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  • Paradigm accuses SEC of bypassing rules in Binance lawsuit
    by Amaka Nwaokocha on September 30, 2023 at 6:41 am

    Paradigm claimed the SEC is attempting to use the allegations in its complaint to alter the law without adhering to the established rulemaking process. Venture capital firm Paradigm has criticized the United States Securities and Exchange Commission (SEC) for bypassing the standard rulemaking procedures in its current legal action against the cryptocurrency exchange Binance.In a statement released on Friday, Sept. 29, Paradigm stated the SEC is attempting to use the allegations in its complaint to alter the law without adhering to the established rulemaking process. Paradigm firmly believes that the SEC is exceeding its regulatory boundaries and further stated that it strongly opposes this tactic.In June, the SEC initiated legal action against Binance, accusing it of multiple violations of securities laws, such as operating without the necessary registration as an exchange, broker-dealer or clearing agency. Paradigm also underscored that the SEC has been pursuing similar cases against various cryptocurrency exchanges lately and voiced apprehension that the SEC’s stance “could fundamentally reshape our comprehension of securities law in several critical aspects.“Screenshot of Paradigm’s amicus brief  Source: ParadigmAdditionally, Paradigm highlighted concerns regarding the shortcomings of the SEC’s application of the Howey test. The SEC often relies on the Howey test — originating from a 1946 U.S. Supreme Court case involving citrus groves — to determine whether transactions meet the criteria for investment contracts and fall under securities regulations.In its amicus brief, Paradigm asserted that many assets are actively marketed, purchased and traded based on their profit prospects. Nevertheless, the SEC has consistently exempted them from being classified as securities. The brief further pointed out instances such as gold, silver and fine art, underscoring that merely having the potential for value appreciation does not inherently classify their sale as a security transaction.Related: Binance Russia buyer tightlipped on owners, denies CZ involvementUSD Coin (USDC) issuer Circle has recently become a participant in the ongoing legal dispute between Binance and the SEC. Circle believes the SEC should not categorize stablecoins as securities.Circle argues that these assets should not be categorized as securities because individuals acquiring stablecoins do not do so to derive profits.Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?

  • Sam Bankman-Fried’s lawyer challenges US gov’t proposed jury questions
    by Ciaran Lyons on September 30, 2023 at 5:51 am

    Sam Bankman-Fried’s lawyer asserts that the proposed questions already insinuate his guilt in fraud and money laundering. The lawyer representing Sam Bankman-Fried, the former CEO of the now-defunct crypto exchange FTX, has claimed that the proposed jury questions for the upcoming fraud trial will elicit biased responses.In a court filing on Sept. 29, lawyer Mark Cohen, who is representing Bankman-Fried, contends that the jury questions presented by the United States government contain prejudice that could result in an unfair trial for Bankman-Fried.“The Government’s proposed voir dire discourages full disclosure from potential jurors, fails to elicit sufficient information to allow the defense to ascertain potential juror bias, and risks tainting the jury by presenting the allegations in a prejudicial manner.”Court filing in the U.S. District Court for the Southern District of New York. Source: CourtListenerHe also argues that the language used in the jury selection questions already portrays a biased image, presuming Bankman-Fried’s guilt in fraud and money laundering.“In particular, by referring to “his fraud,” rather than “his alleged fraud” or simply “fraud,” the final sentence in paragraph 3 improperly suggests that fraud by Mr. Bankman-Fried is an established fact.”Cohen stresses the importance of the court reminding potential jurors that Bankman-Fried is entitled to the presumption of innocence until proven guilty beyond a reasonable doubt.Furthermore, Cohen argued that the court should use the voir dire proposed by Bankman-Fried.However, Cointelegraph recently reported that the U.S. government opposed Bankman-Fried’s proposed questions, declaring them unnecessary and time-consuming. Specifically, the U.S. government objected to his questions concerning pretrial publicity, the effective altruism philosophical movement, political donations and lobbying and attention-deficit/hyperactivity disorder (ADHD).Related: FTX founder’s plea for temporary release should be denied, prosecution saysJury selection will commence on Oct. 3, preceding the trial’s start on Oct. 4.According to a recently released trial calendar, there will be 15 full trial days in October and another six in November. Meanwhile, Bankman-Fried has been in detention at the Metropolitan Detention Center since August 11. U.S. Judge Lewis Kaplan has consistently refused his numerous requests for temporary release to prepare for the trial.Magazine: Deposit risk: What do crypto exchanges really do with your money?

