US Treasury sanctions Ethereum wallet tied to cartel over ‘illicit fentanyl trafficking’

The Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury has added a crypto wallet allegedly connected to a major international crime syndicate as part of its list of Specially Designated Nationals.

In a Sept. 26 announcement, the U.S. Treasury said it had sanctioned 10 individuals, including many tied to the Sinaloa Cartel. Among those added to the department’s list of Specially Designated Nationals included Mexican national Mario Alberto Jimenez Castro through an Ethereum wallet.

‘[Jimenez Castro] reports directly to a Chapitos deputy and operates a money laundering organization that uses virtual currency and wire transfers, among other methods, to transfer proceeds from illicit fentanyl sales in the United States to Sinaloa Cartel leaders in Mexico,” said Treasury. “Jimenez Castro has directed U.S.-based couriers to pick up cash in the United States and deposit it into various virtual currency wallets for payment directly to the Chapitos and for reinvestment in fentanyl production.”

According to data from Etherscan, the wallet had a balance of roughly 0.018 Ether (ETH) — $28.22 — at the time of publication, with the latest activity more than 200 days ago. No other wallet addresses were included in OFAC’s most recent sanctions, which Treasury said was in response to “illicit fentanyl trafficking” affecting the crisis surrounding opioid use in the United States.

“Today’s actions show that Treasury and the Administration will continue to relentlessly target the criminal enterprises threatening international security and flooding our communities with fentanyl and other deadly drugs,” said Brian Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence.

Related: Sen. Elizabeth Warren points to crypto payments as facilitating fentanyl trade in China

The sanctions followed OFAC sanctioning individuals with ties to North Korea’s Lazarus Group. The U.S. Treasury also cited Lazarus as part of its reasons for adding crypto mixer Tornado Cash to its list of Specially Designated Nationals in August 2022. U.S. authorities arrested Tornado Cash co-founder Roman Storm in August for charges related to money laundering and sanctions violations.

Many industry leaders and policymakers criticized Treasury’s actions on Tornado Cash. Six individuals backed by crypto exchange Coinbase filed a lawsuit against Treasury over the sanctions, but in August a judge largely sided with the U.S. government in a motion for summary judgment.

Magazine: Tornado Cash 2.0: The race to build safe and legal coin mixers

Crypto bills could be delayed as many prepare for US gov’t shutdown

The United States government could be shut down in the next 7 days with House Speaker Kevin McCarthy facing political pressure from members of his own party on how to handle spending plans — a decision that could adversely affect how lawmakers move forward with crypto bills awaiting a vote.

In July, U.S. lawmakers with the House Financial Services Committee voted in favor of 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. The passages were a first for the committee to move forward with so many crypto-focused bills, which could lea to a House floor vote in the current session of Congress.

A shutdown, unsurprisingly, would halt lawmakers from moving forward on any pieces of legislation until they resolve the issue of funding the U.S. government into the next fiscal year. Though shutdowns are not unheard of in the history of the U.S. government, the reasons behind them seem to have shifted over the years from public concerns over funding to political maneuvers.

“It is seeming more and more likely there will be a shutdown with the fractured House [Republican] divisions and Senate going in their own direction,” said the Blockchain Association’s director of government relations Ron Hammond on X. “For crypto the longer the shutdown goes on, the more various bills including FIT/market structure and stables get pushed.”

According to Hammond, some of the bills have bipartisan support and are likely to pass in floor votes. However, there were a lot of “landmines politically that can tank either bill”, such as the two major parties’ different approaches to stablecoin legislation.

Related: US crypto’s future could fall on these 4 digital asset bills

Lawmakers have until Sept. 30 — before the next fiscal year — to come to an agreement on the spending bills. A shutdown would effectively stop all federal agencies from doing anything considered “non-essential”, which would include many actions from the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission overseeing digital assets.

As of Sept. 25, Speaker McCarthy was reportedly planning to introduce spending bills that would include restrictions on abortion access, funding for the construction of a U.S.-Mexico border wall, and other initiatives with wide support among far-right members of the Republican Party, but unlikely to be approved by Democrats. The House of Representatives will convene on Sept. 26 to address the issue, while the Senate is scheduled to consider its own stopgap funding measure.

Magazine: Opinion: GOP crypto maxis almost as bad as Dems’ ‘anti-crypto army’

SEC raises concerns over Coinbase in objection to Celsius restructuring plan

The United States Securities and Exchange Commission (SEC) has filed an objection to Celsius Network’s reorganization plan based in part on the regulator’s own ongoing lawsuit with crypto exchange Coinbase.

In a Sept. 22 filing in U.S. Bankruptcy Court for the Southern District of New York, the SEC filed a limited objection and reservation of rights over Celsius’ most recently proposed restructuring plan. The fourth revision of the bankruptcy plan, filed on Aug. 15, followed an initial proposal in March but has not been approved.

A supplement to the reorganization plan proposed a distribution services agreement with Coinbase which Celsius sought to file under seal. The SEC claimed in its objection that the deal may require Coinbase to “go far beyond the services of a distribution agent”, potentially providing services at issue in the commission’s civil suit filed in June.

“The Debtors have confirmed that they do not intend for Coinbase to provide brokerage services to the Debtors, despite the language in the Coinbase Agreements to the contrary,” said the filing. “However, this Court should not be asked to approve a deal where the material terms are missing or inconsistent.”

Revisions to the Celsius restructuring plan have been ongoing since March, while Coinbase faces an SEC lawsuit over allegedly offering unregistered securities. In a Sept. 25 X, Coinbase CEO Brian Armstrong and chief legal officer Paul Grewal said the exchange was “proud to engage with Celsius” in its efforts to return user funds:

Related: Celsius chooses NovaWulf’s bid to exit from bankruptcy

The bankruptcy court filing followed Celsius announcing a deal with Core Scientific in which the mining firm agreed to sell a mining data center to Celsius in exchange for $14 million in cash and settling all existing legislation between the two firms. According to Core Scientific, Celsius had defaulted on its payments since filing for bankruptcy in July 2022.

In August, the bankruptcy court approved Celsius sending out digital ballots to vote on the restructuring plan in October. The next hearing in the bankruptcy case is scheduled on Oct. 5.

Magazine: Tiffany Fong flames Celsius, FTX and NY Post: Hall of Flame

How are crypto firms responding to US regulators’ enforcement actions?

United States regulators including the Securities and Exchange Commission (SEC) have ongoing civil cases against major cryptocurrency firms including Binance, Coinbase, and Ripple, but not every company has been subject to the same treatment.

Gary Gensler, serving as SEC chair since 2021, has been widely criticized by many lawmakers and industry leaders for a “regulation by enforcement” approach to crypto companies and offerings. Some of the cases have ended up in federal courtrooms to determine what may qualify as a security in the United States, and not all judges’ decisions have necessarily been favorable to the regulator.

