Month: December 2025

(Westlaw) The buyers of cybersecurity company Infosec Learning Inc. provided misleading information about their own business to induce the sellers into accepting equity in it as part of the sale, according to a Delaware Chancery Court lawsuit.

Kowatch et al. v. ACI Learning Holdings LLC et al., No. 2025-1398, complaint filed, 2025 WL 3498773 (Del. Ch. Dec. 2, 2025).

James Kowatch and four other former owners of Infosec Learning say in a Dec. 2 complaint that ACI Learning Holdings LLC and other related parties are liable for common law fraud under Delaware law because the sellers reasonably relied on the defendants’ misrepresentations, causing them to suffer damages.

Finances allegedly misrepresented

Infosec operates as a cybersecurity skills training company.

In August 2023, ACI and Infosec signed a letter of intent for an ACI affiliate to acquire all outstanding shares of Infosec for up to $20 million, the complaint says. Under the terms of the LOI, $9.5 million was due at closing, $6.5 million was due upon Infosec’s meeting certain revenue targets in 2023 and 2024, and $4 million was to be paid in ACI equity, according to the complaint.

The LOI also required ACI to make its best effort to structure the deal so the sellers would qualify for deferral of the capital gains taxes on their $4 million rollover equity, the complaint says.

In October 2023, ACI board Chair Chong Moua provided ACI’s financial information from 2017 through May 2023 to Infosec’s financial adviser, according to the complaint. The plaintiffs allege those numbers became the basis for the evaluation of ACI’s enterprise value and the fairness of the pricing of the rollover equity.

ACI’s affiliate signed a stock purchase agreement and rollover agreement with the sellers of Infosec on Dec. 6, 2023, the complaint says.

Days later, ACI provided its monthly financial results for the period ending in October 2023.

Although the materials Moua provided two months before had reported that ACI’s 2022 earnings before interest, taxes, depreciation and amortization were $14.1 million, the figures provided in December showed ACI had EBITDA of only $6.9 million in 2022, according to the complaint. Additionally, the materials Moua had provided overstated ACI’s 2023 EBITDA by several million dollars over the December figures, the complaint says.

Kowatch, who served as Infosec’s sellers’ representative, alleges that he and the other plaintiffs later discovered that ACI had improperly recognized revenue the company had not yet earned.

Further, the complaint says, ACI was aware around August 2023 that it would see a substantial decrease in revenue due to the U.S. government’s ending funding for a program that paid for military veterans’ enrollment in high tech skills training.

Sale allegedly induced by misrepresentation

The plaintiffs assert that the defendants’ actions in negotiating and consummating the sale agreements amount to common law fraud under Delaware law.

Moua, on behalf of the defendants, made significant material misrepresentations and omissions regarding ACI’s historical revenue in his disclosures to induce the plaintiffs to enter into the stock purchase agreement and rollover agreement, the suit says.

Furthermore, Moua’s disclosures showed growth in revenue over time, when in fact revenues had significantly decreased in 2022 and 2023, the plaintiffs allege.

Additionally, ACI failed to help the plaintiffs obtain a deferral of the capital gains taxes due on the rollover equity, the suit says.

The plaintiffs say they never would have agreed to a deal structure that included two earnouts totaling $6.5 million and $4 million in rollover equity if they had known ACI’s true earnings.

Gary W. Lipkin of Saul Ewing LLP represents the plaintiffs.

By Douglas Mentes

(Westlaw) Blue Owl Capital Inc. is facing a proposed class action alleging the asset management firm hid liquidity issues that forced it to halt redemptions by investors in a private subsidiary.

Goldman v. Blue Owl Capital Inc. et al., No. 25-cv-10047, complaint filed (S.D.N.Y. Dec. 3, 2025).

The company falsely claimed that redemption requests created “no meaningful pressure” on the subsidiary’s asset base before it proposed a controversial merger with another subsidiary to alleviate liquidity issues, according to the complaint filed Dec. 3 in the U.S. District Court for the Southern District of New York.

