5 Mistakes People Make When Choosing a Blockchain Lawyer
If your company utilizes blockchain technology, it can trigger numerous federal and state regulations that require compliance. Additionally, it opens up your company to potential civil or even criminal allegations of wrongdoing, especially if you are using blockchain for cryptocurrency.
Unfortunately, companies and individuals who need a blockchain lawyer tend to make mistakes when they look to hire one. The fallout from these mistakes can be catastrophic. They can quickly turn into civil liability and potentially even jail time that could have been easily avoidable with an effective lawyer.
The blockchain attorneys at Oberheiden P.C. have seen it happen numerous times in the past, and have frequently been called in to mitigate the damages caused by these mistakes. Five of the most common that we have seen so far have been:
- Deciding not to hire a lawyer
- Waiting too long to hire an attorney
- Hiring a friend or family member who is an attorney
- Hiring a lawyer or law firm that does not have experience in blockchain technology and the issues that come with it
- Falling for a law firm’s legal marketing, rather than its skills and background
Making any of these mistakes can lead to disastrous consequences for your company and potentially for you, individually.
1. Going it Alone
One of the biggest mistakes that you can make for your company is to move forward without the legal advice or input of an attorney, at all. Going it alone leaves you largely blind when it comes to complying with your legal obligations. It also makes it very difficult to prepare for a potential lawsuit or criminal charge, which in turn makes it far more difficult to defend against one.
Compliance is a huge part of the legal framework surrounding blockchain technologies. Numerous state and federal laws regulate how blockchain can be used in certain contexts. Just a couple types of laws that can be triggered by blockchain – especially when used for cryptocurrency purposes – include:
- Anti-money laundering laws
- Securities laws
- Tax law
- Digital assets and data security
- Bank and investment fraud
- Cryptocurrency fraud
- Real estate law
In some cases, a portion of these legal risks does not arise because of how your blockchain business is structured or because the risk does not permeate your particular industry. In others, though, additional laws can become implicated, requiring even broader compliance obligations.
Learning which laws apply to your company is something that most non-lawyers find overwhelming. Even experienced attorneys can find it difficult if they have not studied blockchain law and have not represented similar clients in the past. There are so many legal obligations that could potentially get triggered by your company’s use of blockchain, with many of them in quite surprising and disparate legal fields, that they are difficult to track down.
But knowing which laws apply is only the beginning. You then have to understand how to comply with them. The steps that you have to take can be confusing and difficult to ascertain. Worse, there are often multiple different ways for you to bring your company into compliance with your legal obligations, some of which are far more onerous, inconvenient, or costly than others.
Having a skilled and experienced blockchain lawyer to help you comply with the law is essential if you want to do it correctly and in a cost-efficient manner.
If you fail to adequately comply with the law, you can find yourself facing civil or even criminal allegations. Even if this is the outcome, blockchain companies that had legal representation in the lead up to these allegations still fare better than those that did not. Experienced business attorneys know that these allegations are always possible and understand how to prepare for them in ways that protect your interests and insulate your company from liability to the highest extent possible.
2. Delaying for Too Long
A similar mistake that blockchain companies and executives make is to delay for too long before hiring a lawyer.
Many blockchain companies – especially small ones that are only just starting up and that are struggling to make ends meet – see effective legal representation as a luxury that they cannot quite afford yet, rather than as the essential business expense that it is. They often delay hiring a lawyer to help them grow, with the intention of hiring one in the future once their finances are more secure.
Unfortunately, this is a recipe for disaster.
The most important time for a blockchain company to hire a lawyer is not when it first learns of signs of legal liability or impending allegations of misconduct; it is when the company first gets off the ground. With the help of a lawyer from the company’s very inception, you can avoid legal pitfalls and drastically reduce the prospects of legal liability – potentially eliminating the costly need for a lawyer to come in and handle the emergency situation where your company is being accused of wrongdoing.
Even if you acquire legal representation and then end up facing the threat of legal liability, anyway, the legal advice that you will have gotten in the lead up to the allegations can drastically mitigate the danger your company faces. An effective blockchain lawyer will have taken the necessary precautions to insulate your company from the worst of the possible outcomes and positioned the organization for success.
3. Hiring a Lawyer Because He or She is Your Friend
Upstart companies that utilize blockchain technologies often hire lawyers based not on their experience in blockchain law, but on the attorney’s personal connections with the company’s founder or executives. This is also a big mistake because it can leave your company exposed to the threats that are inherent in this rapidly-evolving industry. Worse, it can also give you a false sense of security.
