DOL pushes back against cryptocurrency lawsuit | AMERICAN SOCIETY OF PENSION PROFESSIONALS & ACTUARIES – ASPPA Net | Jewelry Dukan

After being sued by cryptocurrency tracking platform provider ForUsAll for issuing its cryptocurrency compliance assistance release, the Department of Labor (DOL) is pushing back.

To be fair, ForUsAll describes itself a little differently – as a “modern” 401(k) provider that also offers cryptocurrency services. But their interest in this lawsuit — according to the lawsuit they filed in June against the aforementioned Compliance Assistance Release — is for what they described at the time as an “arbitrary and whimsical attempt to limit the use of cryptocurrency in defined contribution pension plans…”. .

The DOL’s motion to dismiss the lawsuit, filed earlier this week in the US District Court for the District of Columbia, has dismissed ForUsAll’s claims on multiple fronts. The DOL says the publication itself “has no force of law and does not create new law. Instead, it reminds trustees of their obligations under the Employee Retirement Income Security Act of 1974 (ERISA), Pub. L. No. 93-406, 88 Stat. 829, as amended, 29 USC § 1001 et seq., as set forth in the statute and the Supreme Court’s recent decision in Hughes v. Northwestern University, 142 S.Ct. 737 (2022).”

Informed action.

The movement (ForUsAll Inc. v US Department of Labor et al., U.S. District Court for the District of Columbia File No. 1:22-cv-01551) further notes that the press release “notifies Trustee that the Department has concerns regarding pension plans that offer cryptocurrency investments, a novel and volatile asset class and advises in advance that the Department expects to initiate a program of investigation into unspecified plans offering cryptocurrency investment options to plan participants” – but “it does not preclude that any plan offers cryptocurrency investment options offers or interprets the duty to exercise caution in prohibiting such acts.”

Not only does the DOL allege that the ForUsAll plaintiff mischaracterized the nature of the indemnity, but that he failed to assert a violation that would give him merit/cause to bring a claim.

The answer begins by noting the loss of business opportunity claimed by ForUsAll in response to the disclosure. Noting that the complaint “does not allege that the disclosure itself prevents ForUsAll from engaging in business transactions or otherwise directly regulating the company,” but that the loss of business is the result of “third party decisions” it alleges “are the result of unspecified “enforcement threats” by defendants — not even necessarily release.” The positioning, which DOL says is “too speculative and weakened” to support a basis for standing.

The DOL goes on to state that in such cases, “a plaintiff must produce ‘facts to show that those decisions were or will be made in a manner that creates a causal relationship'” — or put another way, that you must actually prove a connection between the Action and the alleged reaction – with a higher burden of proof for “uncertain” or “speculative” connections. They criticize the alleged “causal connection” here on two fronts; that ForUsAll acknowledges that “other plans” did in fact choose to use their platform after publication, and that “ForUsAll has submitted no basis for concluding that publication was a major motivating factor in the actions of the third party plans thereby.” a causal link is created sufficient to establish standing.” The DOL notes that the lawsuit attributes a decision to prevent implementation due to alleged “enforcement threats” rather than the role(s) of “the interpretation of the clearance by the Trustees, their consideration of their post-clearance duties, others in the complaint, the risk tolerance of the plans, or something else entirely – played a role in changing the course of those plans.”

ERISA standards

The DOL further warns that “the release does not purport to have legal effect itself or attempt to alter the duty of care embodied in ERISA,” further noting that “the release may have brought the Department’s concerns into the plan’s attention.” Trustees and that some plans, as a result of their own internal fiduciary review or risk-taking, chose not to include ForUsAll’s cryptocurrency options in their plan menus, does not render the disclosure a material factor in ForUsAll’s alleged breach.” Indeed, it notes that the Standards of care and prudence, such as those found in ERISA, were created by Congress and that “nothing in any Department guidance reminding fiduciaries of those standards alters them.”

And, as if all of that weren’t enough, the DOL notes that even if the court granted ForUsAll the requested remedy, there was no alleged evidence that it would fix the problem(s) that ForUsAll lays at your feet. “…there is no indication, nor could there be any valid evidence, that the actions of trustees in relation to cryptocurrency are in any way planned and not covered by the duty of care or that the Department is prevented from conducting investigations or taking enforcement action against trustees who they breach obligations related to cryptocurrency investment options. ERISA itself confers powers of action on the Department, and if the clearance were revoked or did not exist at all, this would remain unchanged – as would the power of the proposed participants to bring civil actions for breaches of duty of care. ”

APA ‘Plectic?’

That said, ForUsAll plaintiffs have argued that the DOL’s lawsuit violated the terms of the Administrative Procedures Act (APA) — essentially creating new legislation without the notice, review, and comment deadlines required by law. But here the DOL reiterates that “the clearance does not constitute a final action by the agency, as it does not constitute the completion of the department’s decision-making process or create direct and immediate legal consequences for regulated entities” — and also “interpretation rules and general agency guidelines are declarations.” exempted from such a requirement.”

Noting that “…the release represents a first, preliminary step in the Department’s actions regarding the offering of cryptocurrency investment options in the investment options menu of 401(k) plans,” the DOL stated that “the release pursuant to its own terms is considering further action on this issue by the department. For example, while the press release expresses that the “Department has serious concerns about the prudence of a fiduciary’s decision to expose participants in a 401(k) plan to direct investments in cryptocurrencies or other products whose value is tied to cryptocurrencies,” if this is not the case, it must be determined under what conditions the obligation would be violated.”

It continues: “While the press release indicates that the Department ‘expects’ Trustees to ‘take reasonable steps to protect the interests of plan participants and beneficiaries’, it only states that ‘EBSA expects to conduct an investigative programme’ – Not that it has determined that trustees may not offer cryptocurrency investment options under any or all circumstances, or that any trustee that decides not to offer cryptocurrency options under any circumstances will be investigated.”

“Furthermore, the release bears few hallmarks of a final agency decision. It was not issued in the Secretary’s name, nor was it published in the federal register. “While the Department has worked with a variety of stakeholders following the release of the clearance, including ForUsAll, the clearance was not issued following a formalized investigative process into a particular plan’s offerings. In fact, the press release does not even purport to make a ruling — on the breadth of the law, on specific industry practices, or on disputes of fact. The press release merely expresses the Department’s concerns, which necessarily need to be addressed in the context of specific facts and circumstances before the agency’s decision-making process is completed.”

Stay tuned.

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