Fact Pattern
You are a risk manager and compliance officer at Crypto-Chatter-Box, Inc., a publicly traded corporation listed on the New York Stock Exchange.
Crypto-Chatter-Box is in the social media business. Its social media platform caters primarily to the cryptocurrency community.
Crypto-Chatter-Box has come under recent scrutiny by regulators due to its lax privacy and cybersecurity policies. In particular, it has been fined by both federal and state regulators:
For collecting information about its platform users (its customers) without their consent and
For two cybersecurity breaches that allowed hackers to steal credit card information about its customers and some of the company’s most valuable intellectual property.
Crypto-Chatter-Box has not made any changes to it privacy and cybersecurity policies.
Crypto-Chatter-Box has also been subject to liability for making false statements of material fact in its initial public offering Registration Statement and Prospectus in violation of Sections 11 and 12 of the Securities Act of 1933.
That notwithstanding, Crypto-Chatter-Box has continued to include the same false statements of material facts in its annual report and other periodic reports it has filed with the SEC since its initial public offering.
Crypto-Chatter-Box board of directors has just approved a merger of the company with Mega-Chatter-Box.
The board approved the merger without reviewing the merger agreement and without making any inquiry about whether the merger price was a fair price.
The board of directors has sent out a proxy statement to the company’s shareholders to have the approve the merger.
The proxy statement includes the same false statements of material facts that the company had included in its Registration Statement and Prospectus used in its initial public offering.
Memo Assignment
Robyn, Crypto-Chatter-Box’s Chief Governance, Risk Management and Compliance Officer, has asked you to write a two (2) page memo identifying four (4) legal liability risks faced by Crypto-Chatter-Box in connection with the facts set forth above.
For each of these four legal liability risks, please:
State why you believe the legal liability risk in question is an important one for Robyn to focus on, and
Describe what steps Robyn should take to address these legal liability issues.
