?

CORY: I just drafted a complaint destined for U.S. District Court on behalf of certain employees and stockholders of a company that was sold to a public company. Those who contributed to the company’s value received nothing for their time and ownership of the company’s securities. The complaint contains a theory of disclosure fraud that to my knowledge has never been used, yet raises no obvious defenses. I think and hope that it may provide a model for leveling the playing field for all who contribute to a company’s success.

ADRIAEN: We are both working on a series of articles that explain the SEC’s cryptocurrency suppression program. The SEC’s Enforcement Division claims that digital tokens, including cryptocurrency, are securities, and sues companies that produce such tokens under the theory that the sale or distribution of the digital tokens constitute an illegal offering of unregistered securities. On the other hand, the SEC’s Division of Corporation Finance, which authorizes securities registrations for issuers of securities, will not accept the registration of digital tokens as securities. This is because they are not, usually, securities under the relevant tests. Our articles help to explain what the SEC is doing, how its strategy works, why this program is beyond the SEC’s statutory authority, and hopefully will help companies in this new, emerging industry, avoid some of the pitfalls that have caused other companies to go out of business or, at least, to go out of this business.

Ok super. Thank you for all that. Let’s now shift to the main focus of our interview. The cryptocurrency industry seems extremely dynamic right now. What are the 3 things in particular that most excite you about the industry? If you can, please share a story or example for each.

1. CORY: Reducing regulatory intrusion into the industry. I was employed at the SEC when it began its cyber enforcement program. I was not employed in that unit or involved in any of the actions brought, but I was troubled by the expanded (and, I believe, distorted) meaning of “security” needed to bring digital tokens (other than those that are clearly securities) within the Agency’s jurisdiction. When I joined Arnall Golden Gregory, I began analyzing and writing about what I believe are conceptual flaws in the entire program.

2. ADRIAEN: The role of blockchain and potential new business models using digital tokens. The blockchain is an amazing, decentralized mechanism for storing transactional and other data. We are at the cusp of discovering new ways to apply the technology. For example, I think in the not-too-distant future tracking ownership of real estate (“grantor-grantee indexes”) will be entirely on blockchains. There are applications for decentralized finance that could permit new ways of funding creative and artistic projects directly from consumers and bypassing the usual middlemen. It’s all disruptive, all interesting, and all subject to the uncertainty inherent in any nascent industry.

3. CORY: The new lexicon. The vocabulary of the industry is developing and expanding as fast as the technology. My favorite: “tokenization.”

What are the 3 things that concern you about the industry? Can you explain? What can be done to address those concerns?

1. ADRIAEN: Regulatory intrusion. The government can extinguish the entire industry, and the response is to address the question: What is the objective of regulation? Is it to make the barrier to entry impossible or to safeguard the entrenched interests of existing stakeholders? Those would seem to be insufficient and improper reasons for crafting new regulations. Right now, there is a lot of noise around the concept of needing to regulate digital tokens and cryptocurrency. We are not so sure that regulation for regulation’s sake makes sense. Any regulation should be done in concert with, not in opposition to, the industry. Right now that’s not happening. The SEC, in particular, is running amok with its enforcement program and providing zero clarity to what is and isn’t allowed — at the moment, the position seems to be that it’s preferable to crush crypto under an inappropriate extension of the SEC’s authority rather than allow the industry to exist, mature, and grow up. Addressing this may require a combination of SEC court losses and congressional intervention, preferably in the form of careful new regulation crafted in cooperation with the industry.

2. CORY: Entrenched market interests. The industry would benefit, in my opinion, from contributing more to the narrative of what digital tokens are and are not, and what they do and do not do. These contributions should acknowledge the negative information about the industry, identify where and how it can be baseless, misstated, or overstated, and identify the misinformation’s likely sources. In addressing the sources, the new narrative should identify the entrenched economic interests, such as federal and national banks, that are threatened, why and how they are threatened, why and how they contribute to the narrative, and how they might and do use government to disseminate their message.

3. ADRIAEN: Fraud and self-policing. Methods may need to be devised to permit the industry to identify those who engage in fraud using these digital tokens and to police the conduct, even if the fraudulent conduct is truly tangential to the industry.