Plaintiff Alexander Goldman, an individual investor in Blue Owl, also names co-CEOs Douglas I. Ostrover and Marc S. Lipschultz, as well as Chief Financial Officer Alan Kirshenbaum, as defendants.

Hidden liquidity issues?

Blue Owl manages six business development companies — investment vehicles that lend to small and midsize businesses — including Blue Owl Capital Corp. and Blue Owl Capital Corp. II.

Whereas Blue Owl Capital Corp. trades on the New York Stock Exchange as OBDC, Blue Owl Capital Corp. II is private. It has a crucial liquidity mechanism for investors that allows them to redeem shares at a price equivalent to its net asset value through quarterly tender offers.

Blue Owl filed financial reports Feb. 21, May 5 and Aug. 1, asserting there was no “meaningful pressure” on OBDC II’s underlying assets from redemption requests, according to the complaint.

The company made these representations even as redemptions from OBDC II were surging, the suit says. Investors pulled $150 million from OBDC II in the first nine months of 2025 — a 20% increase over the previous year — with redemptions nearly doubling in the third quarter alone, according to the suit.

The liquidity issues dovetailed with Blue Owl’s disclosure in its third quarter financial report, released Oct. 30, that it had missed fee-related earnings estimates, the suit says.

The company’s share price fell 4.23% following the disclosure.

OBDC and OBDC II announced a merger Nov. 5 and revealed that OBDC II would stop honoring redemption requests prior to its closing, and its investors would receive shares in OBDC, the suit says.

Another factor contributed to the controversy. Whereas OBDC II investors could historically redeem their shares at NAV, OBDC’s shares traded at significant discounts to its NAV, typically around 20%, according to the lawsuit.

Blue Owl’s share price fell a further 4.72% after the announcement

The company’s woes continued after the Financial Times reported Nov. 16 that OBDC Chief Financial Officer Jonathan Lamm acknowledged that OBDC II may limit redemptions if shareholders voted down the deal.

Blue Owl’s share price fell another 5.8% the following day.

The company terminated the merger Nov. 19, citing “current market conditions,” the suit says.

The complaint includes claims for violations of the anti-fraud provisions of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C.A. § 78j(b), and Securities and Exchange Commission Rule 10b-5, 17 C.F.R. § 240.10b-5.

Ostrover, Lipschultz and Kirshenbaum are also liable as control persons under Section 20(a) of the Exchange Act, 15 U.S.C.A. § 78t(a), the complaint says.

Rebecca Dawson of Glancy Prongay & Murray LLP represents Goldman, who seeks unspecified damages, costs, interest and certification of a class of investors that purchased Blue Owl securities from Feb. 6 to Nov. 16.

By Andrew Allard

(JD Supra) In Revenue Procedure 2025-31 (Rev Proc), released November 10, 2025, the Internal Revenue Service (IRS) announced a safe harbor (Safe Harbor) that, if satisfied, would permit exchange-traded products (ETPs) to stake their digital assets without threatening their tax status as investment trusts and grantor trusts for U.S. federal income tax purposes, opening the door for ETPs to share staking rewards with their investors. The Rev Proc also provides a nine-month period (beginning on November 10, 2025) during which an existing ETP may amend its trust agreement to authorize staking, provided the Safe Harbor is satisfied.

In general, there has been concern that permitting a trust to engage in staking could be treated as a power to vary the investment of the trust’s interest holders, risking their tax status under the Internal Revenue Code (Code) and applicable Treasury regulations discussed below. This is why, historically, such trusts and their sponsors have generally been reluctant to stake trust assets. The inability of such trusts to use their digital assets in staking and receive staking rewards has been a limitation, potentially affecting the value of interests in such trusts.

The Rev Proc, while confirming the IRS view that staking rewards are taxable, represents a significant change by permitting ETPs holding proof-of-stake digital assets to deliver yield to their investors, which likely will spur growth in this product segment.

Why does this matter?