The commission filed a lawsuit against Ripple in December 2020 over XRP as an allegedly unregistered offering, but received a partial summary judgment in July that the token was largely not a security. Coinbase, which seemed to expect legal action ahead of the SEC’s lawsuit filed in June, targeted the regulator in response to its case, claiming the exchange tried to “come in and register” without success or proper feedback.

Prometheum, a crypto firm which gained a lot of media attention in June following co-CEO Aaron Kaplan testifying before the House Financial Services Committee on digital asset regulation, received approval from the Financial Industry Regulatory Authority as a special purpose broker-dealer (SPBD) for digital asset securities in May. Some of the firm’s subsidiaries, which also deal in digital assets, have successfully registered with the SEC.

“Prometheum was purpose-built to comply with federal securities laws and create the first digital asset security trading platform subject to those laws including investor protection rules,” Kaplan told Cointelegraph. 

Kaplan’s approach would seem to suggest that certain firms like Coinbase, Binance, and Ripple launched services in the U.S. with the intention of trying to change existing regulations. Major players have sometimes lobbied for legislation favorable to crypto firms: Coinbase CEO Brian Armstrong has been a regular presence in Washington DC and encouraged users to back political candidates in support of pro-crypto policies.

According to the Prometheum co-CEO, certain crypto companies “have been working to rewrite or amend existing laws in their favor and to the detriment of retail investors”, speculating that the current frameworks are incapable of dealing with digital assets. Many industry leaders and lawmakers have echoed similar concerns, claiming crypto firms in the U.S. have an uphill battle in recognizing what digital assets qualify as securities.

Kaplan hinted the fact that Prometheum was able to obtain a SPBD license was evidence that regulatory compliance was at least possible. However, the approval has led to calls to investigate the firm by advocacy groups including the Blockchain Association and crypto-minded members of Congress.

“We are concerned that the [SEC] granted Prometheum a ‘sweetheart’ deal in exchange for support of the Commission’s policy goals, or that Prometheum is leveraging personal connections with the Commission to gain an unfair advantage in the market,” said the Blockchain Association in July. “Most significantly, we are concerned that Chair Gensler is using Prometheum and the SPBD licensure process as a means to thwart congressional efforts toward legislation by continuing to spread the false narrative that the law is already clear with regard to digital asset securities.”

Kaplan added:

“From the moment Prometheum received its SPBD license, there was a seemingly concerted effort by various industry associations and lawmakers to discredit the more than 6 years of hard work we have put in to build our company.”

Related: Binance and CEO Changpeng Zhao ask court to dismiss SEC suit

It’s unclear if Prometheum’s approach will work for existing players in the space in an effort to sidestep enforcement actions, or for up-and-coming projects aware of the regulatory challenges in the United States. David Hirsch, head of the SEC’s crypto enforcement division, reportedly said at a Sept. 19 conference that though the commission was currently embroiled in several civil lawsuits, it would continue to bring actions against firms it saw as violating U.S. securities laws — including decentralized finance projects.

Gensler will be testifying before the U.S. House Financial Services Committee on Sept. 27 in a hearing on SEC oversight. According to a Sept. 22 memo, lawmakers will question the SEC chair on matters including policies on digital asset custodial activities and expansion of the commission’s authority over crypto firms.

Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?

Bybit will suspend services in UK following financial regulator’s ‘final warning’

Dubai-headquartered cryptocurrency exchange Bybit has announced the suspension of services to the United Kingdom in response to pending rules from the country’s Financial Conduct Authority, or FCA.

In a Sept. 22 announcement, Bybit said it will start suspending services to U.K. residents on Oct. 1 by no longer allowing new account applications. This move will be followed by the suspension of new deposits, new contracts, and changes to positions for existing users on Oct. 8.

“In light of the UK Financial Conduct Authority’s introduction of new rules regarding marketing and communications by crypto businesses […] Bybit has made a choice to embrace the regulation proactively and pause our services in this market,” said the firm.

Bybit’s date to wind down its services will fall on the FCA’s deadline for crypto asset firms marketing to users in the U.K. to be in compliance with certain rules aimed at providing “clear, fair and not misleading” marketing regimes. The FCA first announced the rules in June and issued an additional warning on Sept. 21, reminding firms of the Oct. 8 deadline and the risk of criminal charges.

Related: UK considers blanket ban on crypto investment cold calls

According to Bybit, the suspension of services “will allow the company to focus its efforts and resources being able to best meet the regulations outlined by the UK authorities in the future”. The FCA suggested that certain firms could have until January 2024 to be in compliance with the marketing rules, but would need prior approval from the regulator.

Bybit announced a similar winding down of services in Canada in May, citing “recent regulatory development” at the time. However, the firm has expanded into new markets including Kazakhstan, where it received in-principle approval to operate as a crypto custody service provider in May.

Magazine: Deposit risk: What do crypto exchanges really do with your money?

Judge grants DoJ motions barring testimony of Sam Bankman-Fried’s witnesses

A federal judge has sided with the United States Department of Justice in motions aimed at precluding the testimony of 7 witnesses on behalf of former FTX CEO Sam Bankman-Fried, or SBF.

In a Sept. 21 filing with U.S. District Court for the Southern District of New York, Judge Lewis Kaplan granted in limine motions from prosecutors which would bar certain witnesses from testifying in SBF’s criminal trial. Kaplan provided different legal grounds for granting the DoJ’s motions against certain witnesses, which included the proposed testimony being “not at all clear”, irrelevant to the trial, or would otherwise seemingly obfuscate the facts of the case for the jury.

The witnesses at issue in the criminal case included Thomas Bishop, Brian Kim, Bradley Smith, Lawrence Akka, Joseph Pimbley, Peter Vinella , and Andrew Di Wu, many of whom are professionals in the legal field. Court filings from Aug. 28 suggested that SBF’s legal team could have paid upwards of $1,200 per hour for their testimony. 

Kaplan left the door open for SBF’s defense team to call some of the individuals in response to testimony to witnesses for the U.S. government. However, he denied a motion from Bankman-Fried’s lawyers which could have excluded testimony from Peter Easton, a University of Notre Dame accountancy professor, who will speak on FTX customer fiat accounts.

Related: Sam Bankman-Fried says, ‘I did what I thought was right,’ in leaked docs: Report

Bankman-Fried is scheduled to appear before Kaplan for his first criminal trial on Oct. 3, where he will face 7 criminal charges related to the alleged misuse of user funds at FTX and Alameda Research. He will face another 5 criminals charges in a March 2024 trial. SBF has pleaded not guilty to all counts.

Since a federal judge revoked his bail in August, SBF has been largely remanded to the Metropolitan Detention Center in Brooklyn until the start of his trial. However, the former FTX CEO’s legal team has an appeal pending following a hearing before a three-judge panel, in which lawyers argued for early release largely on First Amendment grounds.

Magazine: Can you trust crypto exchanges after the collapse of FTX?

Judges deny Sam Bankman-Fried’s appeal for early release

A three-judge panel from the United States Court of Appeals for the Second Circuit has denied a motion for early release for former FTX CEO Sam Bankman-Fried, or SBF. 