  • Do Kwon dismisses Slack chat records as irrelevant evidence
    by Ciaran Lyons on September 30, 2023 at 2:23 am

    Leaked Slack conversations between Terraform Labs co-founders Do Kwon and Daniel Shin have exposed their contemplation of orchestrating fraudulent transactions. Terraform Labs co-founder Do Kwon has contested the significance of exposed Slack messages presented as evidence. The chat involved discussing manipulating transactions to attract investors with co-founder Daniel Shin.The United States Securities and Exchange Commission (SEC) included the Slack conversation between the co-founders, which dates back to September 2019, in a recent court filing dated back to September 2019.Slack message report between Do Kwon and Daniel Shin. Source: DocdroidThe message report indicates that Kwon and Shin were actively brainstorming tactics to increase investor interest in Seoul-based payments provider Chai Corporation. Chai was founded by Kwon and Shin in mid-2019 and shared offices and staff with Terraform until the two firms split in 2020. According to the leaked message exchange, Kwon intended to create fake transactions to make it more attractive to investors:“I can just create fake transactions that look real.”Kwon further elaborates that the transactions will generate fees and can be gradually phased out as Chai grows.He then attempts to make a pact with Shin to keep the plan confidential. “I wont tell if you wont,” Kwon stated. He further asserted that it will be challenging for investors to uncover the manipulation tactics.“All the power to those that can prove its fake,” he states, adding that he will be making every effort to prevent the scheme from being exposed:“Because I will try my best to make it indiscernable.”Slack conversation between Do Kwon and Daniel Shin on 5/9/2019. Source: DocdroidHowever, Kwon refutes the evidence against him, alleging it was taken out of context.His legal team claims that Kwon and Shin spoke about the possibility of staking LUNA tokens with validators rather than creating counterfeit Chai transactions:“Finally, the SEC misstates evidence in its gratuitous effort to prejudice Mr. Kwon in a procedural motion having nothing to do with the merits (or lack of merit) of the SEC’s case.”“In other words, the SEC’s motion relies on misrepresentations about irrelevant evidence to support its spurious claim that it has been unable to get discovery from Mr. Kwon,” Kwon’s lawyers added.Related: Do Kwon converted illicit funds from LUNA to Bitcoin: S.Korean prosecutorsMeanwhile, Kwon’s lawyers are pushing a U.S. federal court to reject the SEC’s request to extradite him to the U.S. over the collapse of the Terra ecosystem.His legal team stated that the request was “impossible” because he was detained in Montenegro with no scheduled release date. This follows Kwon being found guilty of passport fraud.Magazine: Blockchain detectives: Mt. Gox collapse saw birth of Chainalysis

  • Crypto Biz: Kraken offers stock trading as exchanges adapt to changing regulations
    by Ana Paula Pereira on September 29, 2023 at 9:00 pm

    This week’s Crypto Biz explores Kraken’s securities arm, Gemini’s expansion in India, Binance’s return to Belgium and an oil company in Argentina investing in crypto mining. Cryptocurrency exchanges are adopting alternative strategies to conduct business in the face of tighter crypto regulatory environments worldwide. Signs are everywhere.Kraken is reportedly moving to offer securities trading in the United States and the United Kingdom to expand its reach and compete with popular apps like Robinhood, which offer both crypto and stock trading. On the other hand, Gemini is expanding its presence in India with a $24 million investment in its development center. Another challenge for crypto exchanges has been licensing and communication with regulators. Binance reopened its branch in Belgium this week after a three-month hiatus in the country due to problems with local regulators. Kraken has also expanded its European licenses, and it now provides euro-to-crypto trading services in 27 European Union member states and European Economic Area countries. As crypto regulations evolve, exchanges are adapting to incorporate the practices of a new era.This week’s Crypto Biz explores Kraken’s securities arm, Gemini’s expansion in India, Binance’s return to Belgium and an oil company in Argentina investing in crypto mining.Crypto exchange Kraken plans move into U.S. stock trading: ReportKraken reportedly plans to offer trading services for stocks and exchange-traded funds listed in the United States. The crypto exchange intends to launch its trading services in the U.S. and U.K. in 2024 through a new division called Kraken Securities. The expansion beyond cryptocurrencies would require licensing from the Financial Industry Regulatory Authority and financial regulators in the U.K., which the exchange reportedly already holds. Meanwhile, in Europe, Kraken received an Electronic Money Institution license from the Central Bank of Ireland and a virtual asset service provider (VASP) registration from the Bank of Spain. The Irish license enables Kraken to expand euro-to-crypto trading services to 27 European Union member states and European Economic Area countries. The VASP registration in Spain allows Kraken to offer exchange and wallet custodial services. Cryptocurrency exchange @krakenfx is reportedly planning to expand its services by offering users the ability to trade stocks and ETFs listed in the United States— Cointelegraph (@Cointelegraph) September 27, 2023 Gemini invests $24 million for expansion in IndiaCryptocurrency exchange Gemini is allocating 2 billion rupees ($24 million) for its expansion in India. The funds will be used to grow the exchange’s development center in Gurgaon, a major satellite city of Delhi. Since its initial launch in May, the Gemini Gurgaon Development Center has expanded to over 70 staff, with active hiring for software engineers, technical product managers, talent acquisition, finance, support and compliance. In supporting the expansion, Gemini cited the Indian government’s “robust support framework that allows startups to thrive.” The move is part of Gemini’s “big plans for international growth this year in APAC.”Crypto exchange Binance reopens exchange services in BelgiumCrypto exchange Binance has reopened registrations and access to products and services for Belgian users again — three months after Belgium’s finance regulator ordered the exchange to cease cryptocurrency-related services. “New registrations of Belgian residents are welcome on our platform once again,” Binance said, adding that various products and services will become accessible again to Belgian users who accept its new Terms of Use in the country. Binance has not disclosed what changes were made to allow it to resume services in Belgium. Elsewhere in Europe, Binance has signaled plans to delist stablecoins for the European market by June 2024 to comply with the European Union’s incoming Markets in Crypto-Assets (MiCA) legislation, which is set to come into effect around that time.Great news for our Belgian community We’ve now reopened registrations and access to #Binance products and services in Belgium.— Binance (@binance) September 25, 2023 Argentine oil company to start mining crypto with gas power leftoversTecpetrol, an oil company based in Buenos Aires, has decided to convert excessive gas into energy for cryptocurrency mining. According to local media reports, Tecpetrol plans to drill at least 35,000 barrels of oil daily at the facility, but given the absence of infrastructure to consume the gas being released in the process, the company decided to explore crypto mining. Tecpetrol hopes to start its mining activities between late October and early November. The primary goals are to reduce environmental impact by avoiding gas emissions and generating additional profits. As part of the plan, it is working with an American company with experience implementing similar strategies.This week’s Crypto Biz explores Kraken’s securities arm, Gemini’s expansion in India, Binance’s return to Belgium and an oil company in Argentina investing in crypto mining.

