US White-Collar Criminal Litigation Review 2024: Cryptocurrency, AI, and False Claims Act

Cryptocurrency enforcement remains a particularly hot topic, with both the Department of Justice (DOJ) and US Securities and Exchange Commission (SEC) continuing to ramp up enforcement efforts. The increased scrutiny is perhaps best demonstrated by the conviction and 25-year sentencing of FTX-founder Sam Bankman-Fried on fraud charges. Sources regularly cited the widening scope of cryptocurrency enforcement, with the DOJ and SEC using existing regulation in novel ways to target platform operators and individual defendants in civil and criminal enforcement.

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An area of burgeoning interest appears to be how the regulatory agencies govern and prosecute activity involving artificial intelligence. Whilst enforcement in this area remains relatively novel, what is certain is that government agencies are attempting to get to grips with AI’s use and are willing to investigate companies who it deems to be deliberately misusing it. 

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Practitioners continue to note the increasingly aggressive enforcement of whistleblower claims, including the expansion of the Act’s remit beyond its traditional realm and into the cybersecurity space. The last year has seen the DOJ increasingly utilize the Civil Cyber-Fraud Initiative, originally launched in October 2021, to pursue claims against companies that knowingly fail to comply with predetermined cybersecurity standards, misrepresent its security practices and procedures, or fail to report cyber incidents and breaches in a timely manner. 

Another significant False Claims Act (FCA) development in the last year was the Supreme Court’s decision in the Supervalu case. Given the findings, a defendant may now be held liable if it “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval." This finding soundly rejected the Seventh Circuit's finding that when a defendant’s interpretation is considered to be objectively reasonable, the subjective intent is irrelevant. Whilst the full extent of this decision’s impact remains to be seen, it seems likely that this will make motions to dismiss and summary judgements harder to obtain for defendants. 

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