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Florida appeals court lifts suspension of crypto asset company’s money license | Orrick, Herrington & Sutcliffe LLP

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On May 22, a Florida appeals court overturned the state’s Office of Financial Regulation (OFR) Emergency Suspension Order (ESO) suspending the license of a Florida-based digital asset company (plaintiff) to operate a money services business (MSB). The OFR issued the ESO because the plaintiff’s majority shareholder and CEO entered into federal settlement agreements for BSA/AML violations. According to Fla. Stat. § 120.60(6), the OFR “may” suspend an MSB’s license if it finds that the licensee poses an “imminent serious danger” to the “public health, safety, or welfare.” However, the OFR may only take such action through a process that is “fair under the circumstances” and must explain its “reasons” for concluding that the process was fair. The plaintiff argued that ESO failed to meet this standard, among others, and the court agreed.

The OFR’s ESO did not provide specific reasons for concluding that its procedures were fair, but simply relied on § 120.60(6) for blanket approval. In the court’s view, the ESO should have provided an explanation for why less drastic measures were not sufficient or acknowledged the potential harm to Florida consumers. For example, to comply with the ESO, the plaintiff would have to liquidate all digital assets of all Florida customers, a total of 170,000 accounts, which could threaten financial harm and result in “unplanned and extensive” tax liabilities for customers. Because the ESO did not discuss the OFR’s rationale or alternative remedies, the court ruled that the ESO was not fair under the circumstances. Therefore, the court vacated the ESO but stayed its order until timely motions for a rehearing were made and granted.

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