Sullivan & Cromwell’s Enforcement Practice Leans Into Cryptocurrency Boom

As corporate criminal enforcement has picked up speed under the Biden administration, government lawyers have been in high demand for the past few years.

Just look at the U.S. Securities and Exchange Commission, which continues to see lawyers leaving for private practice.

The movement “could simply be a product of demand,” said one Washington-based legal recruiter, speaking on the condition of anonymity because the recruiter works closely with government lawyers looking to move into private practice.

“SEC lawyers are hot right now,” the recruiter said.

Sullivan & Cromwell is one firm that has prioritized government hires in recent years, and now that focus is paying dividends, according to several firm partners.

In 2020, Steven Peikin, former co-director of enforcement at the SEC, rejoined the firm as head of its newly created securities and commodities investigations and enforcement practice.

Peikin’s arrival was followed by James ‘Jamie’ McDonald, the enforcement director of the Commodity Futures Trading Commission, and returning partner Jay Clayton, the chairman of the SEC between May 2017 and December 2020.

Steve Peikin, former co-director of the U.S. Securities and Exchange Commission (SEC), now with Sullivan & Cromwell. Courtesy photo

More recently, the firm hired Goldman Sachs’ general counsel and management committee member Karen Patton Seymour, who brings a focus in criminal defense investigations.

Other firms that have tapped the SEC’s bench lately include Morgan, Lewis & Bockius, Debevoise & Plimpton, Willkie Farr & Gallagher, Steptoe & Johnson, and Skadden, Arps, Slate, Meagher & Flom, Dechert, and Arnold & Porter Kaye Scholer, among others.

While the recent government experience at Sullivan & Cromwell is a selling point, the plan to create leading enforcement and criminal defense practices has been years in the making.

Peikin, a partner at the firm between 2004 and 2017, said he was drawn to the firm in the early 2000s because of the growth opportunity made possible by the firm’s client base and resources and a coinciding explosion in corporate criminal enforcement.

Now, with the change in administration last year, there has been a renewed focus on white-collar prosecution and a surge of attention directed at cryptocurrency companies that’s led the firm to win more work, according to Peikin.

The Intersection of Finance and Tech

As the financial sector collides with technology, Sullivan & Cromwell has won work from traditional clients such as Goldman Sachs and Wells Fargo as well as technology companies such as BlockFi.

In 2021, the firm was retained by digital asset management firm BlockFi following the arrival of its general counsel Jonathan Mayers and prior to inquiries from the SEC and state regulators.

Mayers was drawn to BlockFi because of its commitment to regulatory involvement and propriety behavior. But that was a tall order because “the regulatory regime for digital assets was not clearly defined,” Mayers said. “It was in that world that we engaged Sullivan & Cromwell.”

That’s a common challenge among technology companies today, according to Peikin. The regulatory landscape is inescapable but also lacks clarity.

In the case of BlockFi, the firm was already working on regulatory compliance and when it started fielding inquiries, “We recognized and had been open to saying there was regulatory ambiguity. We said, ‘If this was the path to get us to clarity, then this is the path we’ll take,’” Mayers said.

BlockFi settled with the SEC and 32 state regulators regarding its interest-bearing crypto product in February for a combined $100 million in penalty and other fines, and announced its intent to register a new interest-bearing crypto account product.

Mayers said the firm chose Sullivan & Cromwell because of its roster of recent enforcement lawyers and their ability to work well on an interpersonal basis, as well as its deep bench across a wide variety of areas.

“There was an incredible level of trust built over time in each other’s integrity,” Mayers said. “When we wanted to go a certain direction and they felt strongly that it was a bad idea, they felt comfortable telling us and we felt comfortable to hear it knowing they had our best outcome in mind.”

He continued, “When they made a representation to the SEC on our behalf, there were two sets of knowledge. They trusted us with the representation we made to them, and the SEC knew that when Sullivan & Cromwell responded to a question, it was the absolute and complete answer.”

The Interdisciplinary Advantage 

Part of the reason Sullivan & Cromwell has made inroads in the crypto sector is because of its broad expertise across regulatory agencies and subject matter and its deep history in financial regulation, according to partners.

“The interdisciplinary approach is a differentiator,” Peikin said. “That has always been the case for every pitch, we’ve had people from the corporate and regulatory side alongside.”

Sharon Cohen Levin, who joined Sullivan & Cromwell from Wilmer Cutler Pickering Hale and Dorr in 2019, said it wasn’t until she arrived at the firm that she realized the value of being supported by the firm’s white-collar (or criminal defense and investigations) group.

Sharon Cohen Levin, partner with Sullivan & Cromwell. Courtesy photo.

The firm was an obvious choice for Levin’s area of expertise — anti-money laundering and sanctions violations — but the white-collar group provided additional support because the underlying financial regulations are the same even if being applied to technology companies in a new context, she said.

Levin, the former leader of the Money Laundering and Asset Forfeiture Unit in the U.S. Attorney’s Office for the Southern District of New York, added that AML expertise is crucial for cryptocurrency companies because even the ones that escape securities matters will likely face money transmitter regulation and be subject to certain licensing requirements.

“There promises to be a heightened enforcement landscape in the AML space … particularly in the money transmitter space and for companies that aren’t necessarily banks,” Cohen said.

Nicole Friedlander, another partner in the criminal defense and investigations practice and a former Southern District of New York prosecutor, agreed, noting that the firm’s experience with financial institutions is helpful in the crypto space “because the regulators and enforcement authorities are applying traditional concepts and ways of thinking to new technologies.”