In a Sept. 21 order, Circuit Judges John Walker Jr., Denny Chin, and William Nardini denied SBF’s motion for early release, which his team argued largely on First Amendment grounds. The ruling said Judge Lewis Kaplan — the judge overseeing SBF’s criminal case — had “correctly determined” that Bankman-Fried’s speech amounted to witness tampering.

“The record shows that the district court thoroughly considered all of the relevant factors, including [Bankman-Fried’s] course of conduct over time that had required the district court to repeatedly tighten the conditions of release,” said the Sept. 21 order. “It also shows that the district court contemplated a less restrictive alternative offered by [SBF] —an order limiting his communications with the press—but reasonably concluded this was not ‘a workable solution longer term.’”

This is a developing story, and further information will be added as it becomes available.

Tether acquires stake in Bitcoin miner Northern Data, hinting at AI collaboration

The firm behind stablecoin Tether (USDT) has invested an undisclosed amount into German-based crypto miner Northern Data Group in a move backing artificial intelligence (AI) initiatives.

In a Sept. 21 blog post, Tether said the strategic investment into Northern Data through Tether group company Damoon was intended to demonstrate “its determination to support emerging technology”, hinting at collaborations involving AI, peer-to-peer communications, and data storage solutions. The company denied a report from Forbes regarding a $420-million investment, but did not specify the exact amount when reached for comment. Cointelegraph also reached out to Northern Data, but did not receive a response at the time of publication.

Northern Data announced in July that it had reached an agreement with Tether to acquire Damoon, a deal in which the stablecoin issuer “agreed to capitalize Damoon prior to completion of the acquisition with the funds needed to acquire latest-generation GPU hardware”. Tether chief technology officer Paolo Ardoino described the investment as a ”fresh venture into new technological frontiers”.

Tether claimed the investment was “separate from [its] reserves” and would not impact customer funds. The firm previously faced legal action in the United States following accusations it had not been fully transparent about its reserves, resulting in millions of dollars in fines and orders to provide reports on USDT’s backing.

Related: Tether stablecoin loans rise in 2023 despite downsizing announcement in 2022

As the largest stablecoin issuer by market capitalization at more than $83 billion, Tether has made many investments globally, from partnering with KriptonMarket in Argentina to signing a memorandum of understanding to help develop peer-to-peer infrastructure with the government of Georgia. In August, Ardoino revealed some of the firm’s mining operations were based in Latin America, though it’s unclear if they could expand to Germany following the deal with Northern Data.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

PayPal rolls out PYUSD stablecoin to Venmo users

Major United States-based payment processor PayPal has announced its PYUSD stablecoin is now available on Venmo.

In a Sept. 20 blog post, the payments firm said PayPal USD (PYUSD) — the company’s stablecoin pegged to the U.S. dollar — is already available to Venmo users and will be “rolling out fully in the coming weeks”. The news came roughly six weeks after PayPal announced the launch of the stablecoin, saying at the time it would be issued by Paxos Trust and fully backed by U.S. dollar deposits, short-term Treasuries and similar cash equivalents.

“PYUSD is already present in native crypto experiences, and continues to be made more broadly available as the ecosystem grows,” said PayPal. “In the few weeks since its launch in the open market, PYUSD is already present on select exchanges including, Bitstamp, Coinbase, and Kraken.”

Related: PayPal’s new PYUSD stablecoin faces legal headwinds and ‘less functionality’

Blockchain analytics firm Nansen reported in August that roughly 90% of PYUSD was held in wallets controlled by Paxos Trust. Crypto firm BitPay announced on Sept. 12 that it would be adding support for PYUSD, citing “payment utility and community involvement.”

PayPal has been making steady inroads into the crypto space, accepting digital assets payments in 2021 and establishing on- and off-ramps for Web3 payments in 2023. The New York State Department of Financial Services included PYUSD on its greenlist of coins approved by the regulator.

Magazine: Deposit risk: What do crypto exchanges really do with your money?

Signal hints at leaving UK market following passage of online safety bill

A bill aimed at regulating certain internet services in the United Kingdom, including activities in the metaverse, has passed through Parliament and awaits King Charles’ approval to become law. 

In a Sept. 19 announcement, the U.K. government said the Online Safety Bill had passed through a final debate in Parliament and will become law in the country “soon.” Lawmakers had previously debated whether the legislation aimed at protecting users online — particularly focusing on children — could extend to virtual environments like the metaverse.

According to the government, the final version of the bill will require social media platforms to “remove illegal content quickly or prevent it from appearing in the first place,” focusing on material deemed harmful to children. The firms will also need to release risk assessments for users, detailing how to report problems related to online safety.

“If social media platforms do not comply with these rules, [the Office of Communications] could fine them up to £18 million or 10% of their global annual revenue, whichever is biggest – meaning fines handed down to the biggest platforms could reach billions of pounds,” said the government.

Some opponents of the bill had pushed for amendments providing protections for end-to-end encryption, saying the legislation could allow the government a backdoor and undermine user privacy. In June, Apple reportedly said the then version of the bill “pose[d] a serious threat” surrounding “surveillance, identity theft, fraud, and data breaches”.

Meredith Whittaker, president of the Signal Foundation, said in a Sept. 20 X post that the encrypted messaging app could leave the U.K. if the firm were “forced to build a backdoor” under the Online Safety Bill guidelines. Her statement followed the final consideration of amendments in Parliament, in which lawmakers did not specify protections for such encrypted services.

Related: UK considers blanket ban on crypto investment cold calls

The passage of the Online Safety Bill came the same day as the House of Lords moved forward with the Economic Crime and Corporate Transparency Bill, aimed at addressing crypto-related financial crimes in the United Kingdom. Lawmakers will consider final amendments to the legislation before passage, but the most recent version would seemingly allow U.K. authorities to have greater power in investigating and seizing crypto used for illicit purposes.

On Sept. 1, the U.K. Travel Rule applying to crypto firms offering services to residents went into effect, following adoption in countries including the United States, Japan, and Germany. The framework could require firms to halt certain crypto transfers from jurisdictions not already in compliance with the Travel Rule.

Magazine: How to protect your crypto in a volatile market: Bitcoin OGs and experts weigh in

Sam Bankman-Fried’s father dragged his mother into an FTX US salary dispute

Joseph Bankman, the father of former FTX CEO Sam Bankman-Fried (SBF), complained to his son about the salary he was receiving during his employment at FTX US, turning the issue into a family matter.

In a Sept. 18 filing in United States Bankruptcy Court for the District of Delaware, FTX debtors filed a complaint against Bankman and Barbara Fried, alleging SBF’s parents misappropriated millions of dollars through their involvement in the exchange’s business. According to court documents, Bankman’s contract with FTX US should have provided a $200,000 annual salary following a leave of absence from the Stanford Law School in December 2021.

