Working With Lawyers Before Your First Legal Hire | Rebecca Matsumura - Fenwick & West

[Music] howy folks welcome to my presentation going to be talking today about how to work with lawyers before your first legal hire start off a little bit about me I'm currently at Fenwick um previously was trained as a traditional Securities litigator uh for another big law firm and then I was in-house at Ripple for a little over a year working on their litigation against the SEC my current position I represent companies across the industry um exclusively in crypto doing everything from supporting token launches to drisking Communications and community relations to representing folks in SEC investigations and litigation and um all sorts of other craziness that comes up in our industry um I'm currently also working on a product um a structure that provides dno Insurance to token holders who participate in governance I am a lawyer so I have to give you a caveat with which is that this is not legal advice um there may be people out here from projects where I actually am your lawyer but as we'll talk about later I would never give you legal advice in this public setting because that would destroy privilege um I'm also should note that I'm a US attorney I'm talking about us legal issues um obviously there's a lot of crossb um issues in our industry and I'm not necessarily going to touch on those all right why you should listen to me why those of you in the audience right now are watching on video are the smartest people at eth member uh we're building in an industry that is rif with regulatory uncertainty and litigation risk I mean obviously any lawyer is going to get up here in any industry and tell you that legal is the most important thing and everyone should pay attention to what we have to say um but honestly it's even more critical for Builders and and folks in crypto but most companies in this space or most projects aren't going to have a lawyer on staff until very late stages and so at the beginning when you're first starting to build it's going to be developers supervising outside Council right and so the point of my presentation today is to talk a little bit about what that looks like and what you should be doing if you're in that position um or another way to think about it would be like what are things that I wish my clients knew before they came to Fenwick and hired me right to avoid issues that we have to fix later so the first question we're going to talk about if I can there we go oops is when to hire a lawyer um again to be self-serving I'm going to tell you as soon as possible get lawyers involved um but actually honestly that's kind of true the less building that you do without legal review the fewer problems that we're going to have that we have to fix or undo later um I have to say that certainly of course anytime you're doing any type of fundraising or token launch or Saft or something like that you're going to want legal to take a look that's C that's an area where there's um kind of a clear inflection point in this industry um but also frankly you know any lawyer in this space should be willing to talk to you about like where you're at right now is this the time to bring in lawyers what might that look like later and and they shouldn't charge you for that so you know certainly my team at Fenwick is always willing to have those conversations and most lawyers in the space will do that um so you should be thinking early and often about where's when is the right time to bring in a legal team to look at what you're doing um and you know and again like there there are ways to do that that are cost- effective and and to to make sure that there's planning for that so then the next thing I want to talk about is like what do lawyers do in this space um and sorry I just have like random memes up here because I was putting this together on a red eye last night so enjoy uh you'll be bringing in lawyers of course to flag legal risk and help you figure out how to mitigate it right but it's a little bit bigger than that like a good lawyer particularly in this space is going to be a builder too right like we're going to help you note business risks and benefits of proposed courses of action and really be a partner in what you're trying to put together one thing I really do want to communicate though is that lawyers are not going to be making decisions for you right so sometimes clients come in and they're like at a moment of inflection and the consider are really difficult and you know they're looking at somebody who's got like years of experience in the industry and and working outside they're like hey maybe this person can like just figure this out for me and that's not like what lawyers are going to do at least not good ones right like what we're going to do is make recommendations to you we'll explain the considerations we'll give you the pros and cons both from a business and a risk perspective but we're not going to tell you what to do we're going to say it depends we're going to say here's some options we're going to say here's our recommendation and we're not doing that to be annoying we're doing that because at the end of the day like we have a different role right and the risk belongs and and and the rewards and the you know decision Point belongs to the business and doesn't belong to us um that said if you come to a lawyer with a plan and they say do not do that and especially if they say do not do that in writing you should take that very seriously right um because lawyers are generally loathed to tell people what to do and what not to do so when we do that um it's generally going to be something that is you know truly truly a problem what are the types of issues that a lawyer in this space should be flagging for you of course given my background as a Securities litigator and SEC troll I'm going to tell you that they should be looking at Securities risk and SEC exposure but there's a lot of other stuff too right there's your tax strategy there's money transmission and banking laws there's intellectual property there's um sanctions and ofac there could be gambling there may be others depending on your project right I I can't give you an exhaustive here but the point that I wanted to make here and why I dedicated an entire slide to this is like don't get short changed like make sure that whoever you're working for is at least conversent in these issues and how they inter intersect in our space so they can tell you when like even if you just hire someone to do your trademark or something like that that doesn't seem necessarily like a web three issue they're going to be learning a lot about your business and you want that person to be able to tell you like this is outside my expertise but it's putting kind of flags off in my brain let me recommend somebody else to you that might need to look at this right because that's part of what you're looking for too like you're building building building building moving quickly you've got a lot going on you need