Lots of blockchain companies realize the dangers of starting up and growing without the help of legal counsel. However, rather than hiring an experienced blockchain lawyer to help them with their development, they turn to a personal relationship – usually a friend or family member – for legal representation. They tend to do this for one of several reasons:
- To reduce the costs of legal advice
- To get a friend or family member involved in the business from its nascency
- They feel that they would trust a close connection more than someone they do not know on a personal level
- They do not want to go through the stress of vetting and hiring a blockchain lawyer or law firm
Unfortunately, hiring a lawyer solely because of their personal connections is a huge mistake. Blockchain companies face a wide range of legal threats and obligations. Unless your family member or friend is familiar with all of those issues, their legal representation is unlikely to be as thorough and effective as you need it to be. This can leave your company exposed to serious threats of liability. Worse, you will likely be unaware of those threats because you feel as if you can trust your friend or family member to handle them. This can build a false sense of security that prevents your company from shielding itself from a significant problem. Meanwhile, that risk can grow until it is no longer manageable.
The blockchain lawyers at Oberheiden P.C. have seen these cases unfold numerous times. We have been called in to protect blockchain and cryptocurrency companies from a serious threat to the business that was allowed to grow unchecked because the company’s legal counsel proved to be unfamiliar with the obligations that come with the industry, and yet was closely trusted because of his or her personal connections to the decision makers in the organization.
All too often, hiring a close connection to provide legal representation for your blockchain company is to the ruin of both the company and your relationship.
4. Hiring a Law Firm That Has No Experience in Blockchain Law
At the heart of the problem of hiring a friend or family member to be the lawyer for your blockchain company is their lack of experience in the industry. Blockchain is a new and unsettled area of the law. Even for experienced lawyers in related fields, it is difficult to see and to understand a blockchain company’s legal obligations and potential risks. It can be even harder to predict how the law will evolve and alter these risks and obligations.
Simply put, there is no substitute for an experienced blockchain lawyer in your company. Going without one – even if you do hire an attorney or law firm that practices in similar but not quite identical fields – can be risky. Those risks are not small. They can cripple your company with allegations of wrongdoing or even charges of non-compliance from federal law enforcement agencies. If you are not careful, those allegations can turn into civil or potentially even criminal liability that can carry substantial fines and even jail time.
Hiring a law firm that is experienced in the needs of blockchain companies and has represented numerous such companies in the past is essential for avoiding that liability.
5. Falling for a Firm’s Marketing Rather Than Its Experience and Background
Another mistake that blockchain companies and executives tend to make is to get distracted by a law firm’s marketing efforts. When you hire a law firm to bring your blockchain company into compliance with legal obligations or to combat allegations of wrongdoing, you are engaging a company to provide a service – in this case, the service of legal representation.
Law firms are companies, just like your own. They make money by getting clients to pay them to provide the legal services that they offer. These law firms find or attract those clients by marketing themselves as an effective and reliable provider of the legal services that you need.
That marketing, though, can be misleading. Law firms routinely over exaggerate their abilities and promise more than they can provide.
Falling for the promises that law firms make in their marketing materials is a common mistake that blockchain executives make when choosing an attorney or firm to help their company succeed.
Instead, you should keep your focus on the firm’s experience, its past clients, and its representative case results. They should have represented clients similar to your own. That will have given the lawyers in the firm the experience necessary to provide effective counsel, should you hire them to represent your company. While prior case results do not guarantee similar outcomes in your situation, it can show you what is possible with this firm’s help. Additionally, any relevant experience that the firm has in the blockchain industry should also be taken as a factor when deciding who to hire to help your company.
These are all tangible factors. Separating them from a law firm’s marketing efforts is not always easy. However, seeing through the marketing smoke and hiring a firm that actually has the ability to help your blockchain company succeed is essential.
The National Blockchain Lawyers at Oberheiden P.C.
The federal law firm Oberheiden P.C. has put together a stellar blockchain team to help companies across the country comply with their legal obligations and fend off any allegations of wrongdoing. Our attorneys include blockchain scholars and thought leaders, as well as investigators who are intimately familiar with the unique needs of the industry.
Contact us online or call our blockchain team at 866-926-3417 to get started.