However, Bankman seemed to express ignorance about the terms of the contract, claiming to both FTX US and his son that he was expecting a $1 million annual salary. The complaint states that Bankman was “[p]utting Barbara on this”, suggesting that SBF’s mother may have been able to persuade her son to follow through with the salary change.

According to the complaint, “Bankman’s influence paid off”, with SBF later providing his parents $10 million from Alameda, a $16.4 million property in The Bahamas funded by FTX Trading, the ability to expense roughly $90,000 to FTX Trading in the island nation, and options to purchase company stock. Cointelegraph reached out to the legal team representing Bankman and Fried, but did not receive a response at the time of publication.

Related: Sam Bankman-Fried says, ‘I did what I thought was right,’ in leaked docs: Report

The legal action brought by the debtors was the latest in the bankruptcy case involving FTX and many of its subsidiaries, filed in November 2022. Bankman-Fried also faces 12 criminal charges, to be spread across two trials starting in October 2023 and March 2024.

Since a federal judge revoked his bail in August, Bankman-Fried has been largely confined to the Metropolitan Detention Center in Brooklyn before the start of his October trial. On Sept. 19, a three-judge panel heard an appeal from SBF’s legal team requesting the former FTX CEO be released from jail in order to prepare for trial, citing the lack of Internet access and First Amendment issues.

Magazine: Can you trust crypto exchanges after the collapse of FTX?

Judges weigh early release for Sam Bankman-Fried as lawyers push First Amendment issues: Report

A three-judge panel from the United States Court of Appeals for the Second Circuit has reportedly taken arguments from lawyers representing former FTX CEO Sam Bankman-Fried (SBF) under advisement in considering releasing him from jail prior to his October trial. 

SBF’s defense team and the U.S. Attorney’s office were each given roughly five minutes to argue before a panel of judges on Sept. 19. One of the judges reportedly claimed SBF’s legal team’s First Amendment argument “has no play anymore” based on Bankman-Fried’s alleged attempts to intimidate witnesses including Caroline Ellison, the former CEO of Alameda Research.

Lawyers representing Bankman-Fried pushed for release due to the need for Internet access in preparation for trial,  also claiming the U.S. District Court “erred” in denying their First Amendment arguments for release. Bankman-Fried previously admitted to releasing Ellison’s private journals to a New York Times reporter, resulting in some of its contents being published.

Assistant U.S. Attorney Danielle Sassoon reportedly acknowledged “there have been some issues with the Internet” during SBF’s confinement at the Metropolitan Detention Center in Brooklyn but suggested he had had time to prepare his case.

“The incident with Ms. Ellison shows an intent to interfere with a fair trial,” said Sassoon. “The judge was correct to say the 1st Amendment had nothing to do with it. It was tampering. Counsel does not dispute that the content put Ms. Ellison in an unfavorable light.”

Bankman-Fried has argued his time in jail violated his First Amendment rights and impaired his ability to properly prepare for his trial, scheduled to begin on Oct. 3. A judge denied his lawyers’ initial appeal for release on Sept. 6, prompting the move to the three-judge panel. It’s unclear when the panel will reach a decision on the former FTX CEO’s release, likely one of his last opportunities to be freed ahead of trial.

The October trial will be the first of two for the former FTX CEO. The first trial will deal with seven fraud charges related to his management of user funds at crypto exchange FTX and Alameda. The second trial, expected to start in March 2024, deals with five additional criminal charges.

This is a developing story, and further information will be added as it becomes available.

Magazine: Deposit risk: What do crypto exchanges really do with your money?

SEC embroiled in court cases; Hester Peirce says crypto firms shouldn’t give up on US

Hester Peirce, one of five commissioners with the United States Securities and Exchange Commission (SEC) and an outspoken proponent of crypto, has urged lawmakers and regulators for clarity on digital assets.

Speaking to Cointelegraph at the Permissionless II conference in Austin, Texas on Sept. 11, Peirce said she wouldn’t have expected the SEC to be “this far behind” in finding a solution for a regulatory framework on cryptocurrencies when she joined the commission in 2018. She pointed to countries like Switzerland and Singapore as seemingly ahead of the curve on crypto regulations globally, but said they largely couldn’t be compared to the situation in the United States.

“I haven’t seen a lot of changes for the better,” said Peirce. “You do have a lot of people who know quite a bit about crypto at the agency, whether that’s in FinHub or throughout the divisions. You have people who are actually quite knowledgeable, and I think that that has changed in the time that I’ve been there.”

Commissioner Hester Peirce (second from right) speaking to policymakers at Permissionless II on Sept. 11. Source: Cointelegraph

The SEC, under the leadership of chair Gary Gensler, has taken a lot of criticism from industry leaders, regulators and lawmakers, often being accused of a “regulation by enforcement” approach to digital assets. At the time of publication, the commission was embroiled in civil actions against crypto firms Coinbase, Binance, and Ripple, and had not approved a spot Bitcoin (BTC) exchange-traded fund for listing in U.S. markets. In August, Grayscale Investments won an appeal against the SEC’s rejection of its spot ETF application, which may lead to a review.

Related: Stoner Cats NFTs are ‘fan crowdfunding,’ not securities — SEC’s Peirce, Uyeda

Peirce said she could not comment on any particular court case involving the SEC, but urged institutions involved in the crypto industry to communicate with the commission on how to move forward. She hinted that the agency could have a “change of heart” over crypto-related policy:

“Don’t give up on the United States. This too shall pass, the confusion shall pass. The United States is a good place to build things and I want it to stay that way. But come forward with very concrete ideas […] be thinking of concrete ways that you need clarity.”

At the time of publication, lawyers with the SEC were meeting with their counterparts at Binance.US in a Washington D.C. courtroom hearing discussing a motion on the need for expedited discovery in the civil suit. The hearing followed Binance CEO Changpeng Zhao announcing Binance.US CEO Brian Shroder was “taking a deserved break” from the crypto firm amid reports other executives at the exchange had departed.

Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?

Rep. Tom Emmer: Digital assets will be a ‘sleeper issue’ for 2024 elections

Tom Emmer, majority whip of the United States House of Representatives and crypto proponent, says that digital assets have become a “sleeper issue” in U.S. politics, both at the state and federal levels.

Speaking to Cointelegraph at the Permissionless II conference in Austin, Texas on Sept. 11, Emmer said certain candidates running for office in 2024 may underestimate the impact of issues surrounding crypto and blockchain. He pointed to financial privacy concerns, specifically mentioning government oversight of central bank digital currencies, or CBDCs.

“It’s politically potent regardless of your political persuasion,” said Emmer. “Democrats, Republicans and others believe that your personal information is supposed to be yours, and you get to choose when you get to share it.”

Rep. Tom Emmer speaking to policymakers at Permissionless II on Sept. 11. Source: Cointelegraph

According to Emmer, there is a generational divide in the U.S. in which residents could push back on policies that potentially inhibit the digital space and, in doing so, “flush out” technologically ignorant lawmakers. At least three candidates from both major U.S. political parties have taken a public position on CBDCs for the 2024 race. 