What are the “myths” that you would like to dispel about cryptocurrency? Can you explain what you mean?

CORY: I would like to dispel the myth that cryptocurrency and fraud are siblings, requiring a rush to regulation. Fraud is found in all business and non-business areas, and cryptocurrency is no more susceptible to it than other products. A new product, such as cryptocurrency, or a novel business model can threaten entrenched economic interests, and the way to suppress the threat is to yell “fraud” and agitate for regulation or, better, prohibition.

ADRIAEN: I agree with Cory. The fact is that fraud has been around since people have been around. One might ask why is it that FDIC insurance is needed for bank accounts? The answer is that the insurance provides some protection against banks going out of business (through bad bets on investments or fraud) and taking depositors’ funds with them — in point of fact, that may happen, but the insurance allows depositors to recover up to 250,000 dollars of their deposits. Whether via banks or otherwise, prior to the invention of bitcoin, con artists and fraudsters have frequently managed to defraud people of their fiat money. The layer of privacy that comes with cryptocurrency does not mean that more fraud is likely, nor does it mean that perpetrators of fraud can’t be caught; there are a number of ways to determine the identity of persons who transact cryptocurrency, and law enforcement tools are evolving to address this anyway.

How do you think cryptocurrency has the potential to help society in the future?

CORY: Cryptocurrency does not require intermediation by a financial organization. In the short term this reduces transaction costs, but in the long term, these organizations may have less power and impact in designing and implementing financial schemes like those that benefit a few at the expense of the many, an example being investment banking’s use of special purpose entities to bring about the Great Recession.

ADRIAEN: It might have the effect of democratizing finance in such a way that more worthwhile business opportunities and projects may be funded through direct, decentralized financing really only possible through the medium of crypto and digital assets.

Recently, more people have been scrutinizing the ecological impact of crypto mining. From your perspective, can you explain to our readers why the cryptocurrency industry is creating an environmental challenge?

CORY: My understanding is mining is a proof-of-work protocol that Bitcoin and Ethereum use to validate transactions. It allows for the total number of outstanding coin units to increase in number; for the money supply to be inflated, by enabling newly “mined” coins. These new coins incentivize and are rewarded to those who append transaction blocks in the blockchain, but this process of ensuring network safety consumes significant amounts of electricity.

ADRIAEN: The industry really needs to address the issue of power consumption as a consequence of data mining. Some figures indicate that bitcoin and associated mining operations by themselves require as much electricity as the country of Finland. By any measure, it’s a lot, and that needs to be cut back.

From your perspective what can be done to address or correct these concerns?

CORY: The proof-of-stake protocols seem to be a plausible alternative.

ADRIAEN: We’ve heard that Ethereum is in the process of adopting this method of validation. Rather than requiring massive amounts of computing power to run simultaneously, this protocol requires a validator to feed some crypto into the system (the “stake”) in order to be chosen at random to “forge” (rather than “mine”) the next block in the blockchain. So, it’s more efficient, in that you don’t have thousands of miners solving for a solution and then having their solution chosen at random, but only the validator chosen to forge the next block sets its processors to work.

CORY: Yes, to all of that, plus there are some additional steps and details to be worked out (such as whether the size of a stake should be deemphasized so as to avoid the problem of wealthy participants squeezing out others), but this seems to us to be the most promising way to address the energy consumption problem. A big challenge will be whether it will be possible to shift the biggest — by far — energy consumer in the crypto world, Bitcoin, to a proof-of-stake model.

Recently, more people have been scrutinizing cryptocurrency’s impact on illegal activity. From your perspective, can you explain to our readers why cryptocurrency, more than fiat currency, is seen as an attractive choice for criminals?

CORY: One benefit of cryptocurrencies is the absence of names attached to transactions; value can be transferred anonymously in large amounts throughout the world. Normal banking products, like checks and wire transfers, typically identify the transferor and transferee and the accounts from and into which the value is transferred.

ADRIAEN: You’re right that it’s perceived that way. We’re not sure this is the reality, however. Fraudsters have never hesitated to commit crimes when only fiat currency was available. But the issue with crypto is the perception that identifying those who profit from a fraud using crypto are harder to identify and track down.