ETPs generally are organized as fixed investment trusts for U.S. federal income tax purposes. Beneficial interests in these trusts are divided into units. A fixed investment trust is an arrangement classified as a trust under Treasury Regulation section 301.7701-4(c). The IRS treats these trusts as grantor trusts under Section 671 of the Code, and the owners of the beneficial interests (units) in the trusts as the grantors. This tax treatment is beneficial because, for U.S. federal income tax purposes, each unit holder is treated as owning an undivided interest in the assets held by the trust and as directly realizing its pro rata share of the trust’s income, gains, losses and deductions.

Critical to an ETP qualifying as a trust is that the trustee or sponsor may not possess the power under the trust agreement to “vary the investment” of the trust’s unit holders. This limitation means that the trustee cannot take advantage of market variations to enhance the returns on investments of the unit holders. Permitting the trustee of an ETP to stake digital assets has been viewed as potentially giving the trustee such a disqualifying power, which is one significant reason ETPs have avoided staking their digital assets.

Staking refers to using a digital asset (or permitting the digital asset to be used), directly or indirectly, through an agent or otherwise, in the digital asset’s proof-of-stake validation protocol, which is how transactions on the relevant blockchain are validated. Some prominent examples of digital assets utilizing a proof-of-stake validation protocol are Ethereum, XRP, and Solana. Bitcoin, the digital asset with by far the largest market capitalization, uses a proof-of-work protocol which takes it outside the Safe Harbor. In exchange for staking, the owner of the digital asset receives consideration, including, but not limited to, staking rewards paid in fiat currency or paid in kind in additional, newly created digital assets. The inability of ETPs to use their digital assets in staking and receive staking rewards has potentially negatively affected the value of interests in such trusts.

Parameters of the Safe Harbor

ETPs satisfying all 14 criteria of the Safe Harbor will be permitted to stake their digital assets and receive staking rewards without losing their status as an investment trust under Treasury Regulation section 301.7701-4(c) or as a grantor trust under Section 671 of the Code. The Safe Harbor requires, among other things, that:

• An ETP’s interests are traded on a national securities exchange, and its activities comply with the regulations and rules of both the SEC and the rules of the exchange on which it trades;
• The ETP owns only cash and single type of digital asset that uses a proof-of-stake consensus mechanism to validate transactions (again, Bitcoin is not included in this);
• A custodian, acting on behalf of the ETP, holds the ETP’s digital assets at digital asset addresses controlled by the custodian, and the ETP retains tax ownership of the digital assets at all times, including while they are staked;
• The ETP’s trust agreement prohibits the trust from seeking to take advantage of variations in the market to improve the investments of its interest holders (including variations based on the value of the digital assets or the amount of staking rewards); in other words, no discretionary trading of digital assets is permitted;
• The ETP (i) directs the staking of its digital assets through one or more custodians who facilitate the staking of the digital assets with one or more third-party staking providers who regularly provide such services,(ii) such services are provided on an arm’s length basis, and (iii) the trust and its sponsor are unrelated to the staking provider;
• The ETP, its sponsor, and the digital asset custodian have no legal right or arrangement to participate in or direct or control the activities of the staking provider in any way, and do not do so, except to direct the staking and un-staking of the trust’s digital assets;
• All of the digital assets of the ETP must be made available to the staking provider to be staked at all times, except where needed to comply with liquidity reserve requirements of the exchange on which the interests in the trust trade, or in certain short-term temporary situations (e.g., the sale of digital assets to pay trust expenses, or digital assets obtained through a contingent liquidity arrangement);
• The ETP’s digital assets are indemnified from “slashing” due to the activities of staking providers (slashing refers to the forfeiture of some staked digital assets where the validator fails to act in accordance with a blockchain network’s consensus mechanism). Since staking indemnities often do not cover the entire value of the loss, this requirement may be difficult to satisfy; and
• The only new assets the ETP can receive from staking its digital assets are additional units, in the same form, of the single type of digital asset held by the trust, and the ETP must distribute the staking rewards or cash from the sale of such rewards (net of trust expenses in each case) to its interest holders no less frequently than quarterly; this requirement effectively prohibits compounding staking, where staking rewards are automatically or manually reinvested into the original staked amount. It could also lead to liquidity issues for the unit holders as they might not be able to liquidate or withdraw these rewards to meet the related tax requirements. IRS guidance still treats staking rewards as taxable.

