The Crypto Currier 18th July

Judges 2: SEC 0.

XRP is not a security, Judge rules in SEC's case against Ripple

“XRP, as a digital token, is not in and of itself a ‘contract, transaction or scheme’ that embodies the Howey requirements of an investment contract”.?

In other words, Ripple’s XRP token is not a security, Judge Torres has ruled, ending the multi-year long question that has implications for the entire crypto industry.

Ripple Labs scored a partial victory on July 13th in a prolonged lawsuit with the SEC, on which it has?spent over $200 million , so far. Judge Analisa Torres ruled in favour of Ripple,?declaring the XRP token isn't a security ?in relation to programmatic sales on digital asset exchanges. The SEC also gained a partial victory, with XRP considered a security when sold to institutional investors, aligning with the conditions of the Howey Test. The SEC's lawsuit, initiated in December 2020, had aimed to stop Ripple from offering XRP, categorising it as a security needing additional regulation. Ripple’s XRP token shot up on the news, with its market cap going up by $21.2 billion, reaching $46.1 billion.

Industry leaders, including Tyler Winklevoss, Gemini CEO, believe this decision will assist crypto exchanges like Coinbase and Binance in their respective SEC lawsuits. Winklevoss commented that the ruling "decimates" the SEC's case against Coinbase, while his twin brother Cameron saw it as a "watershed moment" challenging the SEC's authority over cryptocurrencies.?

Ripple's executives, Brad Garlinghouse and Chris Larsen (alongside other crypto companies), have faced accusations of offering an unregistered security. Allegations remain that Ripple sold XRP as a security directly to investors through a marketing scheme that, according to the SEC, positioned XRP as a security in the eyes of investors. Garlinghouse is continuing to counter the SEC's claims. Experts reportedly believe that an SEC appeal against this ruling is unlikely. (Cointelegraph)?Read More

Allowing Coinbase to go public was not a ‘blessing’ from regulators — SEC.?Judge disagrees

The US SEC has tried to claim in court that approving a company’s S-1 application to go public doesn’t equate to endorsing its business structure or confirming its regulatory compliance.?

During the pre-motion hearing of SEC vs Coinbase, SEC trial counsel Peter Mancuso stated “Your Honor, I'll say that simply because the SEC allows a company to go public does not mean that the SEC is blessing the underlying business or the underlying business structure or saying that the underlying business structure is not in violation of the law." He added “There is no way that an approval of an S-1 is a blessing of a company's entire business... the SEC looked at specific assets and made specific determinations and then gave Coinbase comfort that this would not later be found to be a security.” He said that the S-1 approval focuses more on company disclosures.?

The comments raised eyebrows, including those of U.S. District Judge Katherine Polk Failia who questioned whether the SEC should have forewarned Coinbase about potential regulatory issues. In one of the best responses I’ve heard this year, U.S. District Judge Katherine Polk Failia raised some questions..

“Let's just pause so I can just sort of get rid of the skepticism I currently have as I hear that answer”?

“I am not saying that the commission should be omniscient at the time it's evaluating a registration statement and that it should know all things”… “But I would have thought the commission was doing diligence into what Coinbase was doing, and somehow I thought that it would say, you know, you really shouldn't do this. This is violative of the securities laws, or we are kind of in some interesting unchartered territory here with respect to whether the assets on your platform are securities, so be forewarned that maybe someday there could be a problem.”?

She has a point.?

Judge Failia asked if the SEC could not have said to Coinbase: “‘Hey, you guys need to register as a securities exchange’” adding, “That was within the power of the SEC to do, was it not?”?

Equally valid. Coinbase aims for an early dismissal of the case, arguing that it thoroughly described its business structure and planned activities to the SEC before its IPO. This case so far is seen as a victory for the industry, where regulators have so far been trying to slap down companies for, as the industry would tend to see it, not being able to pre-empt what might become regulation in the future. (Cointelegraph)?Read More

