Kraken Sinks the SEC's Ship

Before we get into the meat of this Triple Entry, I invite you to take a step back and think about everything crypto has survived in just the past few years to get to this point:

• Terra Luna’s inglorious crash and burn
• Major crypto hedge fund Three Arrows Capital (3AC) going belly-up
• The FTX crash and SBF madness?
• Crypto lender Genesis filing for bankruptcy
• Regulation by enforcement from rogue agencies (mainly the SEC)
• Insane amounts of ‘crypto-finances-terrorism” FUD from mainstream media
• Elizabeth Warren’s ‘Anti-Crypto Army’
• Interest rate hikes at a pace we’ve never seen before

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Just to name a few.?

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If you’re reading this, we’ll assume you’re still here. And if you’re still here, we commend you.?

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Crypto will always need accounting and finance professionals regardless of what the market is doing, but man, it’s so much more exciting when we’re going up.

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Now, back to our regularly scheduled programming.

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In this issue, we’re covering:

• ?? Kraken sinks the SEC’s ship.
• ?? Gemini Earn customers get?how much?money back?!
• ???? U.S. lawmakers fight CBDC

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Let’s dive in!

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Today's read time: 6 min, 21 seconds

The Main Entry: Kraken Sinks the SEC’s Ship?

Last week, Kraken filed a motion in court to dismiss the SEC’s lawsuit against them. The SEC sued Kraken last November, claiming it operated as an unregistered exchange, broker, and clearinghouse. What’s striking about this is Kraken isn’t just fighting back by pushing for a dismissal; they’re essentially saying this lawsuit never should’ve happened in the first place.?

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The reason why they’re filing for a motion to dismiss is even more interesting.

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In a revealing?tweet storm (X storm?), Kraken CEO Dave Ripley vividly described what actually went down with the SEC behind the scenes.?

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Let's rewind to May 10th of last year.?Kraken stands before the House Financial Services and Agriculture Committees, laying down the gauntlet against the SEC's broad strokes of regulation. Their beef? The SEC's habit of enforcing first, clarifying later (if at all), which Kraken argues does little to shield consumers. Instead, they're pushing for the pen to hit paper, drafting crisp, new rules for crypto, suggesting maybe it's time for other regulatory bigwigs to step in, ones who actually know what they’re talking about.?

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The?very next day,?the SEC slaps a lawsuit on Kraken, smelling suspiciously like a scare tactic to muzzle any dissent. Kraken's not having it, calling out the suit as flimsy, lacking any real teeth, especially on the grounds of illegal securities trading on Kraken's platform. Kraken is also throwing shade at the SEC's move to stretch the definition of investment contracts, a play that could slap regulatory chains on a whole spectrum of activities.

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This Kraken vs. SEC showdown isn't just another courtroom drama; it’s another major crypto player putting their foot down and saying, “Enough is enough.” It's about carving out a space where innovation can thrive, safeguarded by smart, clear regulations.?

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The good news is that they aren’t alone in the fight.?

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A coalition of state attorneys general from various states, alongside industry lobbyists and others, have submitted a joint amicus brief in support of Kraken against the SEC's lawsuit. They argue the?SEC has overstepped?its regulatory bounds by broadening the definition of an "investment contract" and improperly classifying cryptocurrencies as securities, potentially disadvantaging consumers.

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We’ve written a lot about the Kraken vs. SEC showdown before. Count on us to keep an eye on this case and keep you updated!?

The Side Entry: Gemini Earn Customers Get ALL Their Money Back?

In July of last year,?we wrote?about beef (so much beef this entry!) between the Winklevoss twins, founders of Gemini exchange, and DCG Founder and CEO Barry Silbert. We won’t rehash the whole thing, but the gist of it is:

??Gemini Earn customers loaned their money to Genesis, a subsidiary of DCG, in hopes of earning a yield,

??Genesis turned around, made some risky loans (like a cool $2.3 billion to 3AC), lost the money, and filed for bankruptcy –

?? And Gemini and the Winklevii took the fall for all of it.

Everyone wrote these lost funds off as they did with the other billions that vanished into thin air in the crypto dumpster fires of 2023.?

But the Winklevoss twins and Gemini surprised everyone last week when they committed to returning over $1.1 billion to Earn customers affected by the bankruptcy of Genesis Global Capital, Gemini's partner for its Earn program.?

