The 5 Crypto Stories You Need to Know This Week (14 May 2023)

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1. IRS Files Claims Worth Over $44 Billion Against FTX Bankruptcy

U.S. tax authorities filed claims worth more than $44 billion against FTX.?

Bankruptcy filings from April 27-28 show that the IRS has submitted 45 claims against various FTX companies, including West Realm Shires (the legal entity of FTX.US), Ledger Holdings (the parent company of LedgerX and LedgerPrime), and Blockfolio.?

The most substantial claims are against Alameda Research LLC at $20.4 billion and Alameda Research Holdings Inc. at $9.5 billion.

It is unlikely the IRS will be able to prove that it is actually entitled to such an amount, let alone be able to recover it. However, it will be interesting to watch what impact this IRS development may have on the bankruptcy process especially as it was reported that such IRS claims may have priority over other creditors. Let's not forget that the claimed $44 billion is multiple times the $7 billion recovered.????

2. EU Members Unanimously Endorse New Crypto Tax Reporting Rules

It was reported that European Union rules allowing tax authorities to share data on crypto holdings have been unanimously supported, meaning formal agreement on the law is likely next week.?

Proposed last December, the rules seek to have crypto service providers report all client transactions, including both domestic and cross-border, as a measure against tax avoidance.

This is not surprising as one area where there is consensus from policymakers is that crypto needs to be taxed!

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3. China Launches Blockchain Research Center To Train Half a Million Specialists

China’s national blockchain research center plans to train at least 500,000 blockchain professionals for China’s Web3 industry.

The national blockchain research center in Beijing, backed by the Ministry of Science and Technology, will conduct research and industrialization of blockchain technology.

It also aims to establish a national-level blockchain network connecting existing blockchains in China whilst supporting other industries.

4. Bittrex Files for Chapter 11 Bankruptcy

Crypto exchange Bittrex filed for Chapter 11 bankruptcy protection in a U.S. federal court in Delaware.?

The May 8 filing estimates more than 100,000 creditors and between $500 million and $1 billion in assets and liabilities.

However, this announcement does not impact Bittrex Global, which will continue operations as normal for its customers outside the U.S.

This filing follows a series of legal issues faced by Bittrex.?

Let’s not forget that Bittrex announced it was winding down its US operations at the end of March. Shortly after, the SEC charged the company and its co-founder with operating an unregistered securities exchange.?

Let's not forget that the U.S. Treasury's Office of Foreign Assets Control (OFAC) charged the exchange with Bank Secrecy Act violations in October 2022, leading to a settlement of around $29 million.

Interestingly, OFAC is the largest creditor listed on Bittrex's bankruptcy filing.

5. Coinbase CEO Commends UAE’s Crypto Approach

Coinbase’s CEO praised the UAE’s crypto approach in Dubai.?

The company also published a blog post outlining why the region “is standing out in the development of a web3 ecosystem.”

Whilst some of these praises are intended to show his frustration with US regulators and show that the company has options, it must nevertheless be very refreshing for Brian Armstrong to discuss with regulators in a non-confrontational way and feel welcomed.?

Nevertheless, for a public company to take such a stand is likely to rattle some in Washington.?

However, Armstrong and the Coinbase team weren’t the only prominent crypto figures in Dubai this week.?

For example, speaking at the Dubai Fintech Summit, Ripple CEO Brad Garlinghouse discouraged crypto entrepreneurs from establishing their ventures in the U.S., arguing that the country prioritizes politics over policy.?

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Was shutting down Signature Bank illegal? Was there a breach of regulatory and statutory obligations by regulators? A law firm thinks so.

Some lawyers think that the actions of regulators as part of “Operation Choke Point 2.0” breach constitutional due process clauses and their regulatory and statutory obligations.

An exclusive interview with Cooper & Kirk PLLC Managing Partner David Thompson.

Some of the topics discussed include:

• Why he believes there was regulatory harassment of financial institutions and bank executives
• What was Operation Choke Point 1.0, and how is it different from 2.0?
• How should due process apply in such cases?
• What statutory obligations do regulators have in such cases?
• Why do banks never take legal action against regulators in such cases?
• Is a coordinated action by the Federal Reserve, the OCC and the FDIC against the crypto industry legal?
• What legal options do these banks and crypto firms have in response to these actions?

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Henri Arslanian

*Please note that this newsletter reflects Henri’s personal views and not those of any organisation he is involved with. This newsletter is for educational purposes only and none of its content should be construed as investment or financial advice of any kind.?

Who is Henri?

Henri Arslanian is the co-founder and managing partner of Nine Blocks Capital Management, an institutional-grade hedge fund focused exclusively on digital assets, with a market-neutral crypto fund focused on generating alpha from inefficiencies in crypto markets using relative value, arbitrage, and quantitative strategies.?

Henri was previously a partner and global crypto leader at PwC. In that role, he advised many of the world’s leading crypto exchanges, investors, financial institutions, and tech firms on their crypto initiatives and numerous governments, regulators, and central banks on crypto regulatory and policy matters.

With over 500,000 LinkedIn followers, Henri is a TEDx and global keynote speaker, a best-selling published author, and is regularly featured in global media, including Bloomberg, CNBC, CNN, BBC, The Wall Street Journal, The Economist, and the Financial Times.?

Henri was named by LinkedIn as one of the 2022 global Top Voices in Finance and is the host of the CryptoCapsules? social media video series as well as The Future of Money podcast and newsletter.