Timing

The Safe Harbor applies to all tax years ending on or after November 10, 2025. Trusts that were formed prior to the issuance of the Rev Proc may make an amendment to their trust agreements at any time during the nine-month period starting on November 10, 2025, to authorize staking without jeopardizing their status as an investment trust under Treasury Regulation section 301.7701-4(c) or as a grantor trust under Section 671 of the Code, as long as the Safe Harbor requirements of the Rev Proc are met.

Implications of the Rev Proc

The Rev Proc, together with the SEC guidance outlined in the Rev Proc, represents a significant change by permitting ETPs holding proof-of-stake digital assets to deliver yield to their investors, which likely will spur growth in this product segment. The Rev Proc’s explicit reference to SEC guidance evidences a unique alignment between the IRS and the SEC, which in our view can be traced to the approach toward digital asset regulation articulated in the report of the President’s Digital Asset Working Group.

While confirming the IRS’s view that all staking rewards are treated as taxable income, the Rev Proc leaves many related tax questions unanswered. Specifically, the Rev Proc states that no inference may be drawn as to (i) the effect of a trust falling outside of the Safe Harbor’s requirements, (ii) whether income attributable to staking constitutes “effectively connected income” for non-U.S. investors and is therefore subject to withholding, (iii) whether income attributable to staking constitutes “unrelated business taxable income” for individual retirement accounts and other tax-exempt entities, or (iv) the tax treatment of other digital asset transactions, such as forks and airdrops.

¹ The Rev Proc makes explicit reference to SEC guidance on crypto ETPs, citing, among other documents, SEC Division of Corporation Finance, Statement on Certain Protocol Staking Activities (May 29, 2025), https://www.sec.gov/newsroom/speeches-statements/statement-certain-protocol-staking-activities052925; SEC Release No. 34-103571, 90 FR 36248 (Aug. 1, 2025) (permitting in-kind creations and redemptions for crypto ETPs); SEC Release No. 34-103995, 90 FR 45414 (Sept. 22, 2025) (approving rule changes proposed by three national securities exchanges to adopt generic listing standards for ETPs that hold commodities, including certain digital assets).

(CryptoSlate) The year is 2075. The judge does not ask for a deed. She asks for a transaction ID.

The landlord’s lawyer queues up a Bitcoin transaction from fifteen years earlier that moved a token representing the property.

The tenant’s lawyer concedes the transaction exists, yet claims the signature was obtained under duress.

Everyone in the courtroom accepts what the chain records, but no one agrees on what the record means.

That scene captures a question that is moving from thought experiment to institutional design problem: at what point does a monetary network stop being treated mainly as money and start functioning as a default record of who owned what, and when?

For now, courts still lean on familiar tools.

Chain of title for land runs through registries, index books, PDF databases, and sworn testimonies. Corporate ownership flows through transfer agents, company ledgers, and filings with agencies. Contracts live in filing cabinets, cloud folders, and email threads.

These systems rest on people and offices, not consensus algorithms, and they work until they do not.

Fire, war, regime change, data loss, and quiet fraud all create gaps. According to the World Bank, billions of people lack formal proof of land rights, which leaves them exposed when authorities or rivals dispute an unwritten history.

According to Transparency International, corruption involving public records remains common in many states, including basic acts such as inserting or deleting entries in registries.

Legal systems are built to cope with such fragility, through doctrines on evidence, presumptions, and appeals, yet every workaround carries cost and delay.

Bitcoin’s pitch: an evidence trail that doesn’t depend on institutions staying honest

Bitcoin introduced an alternative way to preserve a history of events, one that does not assume a single office or country will remain honest or functional.

Every roughly ten minutes, miners assemble a block of transactions, compete to prove work on a hash puzzle, and broadcast the winning block to a network of nodes.

Each block commits to the previous one through a hash link, so the longest chain of valid work becomes an ordered list of events that is very hard to rewrite without repeating that work.