Coinbase pauses staking services in four US states following regulators’ orders

Coinbase has (for now temporarily) halted staking for customers in four US states amid regulatory pressure. This comes in the wake of the SEC legal proceedings, which filed a lawsuit in June accusing the exchange of offering unregistered securities, which it claims is what staking services are. The exchange continues to deny these allegations, saying “We strongly disagree with any allegation that our staking services are securities" but promised to comply with the preliminary state orders. Coinbase isn't alone in being targeted. State and federal regulators have also targeted other crypto companies that offer staking services. States in which Coinbase has ceased offering staking are California, New Jersey, South Carolina, and Wisconsin. Further action by regulators in 10 U.S. states has also led to the suspension of certain other services. (Cointelegraph)?Read More

Things aren’t looking good for Binance. The exchange cuts 1,000 jobs and cuts back employee benefits

Binance has?laid off over 1,000 employees globally , according to a WSJ report. The layoffs have so far primarily affected customer service workers, particularly in India. Before these layoffs, the company's headcount stood at around 8,000. Some estimate that the ongoing reorganisation could lead to a total workforce reduction of over a third.?

The exchange has also reportedly?cut and limited certain employee benefits . Since last month, it has, according to the same report, stopped offering reimbursements for certain expenses such as mobile phone use, fitness, and home-working costs. Binance cited the "current market environment and regulatory climate" leading to a profit decline as reasons, hinting at possible further cost-cutting measures. It’s also indicated that it would consider reductions in "certain products, business units, staff benefits and policies" in response to business and regulatory pressures.?

Binance's regulatory troubles began in early June following a lawsuit by the US SEC, and the company has since faced an ongoing investigation by the US Justice Department. Despite the turmoil, CEO CZ has shown no signs of relinquishing control, causing speculation about the future of the exchange. (Cointelegraph)

Everything that’s happened with Celsius and Alex Mashinsky so far -Mashinsky charged in latest DOJ?crypto?case

Alex Mashinsky, co-founder and former CEO of the now bankrupt crypto lending platform Celsius Network has been arrested on criminal and civil charges linked to the company's downfall. Celsius's Chief Revenue Officer Roni Cohen-Pavon was also arrested.

Three US regulatory bodies, the SEC, the CFTC, and the Federal Trade Commission (FTC), have filed lawsuits against Alex Mashinsky and Celsius. The former CEO is facing fraud charges, with Prosecutors alleging Mashinsky "orchestrated a scheme to defraud customers of Celsius Network LLC and its related entities" from 2018 until June 2022.?

Mashinsky "orchestrated a scheme to defraud customers of Celsius Network LLC and its related entities" from 2018 until June 2022.?

The SEC claims Mashinsky made misleading statements to attract investors to purchase Celsius's token, CEL, and invest in their high-return Earn Interest Program. They also accuse Mashinsky of inflating Celsius's financial success, allegedly claiming to have earned $50 million from an initial coin offering when the firm fell short of its target by more than 35%, a fact he reportedly concealed.?

In January this year the NY attorney general sued Mashinsky over "false and misleading statements" which they claim led to investors losing billions. Currently, Mashinsky, who pleaded not guilty to all charges, is free on a $40 million bond with travel restrictions. Mashinsky and ex-Chief Revenue Officer Roni Cohen-Pavon were accused of alleged fraud in late 2022, but the indictment against them remained sealed until now.?

Celsius, founded in 2017, managed $25 billion in assets for over 1.7 million customers during its peak. The 2022 crypto market crash revealed the company's precarious leveraged trading practices, leading to a halt in all withdrawals and the bankruptcy filing.?(American Banker) ?and?(Cointelegraph)

Celsius Network fined $4.7B by FTC

The U.S. Federal Trade Commission has fined now-bankrupt crypto lender Celsius Network $4.7 billion. Celsius is now, along with its affiliates, prohibited from "offering, marketing, or promoting any product or service that could be used to deposit, exchange, invest, or withdraw any assets." New Jersey based Celsius had promoted a range of crypto services such as interest-earning accounts, crypto-secured personal loans, and a cryptocurrency exchange. (Cointelegraph)?Read More

The FTC's complaint alleges that co-founders Alex Mashinsky, Shlomi Leon, and Hanoch Goldstein falsely promoted the platform as a "safe place" for crypto deposits, while wrongfully appropriating over $4 billion of consumer assets.?