Florida Gov. Ron DeSantis, a Republican polling second behind former president Donald Trump, promised in July to ban CBDCs in the U.S. should his campaign be successful. In May, he signed a Florida bill into law aimed at largely prohibiting the use of a federally issued digital dollar in the U.S. state. Other longshot candidates who have taken positions opposing CBDCs include Republican Vivek Ramaswamy and Democrat Robert F. Kennedy Jr. 

“We have a whole host of laws and regulations that say when you have to disclose, what you have to disclose, but it shouldn’t be just a blanket [statement on CBDCs],” said Emmer. “[The U.S. government] can do a central bank digital currency if it’s open, permissionless and private. It has to emulate cash.”

Related: Blockchain could authenticate AI as crypto racks up court victories: Rep. Emmer

Emmer has reintroduced a bill aimed at limiting the Federal Reserve from issuing a CBDC in the United States. He has also backed an appropriations amendment for the Securities and Exchange Commission’s funds, which could reduce the commission’s ability to follow through with enforcement actions on crypto firms.

On Sept. 20, the House Financial Services Committee will meet in a markup session for the Digital Dollar Pilot Prevention Act — legislation that could prohibit the Fed from initiating CBDC pilot programs without approval from Congress. The committee discussed CBDCs in a Sept. 14 hearing for the first time since Congress’ August recess.

Magazine: Opinion: GOP crypto maxis almost as bad as Dems’ ‘anti-crypto army’

NYDFS calls for public feedback on proposed crypto regulatory guidance

The New York State Department of Financial Services, or NYDFS, has called on the public to provide feedback to a proposal aiming to strengthen regulatory requirements for crypto firms operating in the state.

In a Sept. 18 notice, the NYDFS said Superintendent Adrienne Harris had released proposals on guidance for “enhanced criteria for coin-listing and delisting procedures” in addition to a framework “for designating coins or tokens” to the regulator’s greenlist. The proposal included recommendations for heightened standards focusing on illicit finance, legal, reputational, market and liquidity, and regulatory risks.

“Since joining DFS, I have made it a priority to ensure the Department’s regulatory and operational capabilities keep pace with industry developments to protect consumers and markets,” said Harris. “In less than two years, we’ve built our team to over sixty experienced professionals, created and enhanced consumer and industry safeguards, and engaged with policymakers around the world.”

Related: 19% of New Yorkers own cryptocurrency: Coinbase report

At the time of publication, the NYDFS greenlist for tokens included Bitcoin (BTC), Ether (ETH), and several stablecoins issued by Gemini and PayPal. The announcement also followed the adoption of rules allowing the NYDFS to assess supervisory costs from licensed crypto firms operating in New York.

Since 2015, crypto firms operating in New York have largely been required to apply for a BitLicense through the NYDFS. The regulator’s list showed trading platform eToro was the most recent to receive a license in February, making more than 30 firms licensed in the state.

Magazine: Crypto City: Guide to New York

Gemini legal team accuses DCG of ‘gaslighting’ Genesis creditors

Lawyers representing Gemini Trust have pushed back against a plan proposed by Digital Currency Group (DCG) for creditors of Genesis Global.

In a Sept. 15 filing in United States Bankruptcy Court for the Southern District of New York, the legal team accused DCG of gaslighting Genesis creditors through “contrived, misleading, and inaccurate assertions” in the recovery plan. The plan, filed in bankruptcy court on Sept. 13, claimed that unsecured creditors could have a “70–90% recovery with a meaningful portion of the recovery in digital currencies” while Gemini Earn users could expect an “approximately 95–110%” recovery for their claims.

According to the legal team, DCG was attempting to “bait the Gemini Lenders into accepting a deal” that would allow the company to pay less than it allegedly owed. Lawyers called on the firm to “significantly improve the terms of the loans” provided to Genesis and not use Genesis’ bankruptcy proceedings as cover for justifications in the recovery plan.

“To distract the Genesis creditors from the inconvenient facts of its facially inadequate and inequitable proposal, DCG touts proposed recovery rates that are a total mirage — misleading at best and deceptive at worst,” said the Sept. 15 filing. “Make no mistake: Gemini Lenders will not actually receive anything close in real value terms to the proposed recovery rates under the current ‘agreement in principle.’”

Sept. 15 filing in U.S. Bankruptcy Court for the Southern District of New York. Source: CourtListener

The legal battle involved entanglements with cryptocurrency exchange Gemini and DCG over the Gemini Earn program, financed in part by Genesis. Genesis halted withdrawals in November 2022 in the wake of FTX’s collapse, citing “unprecedented market turmoil” at the time, and filed for bankruptcy in January 2023.

Related: DCG reaches ‘agreement in principle’ with Genesis creditors, debtors

According to court filings by Gemini, Genesis owed more than $3.5 billion to its top 50 creditors at the time of its Chapter 11 filing. The crypto exchange filed a claim in May aimed at recovering more than $1.1 billion in assets for roughly 232,000 Earn users, and a lawsuit against DCG and CEO Barry Silbert in June, alleging fraud.

“Barry was not only the architect and mastermind of the DCG and Genesis fraud against creditors, he was directly and personally involved in perpetrating it,” said Gemini co-founder Cameron Winklevoss in June.

The U.S. Securities and Exchange Commission filed a civil suit against Gemini and Genesis in January for allegedly selling unregistered securities through the Earn program. The two firms filed a motion to dismiss the case in May, but it was still ongoing at the time of publication.

Magazine: Deposit risk: What do crypto exchanges really do with your money?

Sam Bankman-Fried says ‘I did what I thought was right’ in leaked docs: Report

Former FTX CEO Sam Bankman-Fried (SBF), facing multiple criminal charges related to alleged misuse of user funds, reportedly denied many of the allegations against him in documents containing a draft of a Twitter thread he never posted.

According to a Sept. 14 report from The New York Times, documents provided by crypto influencer Tiffany Fong revealed details about Bankman-Fried’s life while under house arrest as well as his thoughts on the legal team handling FTX’s bankruptcy case. SBF reportedly drafted a roughly 15,000-word X — formerly Twitter — thread but never posted it to the social media platform.

“There will probably never be anything I can do to make my lifetime impact net positive,” said Bankman-Fried, according to the report. “[T]he truth is that I did what I thought was right.”

The drafted posts reportedly contained personal information about SBF’s personal relationship with former Alameda Research CEO Caroline Ellison, who will testify in his criminal trial starting in October. The drafts claimed Ellison had refused SBF’s requests to stop Alameda’s trading hedges, resulting in him sending a message with “the meanest thing I’ve ever said to her”.

Bankman-Fried has not tweeted anything on X since January, though he likely still has access to the platform and internet access while preparing for his criminal trial. SBF has been largely confined to the Metropolitan Detention Center in Brooklyn following a federal judge revoking his $250-million bond on bail as a result of allegations regarding witness intimidation.

