DealLawyers.com Blog

If you’re involved in a SPAC IPO or de-SPAC transaction, take a look at this Woodruff Sawyer blog with a list of the top 5 insurance and risk questions SPAC teams should be asking. Here’s one that’s particularly timely:

Crypto-Treasury Strategies Are Popular Now. Are There More Risks or Costs If My SPAC or Operating Company Goes in That Direction? Yes, on both fronts. 

• Insurance implications: Carriers view crypto-related strategies in general and crypto-treasury strategies in particular as higher risk. Some won’t quote coverage for them at all, while others will require higher premiums or impose restrictive terms. If your SPAC or operating company is considering holding or investing in crypto assets or pursuing a target with the purpose of engaging in crypto-related activities, expect increased scrutiny from insurance underwriters and higher insurance premiums.
• Litigation and regulatory risk: Crypto strategies carry elevated litigation and regulatory risk. Like any fast-moving trend, there are bound to be missteps in this developing area, especially as companies race to adopt new structures and strategies without fully understanding the regulatory framework or potential business risks around them. This can lead to shareholder suits, SEC investigations, and other costly legal challenges.

If you’re pursuing a crypto-treasury strategy, talk to your broker about increasing your coverage limits. Legal fees in these scenarios can escalate quickly, and a higher limit may be necessary to protect your directors and officers. You’ll also want to ensure that your policy includes coverage for regulatory investigations and defense costs. These new strategies are certainly interesting, innovative, and exciting, but they carry an increased level of risk. Make sure your insurance program reflects that reality.