your legal partner to be somebody who can help you figure out when you need more help help you figure out when you're tripping into a red area help you avoid that quicksand do you need crypto native counsel it depends I told you that was lawyer's favorite thing to say if you're looking for advice on an issue that you can explain fully without using any jargon you're probably okay with a lawyer who's an expert in that field and may not necessarily be an expert in crypto so a good example of this might be trademark right if you're trademarking something it kind of doesn't matter what you're using the trademark for like that's going to be pretty much the same across the you know industry and you want to find somebody who's good at trademark and not necessarily somebody who's good at crypto but if you're looking for advice on a fundamental decision for your business right if you're looking if you're asking questions that require an understanding of what you're building and how it works and how the industry functions make sure you get a lawyer who understands what you're building how it works and how the industry functions right because there's a lot of lawyers out there who hold who have had like one crypto client and they hold themselves out as like I'm now an expert I'm a web three lawyer this is how I'm marketing myself and when you dig below the surface you realize that they don't you're not speaking the same language right and they're not really understanding what you're asking for here and so they can't do that important work of flagging issues for you and making sure that you're not taking on more risk than you want to all right how do you find a crypto native lawyer this next slide is not really a gift but it's a shout out to Microsoft teams which has these like lawyer sharks that I'm lowkey obsessed with um how do you find a Crypton native lawyer come to Fenwick just kidding um when I was in House at Ripple there were a few things that I would ask lawyers to determine whether or not they were someone who might be a good fit for a project that required a deeper understanding of what we were building what we were doing one question was just like how do you keep up with the industry right I think we all know what the correct answers are um mostly Twitter um but a lot of lawyers will come back and they'll be like well I do cles and I go to presentations and I read Publications and you're like what what are we talking about here right because if they're look if they're learning about the industry from content that's created by non- Crypton native lawyers for other non-crypto native lawyers they're not going to have the depth of understanding that you want you should also dig in on a lawyer's experience what types of project have you represented before like lawyers can't always name our clients right so they may not be able to give you that list although they should be able to give you some kind of references or referrals but they can tell you like I've represented layer ones I've represented layer twos I've represented token projects I've represented you know folks in the ZK space like whatever the thing is that you're working on they should be able to tell you if they've worked on that before I would also ask people like do you hold tokens which ones where do you put them do you self custody I'm just trying to get a feel for like whether there's someone who's truly like invested in the space and invested in the industry or if this is just a new Hot Topic that they're looking to like make a name in or make a quick fck in or like kind of like they're going to do this for now if all else fails if you're evaluating um whether to hire a lawyer and you're trying to figure out whether there's somebody who has the expertise you need you could just start talking and see how glazed over their eyes get right so start explaining to them like how your product works what you're trying to do like how things work in your industry like in your particular segment of it and then just see what questions they ask and it's pretty easy to tell when you're talking about something very technical if someone's tracking to the point you need them to or if they're just completely lost and like using buzzwords and like to be clear like you're not going to find crypt native counsil who understand what you're doing as well as you do like that's not the goal and that's not going to be possible but you want somebody who can like with a little bit of digging and with a little bit of time maybe like actually understand how the pieces fit together and how this works I don't know how anybody could ever do that if they're not themselves participants in the industry right which is why I ask I would always ask the question like what tokens do you hold where do you hold them like what what kind of what is your exposure to crypto and how do you use it um but maybe I'm wrong like maybe there are people out there who like deeply understand the industry without ever doing those things right like I guess it's possible all right we're halfway through we're going to stand on the next slide for a while because this is the bulk the most important part of the presentation so if you were sleeping or on your phone now is the time to listen we're going to talk about attorney client privilege this is the number one thing that I wish that my clients understood and that I wish that they understood before they hired Council right and when they're working on these kind of like one-off projects at the beginning before they have kind of a comprehensive relationship with a law firm that's really like shepherding through their business because this is an area where you can do a lot of good work and a lot of mitigating risk if you understand what you're doing attorney client privilege protects confidential Communications between an attorney and a client for the purpose of giving or receiving legal advice the privilege exists primarily so that people can ask their lawyers for advice without worrying that that will be used against them later right so there's all you know particularly in US legal system there's a lot of disclosure most of what you say is eventually going to come out in public or at least in the you know public in the context of a litigation but the conversations with your lawyer are special and they're unique because you want people to be able to come to you and say like hey I'm thinking about you know selling crypto in Iran is that a good idea and then I can say no do not [ __ ] with do not mess with sanctions I don't know if I'm allowed to C on stage uh and that's the purpose of the privilege right is to make sure that you can really have those open and honest conversations with your lawyers and get the advice that you need a necessary ingredient to protecting the privilege is a lawyer right so one consideration we talked about earlier when to hire legal counsel one consideration might be if you find yourself making decisions that you're like this feels like a legal decision right or I'm getting