BlockFi CEO ignored risks from FTX and Alameda exposure, contributing to collapse

The CEO of now bankrupt crypto lending firm BlockFi, Zac Prince, reportedly ignored warnings from its risk management team about lending assets to Alameda Research. According to a filing from the unsecured creditors' committee, the team had raised multiple red flags regarding the associated risks. The filing reads:

“As early as August 2021, BlockFi’s risk management team was advised that Alameda’s balance sheet was largely comprised of 7 billion unlocked FTT and 11 billion total including locked tokens based on unaudited financials... Mr. Prince dismissed the concerns, urging the risk team to learn to ‘get comfortable [with Alameda] being a three-arrow borrower, just with FTT and other collateral types instead of GBTC shares.’”?

The team eventually ceased issuing memos about the potential risks, transitioning the conversations to "offline meetings and Slack."?

Not ideal. BlockFi had around $1.2 billion in assets tied to FTX and Alameda Research at the time of its bankruptcy filing in November 2022. (Cointelegraph)?Read More

Crypto lender Geist Finance shuts down permanently over Multichain hack

Geist Finance, a lending protocol on the Fantom network, is the latest crypto lender to shut. The platform, which has a total locked value of $29 million, announced its permanent shutdown following losses from the recent Multichain exploit. According to a social media post, Geist contracts had initially been paused on July 6 and were subsequently resumed on July 9 in "withdraw and repay only" mode, but due to the unreliable output of the oracles post-exploit, the team decided not to resume lending and borrowing on the platform. Before the hack, Geist facilitated borrowing and lending, using the Multichain platform bridged tokens as collateral.?The Geist team has claimed “Nobody is to blame except @MultichainOrg here”, blaming what has been alleged as a $120 million hack (and the missing CEO of Multichain…) for the collapse of the platform. (Cointelegraph)?Read More

UK’s FCA to revamp social media guidance for crypto companies

The UK's Financial Conduct Authority has announced plans to enhance its scrutiny of online financial promotions and clamp down on illegal promotions of crypto activities. This seems to be in response to their seeing "a growing number of ads falling short of the guidance we have in place to stop consumer harm.” The FCA intends to roll out new guidelines for firms promoting financial services online, addressing concerns about the rise of ‘finfluencers’ (finance influencers). As of October 8 this year, crypto investment incentives such as ‘refer a friend’ bonuses will be prohibited. It will also mandate firms to display clear risk warnings and impose a 24-hour cooling period for first-time investors, measures resembling those for other high-risk investments. Lucy Castledine, the FCA’s Director of Consumer Investments, warned “for those touting products illegally, we will be taking action against you. (Finextra)?Read More

SEC accepts BlackRock’s Bitcoin ETF application, signalling (potential) regulatory review

The US SEC is reviewing BlackRock's proposal for a spot Bitcoin ETF (exchange-traded fund). In theory, this is a signal of a degree of readiness from the regulator to consider such a product, after a number of failed attempts by ETFs to gain ground. Alongside BlackRock's proposal, the SEC is examining applications from various other funds, including Wise Origin Bitcoin Trust, WisdomTree, VanEck, and Invesco Galaxy. The industry tends to view this move as a positive development for the crypto industry. While the US is yet to approve a spot Bitcoin ETF, Canada already has three on the go. An ETF is an investment fund that tracks specific indexes. A cryptocurrency ETF would mirror the value of specific digital tokens.?(Cointelegraph)?Read More

Ron DeSantis vows to ban CDBCs in the US if elected president

Florida Governor and U.S. presidential candidate Ron DeSantis has vowed there will be no US CBDC if he becomes president. He has consistently opposed a digital dollar, and is one of the few to admit that CBDCs would result in a "massive transfer of power from consumers to a central authority." CBDCs are one of the greatest threats to user privacy and risk leading to greater government control. At least 39 countries already have a CBDC pilot, proof-of-concept or other related initiatives underway. The U.S. Federal Reserve?has reported no plans to issue?a digital dollar soon, although this risks changing after next year’s election. (Cointelegraph)?Read More

Disclaimer:?The Crypto Currier offers information, not advice or recommendations.?It does not recommend any particular investment or investment strategy and focus on news, use cases and applications of the technologies rather than investment. You should carry out your own independent research including your own independent verification of facts and data. I write the Currier carefully but we can’t guarantee the accuracy or completeness of any information we publish and we accept no liability for any act or omission by a reader of our content. Opinions entirely my own and might be totally incorrect.