The result is a timechain: a public, replicated log where each entry has a position, a timestamp window, and an economic cost to alter. Per the original Bitcoin white paper, proof-of-work turns the chain into a record of “what happened when” that any node can verify. Even if some nodes shut down or some jurisdictions ban miners, other nodes can preserve the ledger and its ordering.

Inside that ledger, Bitcoin’s unspent transaction output model, or UTXO set, defines who can move which coins. Every transaction consumes old outputs and creates new ones. Ownership of a coin, in protocol terms, means the ability to produce a valid signature that spends a given output under its locking script. That graph of spending forms a perfect chain of title for satoshis, from coinbase transactions to the present.

That same structure can be used to mark other claims. Colored coins, inscriptions, and various token layers embed references to external rights inside Bitcoin transactions.

A satoshi can come to stand for a share in a company, a document hash, or a pointer to a land parcel held in a separate database. The timechain then becomes a permanent index of when those markers moved between keys, whether or not any court noticed at the time.

Bitcoin, however, only guarantees certain things. It shows that, at a particular block height, a set of digital signatures passed verification under known rules. It shows that the network accepted it as valid and that later blocks were built on that acceptance.

It does not know who held the hardware wallet. It does not know whether a person signed freely, signed under duress, lost a key, or used malware.

Courts care about that gap. Legal ownership rests on identity, capacity, intent, and consent. When judges admit a PDF contract or a bank ledger, they do not treat those records as automatic proof of rightful ownership. They treat them as evidence that can be challenged with testimony, other records, and context. A Bitcoin entry fits that pattern. It is part of the story, not the whole story.

Even so, Bitcoin is already being used in formal disputes.

United States cases involving Silk Road, ransomware, theft, and exchange failures have relied on blockchain analysis to trace funds and to prove that certain payments occurred, with judges accepting block explorers and expert testimony as a way to ground facts about transfers — see Silk Road seizure, Colonial Pipeline ransom recovery, and Bitfinex arrests & recovery.

According to the Law Library of Congress, courts and lawmakers in several jurisdictions, including Vermont and Arizona, have granted blockchain records (not only Bitcoin) a presumption of authenticity or legal recognition for some purposes.

Further, the Supreme People’s Court of China has authorized internet courts to accept blockchain entries as evidence when parties can show how the data was stored and verified.

A short timeline of turning a blockchain entry from curiosity into courtroom material already exists.

Each entry, on its own, is modest.

Together, they show a pattern in which courts treat blockchains as a trustworthy factual substrate for digital events, then embed that substrate within older doctrines.

Bitcoin was built as a way to move value without trust in a bank, yet in practice, it also operates as a way to anchor facts without trust in a clerk.

From timestamped proof to default registry

The question is when that anchoring crosses a threshold from a rare exhibit to a default record. The shift is less about ideology and more about convenience and cost.

A judge reaches for a standard source when it is easier to access and harder to argue with than the alternative.

For locally recorded assets inside a stable jurisdiction, that will remain the land office or corporate registry for a long time. For cross-border claims, long time horizons and fragile states, the calculus looks different.

Imagine a real estate portfolio spanning five countries, where registries vary in quality and political risk.

A fund can maintain its own internal ledger and sign periodic snapshots, yet it still faces disputes over which version of that ledger should prevail in court.

If, instead, it embeds hashes of its ownership tree into Bitcoin every quarter, any shareholder, regulator, or counterparty can verify that a particular position existed at a specific block height. A future litigant might argue about how to interpret that snapshot, yet they cannot say that it never existed.

Something similar already happens for documents. According to public documentation from OpenTimestamps and related projects, users can include file hashes in a Bitcoin transaction and later prove that the files were created before a given block.

Human rights groups and journalists have used related methods, such as the Starling Lab framework, to timestamp photos and reports, thereby creating a resilient trail when traditional archives are censored or confiscated.

In those cases, Bitcoin acts as a neutral notary that no single regime can silence.

Moving from timestamp to title is a larger leap.

Property law involves competing claims, public notice, and state-backed enforcement. Even if every deed in a country were mirrored on Bitcoin, courts would still need a rule for conflicts between the chain and the paper registry.