some informal advice from lawyers or I'm looking things up online and I would really like this to be privileged and to be protected and to be in the context of that you know protected relationship where I can really test the boundaries and ask the questions that I want to ask without fear of reprisal or without fear of that coming of back to be used against me later the privilege will apply whether you use outside counsil or in-house Council as long as it's with a lawyer and for the purposes of legal advice why is this so important why am I spending probably half of my time talking about privilege I'm going to back up a little bit and talk to you about what happens when you get a regulatory notice of Investigation or subpoena or when you get involved in litigation it's not fun all of your documents are going to have to be handed over pretty much right so when I when I when we get one of my clients gets a letter from the SEC saying we're investigating or you know some private plff says hey I'm about to bring this claim against you the first thing that we have to do is protect all of the documents that exist that might be related to that potential litigation or regulatory action right and then as the matter progresses we actually have to start handing those over to the other side again this is the US other countries have a different practice so what that looks like in practice is like we're going to slack and we're pulling everything in slack from an admin level and then we're ingesting it into our legal systems at Fenwick we're determining what's related to this litigation and that's going across right we're pulling everything from Google Drive Right and those things are going to go across if they're related to litigation we're pulling people's phones right if you use telegram if you use signal if you use WhatsApp if you use text messages we're taking copies of of your accounts on there and we're turning over those Communications to the extent that they're related to the to the litigation and there's really not a lot that stops things from going AC cross right like this is the way we do litigation in the US the whole idea is that like you know you want to sunlight is the best disinfectant we want to bring out all the facts so both parties understand what's going on it's very Noble it's a very big pain when you're actually dealing with it in in the real world the main way that we stop things from going across is if they're privileged right so if you have conversations with your lawyer right that are privileged conversations those are almost never going to be turned over to the other side they're almost never going to be turned over to the government so that's why this is such an important area to protect because you don't want to be in a position where you've been building building building maybe getting some casual legal advice you've got a lawyer who doesn't really understand how privilege Works in this context and then you get you know a year later You' got an SEC inquiry and all of those conversations that You' would have wanted to be protected or maybe even thought were protected are going over to the SEC so they can see exactly what you were considering and use that against you and can I make it look like you were trying to do something that was you know illegal or wrong I don't have time today to go over all of my key points about how to protect privilege but I'm going to give you a couple of practical tips um yeah I'm talking about privileg for a long time um one really important thing to note is that as the client you can break privilege by introducing parties who are not part of the attorney client relationship to the conversation right so if you forward emails from your attorney to a friend or another founder or an investor or your girlfriend or whatever like that can break privilege so you want to be really careful about emails from your lawyers and keeping them within the safe space as projects decentralize this gets really really complicated right because if you have a project that starts off maybe as you know kind of a more centralized project that's coming from a you know development team here in the United States but then as we get closer to token launch or some other event we start to spin out other entities or other people become involved and now there's an overseas foundation and now there's some development companies in Europe and there's all these other things going on employees are moving around among these entities people who used to be part of the privilege aren't part of the privilege anymore depending on the stage of decentralization you're at right and I think this is something that where it's really becomes important to have a lawyer who understands the industry because that's so different than in a normal web 2 you know or even just like regular company context where it's so easy to tell you know you work for the company you're in the privilege you don't work for the company you're not in the privilege like that's not the world that we're operating in third Point only Communications that relate to giving or receiving legal advice are privileged copying your lawyer on everything will not make it privileged copying your lawyer on everything will not make it privileged people get confused about that fourth practical tip start new threads for things that you want to keep privileged so that applies to email that applies to slack that applies to telegram whatever start a whole new conversation when you're talking about something that you want to keep privileged it makes it a lot easier when you get to the point of trying to withhold things and not hand them over because you claim that they're privilege if the if the conversation is limited to this one privileged topic and there's not a lot of inner spersed other things going on Fifth tip questions about privilege are privilege right so if you find this confusing when you're starting to work with an attorney like this should be an area that you really explore and that you should talk to your attorney about and say okay like at this stage what's privileged who's in the privilege who's out as we decentralize what's privileged who's in the privileged who's out and keep this on your mind and if you don't have a lawyer who's flagging these issues and who's like helping you manage where documents are going and who has access to them so that we can maintain privilege over them your lawyer is not doing their job right I think that's an area again like that is so important in our space that's so different from the way kind of traditional companies are built oh my gosh did I finish with some time left for the first time ever an attorney is going to stop before her time is up because I've covered the things that I wanted to prepare today thank you guys so much for your time and attention if you have any followup you can find me on all the social medias my handles at reeba matsumura or you can just look for Rebecca matsumura at Fenwick have a great rest of the time at eth Denver bye y'all