Related: Caroline Ellison’s list of ‘Things Sam Is Freaking Out About’ could be used in trial

Prior to his bail being revoked, Bankman-Fried had been largely staying in his parents’ California home for roughly 8 months — when the drafted tweets were reportedly written. It’s unclear if the documents are already in the hands of prosecutors or will be used during either of his two criminal trials, with the first scheduled to begin on Oct. 3. SBF faces 12 counts related to fraud at FTX and Alameda.

Ellison, in addition to former FTX Digital Markets co-CEO Ryan Salame, FTX co-founder Gary Wang and FTX former engineering director Nishad Singh have already pleaded guilty to similar fraud charges. Bankman-Fried has pleaded not guilty to all counts.

Magazine: Can you trust crypto exchanges after the collapse of FTX?

Celsius and Core Scientific propose $14M settlement for litigation

Crypto mining firm Core Scientific has announced an agreement with lending company Celsius Network to settle a legal battle which had been ongoing for months.

In a Sept. 15 announcement, Core Scientific said it had agreed to sell a Bitcoin (BTC) mining data center to Celsius in exchange for $14 million in cash to settle “all existing litigation”. The value of the Texas-based data center was roughly $45 million, and the deal will need court approval before being finalized.

The conflict between the two firms largely started in October 2022, when Core Scientific alleged Celsius had failed to pay its bills, while Celsius claimed the mining firm had not been deploying rigs as required under their contract. Both firms separately filed for Chapter 11 bankruptcy protection in the United States: Core Scientific in Texas in December 2022 and Celsius in New York in July 2022. 

Sept. 14 court filing on the proposed settlement between Core Scientific and Celsius. Source: Stretto

The Texas data center, which will likely go to Celsius’ mining arm if the deal is approved, was reportedly non-operational but capable of supplying 215 megawatts to BTC rigs. According to Celsius CEO Chris Ferrero, crypto mining firm US Bitcoin played a “key supporting role in structuring and executing the transaction” in addition to being a party to a winning bid for Celsius’ assets in bankruptcy proceedings.

Related: ‘Unjustly enriched’ — Core Scientific knocks back $4.7M claim from Celsius

The litigation between the two firms is separate from the criminal charges against former Celsius CEO Mashinsky and former chief revenue officer Roni Cohen-Pavon. Mashinsky was arrested in July and has pleaded not guilty to charges related to fraud and manipulating the market. Cohen-Pavon pleaded guilty to 4 charges on Sept. 13 and will be sentenced in December.

Magazine: Get your money back: The weird world of crypto litigation

Bitcoin clean energy usage reportedly exceeds 50% — Will Tesla start accepting BTC payments?

Elon Musk said in 2021 that Tesla would accept Bitcoin payments once miners were using roughly 50% clean energy sources “with positive future trend” — a benchmark that may have recently been met.

In a Sept. 14 thread on X (formerly Twitter), Bloomberg analyst Jamie Coutts reported the percentage of Bitcoin (BTC) mining energy coming from renewable sources had exceeded 50% with “falling emissions plus a dramatically rising hash rate.” According to Coutts, the push toward renewable energy sources was the result of miners dispersing from China in the wake of the country’s mining ban starting in 2021, as well as certain nations turning to mining to “monetize stranded and excess energy.”

Countries investing in BTC mining include El Salvador — which has also recognized the cryptocurrency as legal tender since 2021 — Bhutan, Oman and the United Arab Emirates. The 50% energy benchmark could mean a greater move toward adoption by one of the biggest companies in the world.

Related: Tesla’s diamond hands: EV maker’s Bitcoin holdings see no change in Q2

Musk — the CEO of Tesla, owner of X and founder of SpaceX — announced Tesla would stop accepting BTC payments in May 2021, citing the “rapidly increasing use of fossil fuels for Bitcoin mining and transactions” at the time. Since establishing a sustainable energy source threshold of 50% for when the firm would resume payments, Musk acknowledged that there was a positive trend toward green energy sources but hasn’t changed Tesla’s policy.

The Tesla CEO did not appear to have publicly announced any move to resume BTC payments. At the time of publication, the price of Bitcoin was $26,572, having risen more than 2% in the last seven days.

Magazine: Bitcoin is on a collision course with ‘Net Zero’ promises

Former Celsius exec pleads guilty to criminal charges

Roni Cohen-Pavon, the former chief revenue officer of cryptocurrency lending firm Celsius, has reportedly pleaded guilty to charges related to fraud and price manipulation.

According to a Sept. 13 filing in United States District Court for the Southern District of New York, Cohen-Pavon pleaded guilty to conspiracy to commit price manipulation, securities fraud, manipulation of security prices, and wire fraud. He will be free on bail until a Dec. 11 sentencing hearing.

Reuters reported the guilty plea was part of an agreement with prosecutors requiring Cohen-Pavon to make restitution to parties affected by the collapse of Celsius. Former CEO Alex Mashinsky allegedly made roughly $42 million in profits from sales of the CEL token by artificially inflating the price, while Cohen-Pavon earned roughly $3.6 million.

The U.S. Justice Department announced charges against the two former Celsius executives in July, but Cohen-Pavon’s whereabouts — as a resident of Israel — had been largely unknown at the time. Mashinsky pleaded not guilty to all charges and at the time of publication was free on a $40-million bond.

Related: Celsius Network files ‘adversary complaint’ against EquitiesFirst

Amid the legal proceedings, a federal judge allowed U.S. authorities to freeze some of Mashinsky’s assets, including certain bank accounts and an Austin, Texas property. On Sept. 11, lawyers for the former Celsius CEO filed a motion seeking the dismissal of the Federal Trade Commission’s case against him, arguing the allegations do not meet the standards for a claim.

Celsius Network’s bankruptcy case, filed in July 2022, was ongoing at the time of publication. A settlement plan proposed in August will go before a bankruptcy judge in October.

Magazine: Tiffany Fong flames Celsius, FTX and NY Post: Hall of Flame

Genesis announces winding down of crypto trading services

Crypto lending firm Genesis, a subsidiary of Digital Currency Group (DCG), will stop offering spot and derivatives trading for crypto assets through its British Virgin Islands unit.

According to a Sept. 14 statement from a Genesis spokesperson, the firm will “voluntarily and for business reasons” wind down its digital asset trading services through all of its entities. Genesis had been offering trading services through its GGC International arm in the British Virgin Islands.

The move followed Genesis Global Trading — a firm also affiliated with DCG but not subject to the same bankruptcy proceedings as Genesis Global Capital — announcing in January it would eliminate its crypto spot trading services under similar circumstances — i.e. “voluntarily and for business reasons”. GGC International had still been offering spot and derivatives trading at the time.

Genesis Global Capital halted withdrawals in November 2022, citing “unprecedented market turmoil” at the time. Reports from January suggested the firm could have laid off as much as 30% of its staff before it filed for Chapter 11 bankruptcy protection in New York. The SEC charged both cryptocurrency exchange Gemini and Genesis for offering unregistered securities through Gemini’s Earn program.