A legislature could state that the on-chain token is legally controlling, that it is only evidence alongside the official roll, or that it has no effect at all. Until a jurisdiction writes these rules in detail, Bitcoin-based titles will remain in a gray zone.

There are, however, environments where that gray zone becomes an advantage.

In a failed state where the land office burned or where officials routinely overwrite past records, parties may prefer any external anchor that a foreign court will take seriously.

If a regional arbitration panel or an international tribunal begins to treat old Bitcoin entries as the cleanest account of who controlled which claims at which dates, that practice could pull local courts along over time.

The ledger becomes the default not because someone declared it so, but because nothing else is more durable or more widely checkable.

That is also true inside corporations. Many firms already push internal logs to append-only storage so that auditors can see when orders changed, who approved transfers, and how inventory moved.

Anchoring periodic Merkle roots of those logs to Bitcoin raises the bar: it forces any would-be fraudster to fight the entire history of the chain if they want to hide edits after the fact.

Regulators who grow comfortable reading those anchors will face pressure to treat them as baseline evidence in enforcement actions.

A global evidence ledger would not serve everyone equally.

Long-term savers, whistleblowers, and dissidents gain from a record that survives regime changes and server failures. Tax authorities gain from the ability to reconstruct years of transactions from a shared public database. Authoritarian governments gain from new tools to monitor flows and identify networks that treat pseudonymous records as a thin cover. Privacy advocates, defense lawyers, and citizens who want the option to move on from past mistakes face a ledger that never forgets.

Legal systems will have to confront a deeper challenge as they lean on infrastructure they do not control.

A judge can order a registrar to correct a wrongful entry or expunge a file. No court can order miners and nodes worldwide to delete a block.

Remedies will need to act at the edges: ordering a bank to treat a specific output as tainted, ordering a company to reverse a token transfer on a side ledger, granting damages rather than rewriting the past.

Jurisdictions will diverge in how much weight they give the same transaction ID. One court may treat it as conclusive proof of ownership at a date. Another may treat it as a single data point that can be overcome by testimony of theft or coercion.

Forks and bugs expose another layer of fragility.

Bitcoin’s history already includes rare moments when the community stepped in to change what the chain “really” was.

In 2010, an integer overflow bug created an invalid amount of new coins, and developers released a patch that led nodes to reorganize the chain and forget those outputs.

In 2013, a database glitch caused a temporary split that nodes later healed by agreeing on which side to follow (see BIP-50 post-mortem).

According to developer mailing list archives, these events were treated as emergency responses, not routine governance, yet they show that immutability is both code and social coordination.

Future forks could be more contentious. The 2017 split that created Bitcoin Cash showed how communities can diverge over block size and treat different chains as the real continuation of a project.

For most users, market prices and protocol support settled the matter.

For courts, the question is more subtle: which chain holds the authoritative record for a tokenized share or deed that was originally anchored before the split.

Legislatures may need to define how to pick an authoritative chain for evidence purposes, possibly by reference to hash rate, node count, or named software clients.

Lawyers will adapt by hedging.

Parties who treat Bitcoin as an evidence anchor can mirror the identical hashes onto other public chains or trusted timestamping services, keep notarized paper copies, and write contracts that specify which chain controls in case of a split.

Judges can accept blockchain entries while still requiring corroboration. Nothing requires a binary choice between on-chain and off-chain records.

The turning point, when Bitcoin functions less as a curiosity and more as infrastructure that courts quietly rely on, will not arrive with a single statute or landmark case.

It will arrive when line judges, registrars, and in-house counsel find that checking the timechain for a transaction or a document hash has become routine, that overturning that record is more complex than living with it, and that litigants expect those checks as part of due diligence.

Back in the courtroom, the eviction case ends with a written opinion that cites the transaction ID as proof that a digital claim moved at a particular block height, then spends far more pages working through whether that move reflected valid consent under local law.

The judge does not need to declare Bitcoin the world’s archive. By citing it without ceremony, the court treats the chain as one more institutional record in a world where many records have drifted out of human hands, into a ledger that keeps track of who claimed what and when.