From your perspective what can be done to address or correct these concerns?

ADRIAEN: Some are arguing for a surrender of anonymity requirement where participants in cryptocurrency transactions would be identified and knowable. We’re not sure exactly how this would work in practice, but this is an area the industry needs to help the government solve.

Ok, fantastic. Here is the main question of our interview. What are “The 5 Things You Need To Understand In Order To Successfully Invest In Cryptocurrency?” (Please share a story or example for each.)


1. Cryptocurrency price or value is determined by supply and demand only. Whereas the value of a security or derivative depends on the perceived value of the issuer or contract, cryptocurrency may not be dependent on or “tied” to anything else.

2. As with any money supply, it is important to know whether the money supply of a given cryptocurrency — the total number of units outstanding — is limited now or in the future, by how much it is limited, and what assurances exist that it is limited. Inflation reduces the value of each unit.

3. Apart from food and water, no object, such as an ingot of gold or silver, or representation of such object (such as former gold and silver certificates) has an “inherent value.” The value is determined by supply and demand, and the demand for many if not most things is not a function of need. Trading or investing in cryptocurrency is not a need.


4. Beware of products that promise big returns while doing great good for society.

5. Conduct due diligence on all purchases of substantial amounts and recognize that it is part of the purchase price. Do not spend more than you can easily afford to lose.

What are the most common mistakes you have seen people make when they enter the industry? What can be done to avoid that?

CORY: Not understanding the regulatory lay of the land. The SEC, CFTC, FINCEN, and DOJ, just to name a few potential regulators, all play a role in policing activity in this space. Understanding this and figuring out how to avoid immediately running afoul of them requires attention and coordination with lawyers experienced in dealing with these issues — too many companies want to get to creating the cool stuff before figuring out the boundaries.

Do you have a particular type of cryptocurrency that you are excited about? We’d love to hear why.

ADRIAEN: Not necessarily a specific cryptocurrency, but I am very interested in the development of NFTs (Non-Fungible Tokens), currently using the Ethereum blockchain, I believe. NFTs are just getting started and the number of applications of this new type of digital token are very interesting. As originally intended, NFTs can and probably some day will provide the primary method for representing ownership of almost any type of asset, physical or intangible. For example, you could use the NFT protocol as a replacement for the current grantor-grantee indexes kept physically in county courthouses to record property transfers, mortgages, liens, etc. More immediately, NFTs have become something of a fad among the rich and well-heeled as digital art works and things like the first tweet on Twitter, by Twitter’s CEO Jack Dorsey, have been tokenized and sold for very large sums to wealthy collectors/investors. Dorsey’s first tweet, on March 21, 2006 (which you can go on Twitter and read), was “just setting up my twttr.” It sold for 2.9 million dollars as an NFT.

CORY: Some artists and musicians are creating content as NFTs and selling these through various marketplaces, such as Rarible, OpenSea, and Enjin Marketplace. Then there are clips of plays available as NFT’s on the NBA’s Top Shot NFT venture — with more professional leagues getting in on this action. To purchase any NFT, a buyer needs to have a digital wallet with an accepted cryptocurrency with which to pay for the NFTs. There are some kinks and growing pains with all of this, but the future seems really exciting to me.

You are people of great influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. 🙂

CORY: Education that includes a powerful ethic of compassion.

ADRIAEN: I agree that education is the great leveler in terms of understanding the world and being able to perceive inequities and then work to resolve them. And since we live in a democracy, if our population were well-educated as Cory suggests it should be, we would then be able to ensure that our government works for everyone, not just the wealthy and powerful and well-connected among us. Everything flows from this.

We are very blessed that very prominent leaders read this column. Is there a person in the world, or in the US with whom you would like to have a private breakfast or lunch, and why? He or she might just see this if we tag them 🙂

CORY: Ian Morris. Because I’d love the chance to speak with him about the Archaic Age in Greece and the causes and consequences of change in that period, beginning around 800 BCE.

ADRIAEN: Trevor Noah; he’s had such an interesting life and career and I think he has an unusual and insightful take on a wide variety of subjects.

Thank you so much for these excellent stories and insights. We wish you continued success and good health!

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