Related: Gemini Earn users could recover all funds in new DCG remuneration scheme

The bankruptcy, legal, and regulatory entanglements between the various DCG subsidiaries and crypto firms — DCG is also the parent company of Grayscale Investments — have made waves in the space in the last year. Genesis blamed its collapse on Three Arrows Capital and reported it had suffered losses following the failure of crypto exchange FTX.

In August, DCG announced it had reached an “agreement in principle” with Genesis allowing creditors to recover the majority of their funds. However, Genesis lenders later described the deal as “wholly insufficient” — the firm reportedly owes roughly $3.5 billion to its top 50 creditors.

Magazine: Get your money back: The weird world of crypto litigation

Web3 company to have balloons featured during Macy’s Thanksgiving Day Parade

The Macy’s Thanksgiving Day Parade, one of the most iconic events surrounding the United States holiday in November, will feature characters from the crypto and blockchain space for one of the first times in its 99-year history.

In a Sept. 14 announcement, Web3 firm Cool Cats Group said some of the characters from their nonfungible token (NFT) collection will appear as balloons in the Thanksgiving Day parade scheduled for Nov. 23 in New York City — a blue cat and a milk carton. According to the parade’s producer Jordan Dabby, the characters will be represented physically for thousands of New Yorkers watching from the streets and millions watching from their homes.

With roughly two months until Thanksgiving, it’s unclear whether any other firms in the crypto and blockchain space plan to have characters represented with parade floats or balloons. The lineup at the Macy’s parade changes from year to year, and has featured characters including Baby Yoda from The Mandalorian series, Sonic the Hedgehog, Pikachu, and Charlie Brown.

Related: Indonesian government looks to NFTs to preserve cultural heritage

In 2021, when the parade returned to its full procession following the 2020 shutdowns amid the COVID-19 pandemic, the organizers also launched an NFT series. The following year, in addition to the proceedings held in-person, the event arranged for a virtual parade within the metaverse.

Having a Web3 firm represented in a major event like the Thanksgiving Day parade will likely come amid other happenings in New York. Former FTX CEO Sam Bankman’s criminal trial is set to kick off on Oct. 3 and may still be going on at the time of the holiday parade.

Magazine: Crypto City: Guide to New York

Blockchain Association responds to US lawmakers’ request for crypto tax guidance

The Blockchain Association, a United States-based cryptocurrency advocacy group, has submitted suggestions for lawmakers to consider in potential legislation on the tax treatment of digital assets.

In a Sept. 8 letter to U.S. Senators Ron Wyden and Mike Crapo, the Blockchain Association said lawmakers should support the Keep Innovation in America Act, a bill aimed at changing the reporting requirements for certain taxpayers involved in crypto transactions. According to the advocacy group, any legislation introduced in Congress should “create symmetry” between taxation of crypto and non-crypto assets, as well as clarify requirements for information on income earned from staking and mining crypto.

Some of the recommendations were similar to those proposed by crypto advocacy group Coin Center in August, including establishing a de minimis threshold aimed at excluding gains or losses of certain crypto transactions from tax reporting requirements. The Blockchain Association submitted the letter on the last possible day the U.S. Senate Financial Services Committee said it would be accepting responses following a July request.

“The Committee should focus on developing intentional, measured legislation concerning specific issues of taxation as they relate to digital assets,” said the Sept. 8 letter. “The Association urges the Committee to take care not to enact legislation that provides less-favorable tax treatment for digital assets as compared to other assets and rather, focus on developing legislation that would level the playing field for digital assets compared to other assets.”

Related: Blockchain Association calls for investigation into Prometheum over alleged ‘sweetheart’ SEC deal

Other suggestions for the two senators to consider included opposing a digital asset mining excise tax proposed by the Biden administration, claiming the measure could “inhibit the growth and development” of the crypto industry. The proposal, first announced in March as part of U.S. President Joe Biden’s FY2024 budget, would include a 30% excise tax on electricity used by crypto miners.

The call for crypto tax guidance by U.S. lawmakers followed a July 31 announcement from the Internal Revenue Service (IRS) stating that filers must report staking rewards as gross income in the year they were received, setting new standards for U.S. taxpayers in 2024. The IRS largely taxes the buying, selling, and exchange of crypto assets as capital gains and losses, with mining rewards subject to the same requirements.

Magazine: Best and worst countries for crypto taxes — plus crypto tax tips

Apple secures rights to book on Sam Bankman-Fried for $5M: Report

Multinational technology company Apple has reportedly paid $5 million for the rights to author Michael Lewis’ upcoming book on former FTX CEO Sam Bankman-Fried (SBF) following a bidding war.

According to a Sept. 7 report from The Ankler, Apple secured the rights to the book Going Infinite: The Rise and Fall of a New Tycoon, which is set to be released on Oct. 3 — the start of SBF’s trial in New York. Lewis suggested an October publication date at the Bitcoin 2023 conference in Miami, aiming for the beginning of the former FTX CEO’s criminal trial.

Michael Lewis’ book on Sam Bankman-Fried, scheduled for publication on Oct. 3. Source: Amazon

In addition to the book, the media outlet reported a documentary was in the works by director Nanette Burstein, who was behind films on programmer and crypto evangelist John McAfee — who died in prison in 2021 — and former U.S. Secretary of State Hillary Clinton. Bankman-Fried is likely to be the subject of many documentaries amid and following his criminal trial due to the high-profile case as well as his unique fashion style and hair. 

It’s unclear how such films may be moving forward with the ongoing strike of the Writers Guild of America coupled with that of the Screen Actors Guild and American Federation of Television and Radio Artists. The union members are calling on the Alliance of Motion Picture and Television Producers to address issues including residuals from streaming media and how artificial intelligence may be used in the industry in the futur.

Related: Top 5 Bitcoin documentaries to add to your watchlist

The story of Bankman-Fried dominated headlines well before the downfall of crypto exchange FTX and his arrest in the Bahamas. Many once looked at the former CEO as a rising star who grew to oversee billions of dollars in assets at Alameda Research and FTX but kept making public appearances largely in a T-shirt, shorts, and sneakers. During court appearances prior to his bail being revoked, SBF often appeared in a full suit and tie.

Other documentaries featuring prominent figures or events in the crypto space include Netflix’s Trust No One: The Hunt for the Crypto King on QuadrigaCX founder Gerald Cotten, who allegedly died during a trip in India, as well as one exploring the journey of Coinbase co-founder and CEO Brian Armstrong. Prior to the writer’s strike, there was reportedly a film being produced on the relationship between Bankman-Fried and Binance CEO Changpeng Zhao.

Magazine: Sam Bankman-Fried’s life in jail, Tornado Cash’s turmoil, and a $3B BTC whale: Hodler’s Digest, Aug. 20-26

CFTC commissioner calls for crypto regulatory pilot program

Caroline Pham, a commissioner with the United States Commodity Futures Trading Commission (CFTC), has suggested a limited pilot program in an effort to address crypto regulation.