This commitment comes as part of a settlement with the New York Department of Financial Services (NYDFS), promising a full recovery of assets for Earn customers, assuming court approval.?

The crazy part? Earn users will receive “any and all appreciation of [their] assets since [they] lent them to the Earn program.”?

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In the end, Gemini may have just done Earn customers a huge favor by forcing them to HODL their crypto through the bull market and make some massive gains because of it.

Spotlight ?? -? Navigating the $10k Transaction Reporting Law at ETHDenver

The Bitwave crew hit ETHDenver last week for a bevy of amazing side events, a few parties with fellow degens that ran irresponsibly late, and of course, the electrifying main event at SPORK Castle!?

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Best of all, our own COO Amy Kalnoki hit the speaker stage at the event for a session on navigating the new $10K reporting rule, delivered to a highly-engaged audience on the last day of the conference.??

Click here?or through the image below to hear the livestream audio of Amy's session, "Your Stay-Out-of-Jail-Free Card: Navigating the $10k Transaction Reporting Law."?

The Water Cooler ??

Things (STILL) worth talking about at the office water cooler…if you 1) talk to people, 2) still work in an office, and 3) have a water cooler.

Other Significant Findings

Check it out - three more stories of interest hand-picked for YOU, aka a thought leader in crypto accounting and finance. Can we do it in 100 words (or less)? Test us.?

• US lawmakers are starting to stand with crypto [!], fighting CBDC [??], advocating crypto custody for banks [??!] [CoinTelegraph] Warm fuzzy stories of lawmakers showing up for crypto?! What kind of alternate reality is this??! First, five US senators co-signed legislation to ban central bank digital currencies (CBDCs), challenging President Biden's plans for a "digital dollar." They contest the Federal Reserve's authority to implement CBDCs, aiming to prevent their use for monetary policy.?Second, the U.S. House Financial Services Committee (HSFC) voted for a resolution which would overturn the SEC’s 2022 Staff Accounting Bulletin No. 121 (which currently requires institutions holding crypto to record them as liabilities). This resolution seeks consumer protection by allowing regulated banks to act as custodians of digital assets.Finally, at ETHDenver 2024, SEC Commissioner Hester Peirce, aka "Crypto Mom," emphasized decentralization's role in “bringing resilience and strength” to the financial system. Nice to know we’ve got friends on the inside!
• Morgan Stanley Considering Adding Spot Bitcoin ETFs to Brokerage Platform [CoinDesk] Morgan Stanley is conducting due diligence to potentially offer spot bitcoin ETFs on its brokerage platform. Are we surprised? I mean, no. Since the SEC's approval of spot bitcoin ETFs in January, we think it’s just a matter of time before all the white-haired legacy institutions get on board. The involvement of broker-dealers and registered investment advisor networks like Morgan Stanley could attract more investment into the ETFs. While billions have already been invested in existing spot bitcoin ETFs, widespread adoption may hinge on availability through major RIA networks and broker-dealers like Merrill Lynch and Wells Fargo. Morgan Stanley, a leader in alternative investments, previously offered wealthy clients access to bitcoin funds in 2021, confirming access via external crypto funds during its first-quarter earnings call.
• A $30 Billion RIA Platform Greenlights Just Four Spot Bitcoin ETFs[Bloomberg] Gatekeepers to financial advisors' assets, like Carson Group, are selective with newly launched US-listed spot Bitcoin ETFs. Carson approved four of the ten new ETFs, including BlackRock's iShares Bitcoin Trust (IBIT) and Fidelity Wise Origin Bitcoin Fund (FBTC), prioritizing significant asset growth and trading volume. Bitwise Bitcoin ETF and Franklin Bitcoin ETF, among the least expensive offerings, were also approved. Platform approvals, critical for ETF growth, vary; some like Fidelity and Charles Schwab offer them for trading, while LPL Financial adopts a wait-and-see approach. Bitwise's CEO sees platform approvals as a significant catalyst for fund growth, given the massive assets under management by financial advisors.

Extraordinary Items ??

An important regulatory update from Janet Yellen.

Or send this to a friend who pivoted.

Do you have any thoughts or feedback on this week's Triple Entry??Sound off in the comments and let us know what you found most helpful this week—we’d love to hear from you!?

“Calc”-you-later, ???

Trevor