  • Industry leaders and policymakers weigh in on a potential US gov’t shutdown
    by Turner Wright on September 29, 2023 at 8:30 pm

    A U.S. government shutdown is not inevitable, but even if one lasts for just hours or days, lawmakers’ priorities on their return may not be digital assets. The United States House of Representatives has rejected a bill passed by the Senate aimed at funding the government, and Speaker Kevin McCarthy’s proposals have so far failed to gain traction with hard-right lawmakers in the House — all actions suggesting that the U.S. government is heading toward at least a partial shutdown starting on Oct. 1.A U.S. government shutdown, which occurs when Congress fails to pass legislation for funding for the next fiscal year, would effectively stop all federal agencies and departments from doing anything considered “nonessential.” Even if the shutdown were to only last a matter of hours — one in February 2018 lasted less than a day — crypto bills may take a backseat to other policies among lawmakers once activities resume.Bills for the good or ill of digital assets would be halted amid a shutdown, and financial regulators, including the Securities and Exchange Commission and Commodity Futures Trading Commission, would be running on a skeleton crew. Following a 2019 shutdown, Cointelegraph reported that SEC officials had limited capabilities for enforcement and oversight.“In the aftermath of a shutdown, it is unclear what issues will rise to the top of the priority list in terms of gathering congressional interest,” Sheila Warren, CEO of the Crypto Council for Innovation, told Cointelegraph. “Apart from funding the government, Congress faces a number of statutory deadlines which will require additional legislative action before the end of the year.“In July, lawmakers with the House Financial Services Committee voted to pass the Financial Innovation and Technology for the 21st Century Act (FIT), the Blockchain Regulatory Certainty Act, the Clarity for Payment Stablecoins Act and the Keep Your Coins Act. Should a shutdown occur, no action can be taken on these crypto-focused bills — no amendments, no floor votes.Warren suggested that congressional priorities could easily shift from crypto to any number of issues arising amid the shutdown, and there will likely be additional distractions as the 2024 elections approach. Treasury Secretary Janet Yellen also voiced her opposition to “House Republicans’ failure to act” in a Sept. 29 speech, claiming a shutdown was “dangerous and unnecessary” and could “cause economic headwinds” in the future.If we have a government shutdown, a lot of vital work in science and health could be impacted—from cancer research to food safety. The American people need House Republicans to do their job: fund the government.— Joe Biden (@JoeBiden) September 28, 2023 Related: US gov’t shutdown looms — 5 things to know in Bitcoin this weekPrior to any bills being put forward in the House, many Democratic members of the House Financial Services Committee staunchly criticized Republicans at a Sept. 27 hearing, though the focus was intended to be on oversight of the SEC. Virginia Representative Don Beyer was one of the few Democrats pushing a crypto-related bill amid concerns over government funding, but lawmakers will be unlikely to address the legislation before Oct. 1.“The imminent shutdown highlights just how hard it is to pass any critical legislation in a split Congress,” the Blockchain Association’s director of government relations, Ron Hammond, told Cointelegraph. “For crypto legislation, the longer the shutdown, the less time Congress has to vote on proposals such as stablecoins and market structure. But the good news is the various crypto bills in the House have strong bipartisan support and likely will see action now in November.” At the time of publication, the price of Bitcoin (BTC) had dropped below $27,000 but did not appear to be correlated with any news of congressional spending bills or the SEC moving ahead of schedule on delaying decisions for spot Bitcoin exchange-traded funds. In contrast, the price of Ether (ETH) moved above the $1,600 level in the last three days as firms announced their intention to launch ETFs tied to Ether futures the first week of October. Magazine: US gov’t messed up my $250K Bitcoin price prediction: Tim Draper, Hall of FlameUpdate (Sept. 29 at 11:55 PM UTC): This article has been updated to include a statement from the Blockchain Association’s Ron Hammond.