In a pre-recorded message for a Cato Institute event on Sept. 7, Pham said that following public roundtable discussions she planned to propose a pilot program for digital asset markets, claiming the U.S. may soon need to “play catch-up” to crypto-friendly jurisdictions. She suggested that the program would be similar to regulatory sandboxes previously introduced at the state level.

“A pilot program can create a framework for emerging technologies and market structures under our existing laws and regulations,” said Pham. “It is my hope that a pilot to test, gather data, and develop a pragmatic approach to tokenization can ensure we continue to uphold our mandate to fostering open, transparent, competitive and financially sound markets.”

Pham called for a stakeholder roundtable and for the CFTC to propose and adopt rules on the risks of crypto based on previous pilot programs. At the conclusion of the program, the commission would determine whether to implement the changes permanently.

Related: CFTC issues $54M default judgment against trader in crypto fraud scheme

Serving at the CFTC since April 2022, Pham is one of five commissioners who has called for greater clarity on crypto regulation. In addition to sponsoring the commission’s Global Markets Advisory Committee, she has suggested initiatives aimed at protecting crypto retail investors.

The proposed pilot program came following U.S. lawmakers’ attempts to clarify the roles of the CFTC and Securities and Exchange Commission on crypto regulation. In July, the House Financial Services Committee approved the Financial Innovation and Technology for the 21st Century Act, setting the bill up for a full House vote possibly before 2024.

Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?

Former FTX exec will give up real estate, car, and $11M following guilty plea: Report

Ryan Salame, the former co-CEO of FTX Digital Markets, has pleaded guilty to charges related to defrauding the United States Federal Elections Commission and conspiracy to operate an unlicensed money transmitting business

According to a Sept. 7 announcement from the U.S. Justice Department, Salame pleaded guilty before a judge in U.S. District Court for the Southern District of New York, making him the fourth major player connected to defunct crypto exchange FTX facing criminal charges to do so. The former co-CEO could face years in prison for the campaign finance charge as well as additional time related to operating an unlicensed money transmitting business.

The former FTX executive pleaded guilty to the criminal charges, but Assistant U.S. Attorney Samuel Raymond reportedly said he would make a submission to probation following the criminal trial of former FTX CEO Sam Bankman-Fried scheduled to begin on Oct. 3. Salame will reportedly pay $6 million in penalties to the U.S. government, $5 million to FTX debtors, and surrender two properties in Massachusetts as well as a Porsche in his name.

“I made $10 million in political contributions and called them loans, which I never intended to repay,” said Salame, according to Sept. 7 X thread from Inner City Press. “This was supported by Sam Bankman-Fried. I knew it was prohibited […] As Alameda’s head of settlements I used banks, one used in California. I was unaware licensure was required. But now I know.”

At the time of publication, Salame remained free on a $1-million bond, with sentencing scheduled for March 2024.

This is a developing story, and further information will be added as it becomes available.

House committee will reopen discussions on digital dollar in Sept. 14 hearing

The United States House Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion will be holding a hearing discussing central bank digital currencies (CBDCs) for the first time in months.

In a Sept. 7 announcement, Republican lawmakers on the committee said they planned to hold a hearing discussing the implications of releasing a CBDC as well as “private sector alternatives”. The ‘Digital Dollar Dilemma’ discussion will be held on Sept. 14, roughly two weeks before U.S. Securities and Exchange Commission chair Gary Gensler will reportedly testify before the full committee.

The hearing will mark the first time in months lawmakers in the House committee will address issues related to the rollout of a digital dollar in the United States. Members of Congress were largely in recess for August.

Related: CBDC supporter likely in White House next term, crypto divide not red vs. blue: Grayscale

A potential CBDC rollout in the U.S. has become a policy position for a few presidential candidates running in 2024. Florida Governor Ron DeSantis, the leading Republican Party candidate behind former U.S. President Donald Trump, said in July he planned to ban CBDCs if elected. Vivek Ramaswamy, another Republican candidate trailing behind DeSantis, has also criticized CBDCs, comparing the technology to China’s social credit system.

Some U.S. lawmakers have proposed different legislative approaches to tackling issues related to a CBDC rollout in the country, including limiting the Federal Reserve’s authority over issuing a digital dollar. Various U.S. states have also passed bills banning CBDCs as payment options, including Florida.

Magazine: Are CBDCs kryptonite for crypto?

UK financial watchdog could give crypto firms until January 2024 for marketing compliance

The United Kingdom’s Financial Conduct Authority, or FCA, has reiterated its warning for all crypto asset firms marketing to users in the country to be in compliance with rules going into effect in October 2023, but added companies could have “more time to implement certain changes”.

In a Sept. 7 notice, the FCA said crypto firms operating in the U.K. could have until January 8, 2024 to address technical issues related to its financial promotions regime if granted approval. The financial watchdog announced the rules aimed at curbing aggressive marketing by crypto firms in June, saying that companies would have to provide “clear, fair and not misleading” ads or risk criminal charges.

“Crypto firms must market to UK consumers clearly, fairly and honestly,” said FCA consumer investments director Lucy Castledine. “They must provide risk warnings people understand. As a proportionate regulator, we’re giving firms that apply a little more time to get the other reforms requiring technology and business change right.”

According to the financial watchdog, promotions falling under the compliance regime included “websites, mobile apps, social media posts and online advertising,” which were “capable of having an effect in the UK” and not limited to firms based in the country. The FCA suggested that it could pursue “robust action” against firms including adding company names to a warning list and requesting removal of social media accounts and websites.

Related: UK’s Travel Rule comes into effect, could halt certain crypto transfers

The modification of the enforcement rules, according to a Sept. 7 letter, came in response to crypto firms “not sufficiently considering how certain rules apply to the specifics of the cryptoasset services they provide” as well as significant changes required to be in compliance. Only firms granted approval will have until Jan. 8 — others face an Oct. 8 deadline.

“We understand the challenges firms have faced in preparing for the financial promotions regime. This will be the first conduct regime for the sector and represents a fundamental change to how cryptoasset activities are regulated in the UK.”

In addition to complying with the FCA’s marketing regime, companies must register with the regulator to “carry out crypto asset activities” in the United Kingdom. At the time of publication, the FCA listed 42 registered crypto firms in compliance with its requirements.

Magazine: Billions are spent marketing crypto to sports fans — Is it worth it?

Former FTX exec is planning to plead guilty to criminal charges: Report

Ryan Salame, the former co-CEO of FTX Digital Markets, is reportedly planning to plead guilty to criminal charges related to his alleged involvement in illicit activities at the failed cryptocurrency exchange.

According to a Sept. 7 Bloomberg report citing “people familiar with the case”, Salame plans to plead guilty to a variety of charges during a scheduled court appearance. His guilty plea would make him one of many executives previously tied to FTX to do so since the exchange’s collapse in November 2022.

Former Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang pleaded guilty to federal fraud charges in December 2022. FTX’s former engineering director Nishad Singh pleaded guilty to similar charges in February 2023.

FTX Digital Markets was crypto exchange FTX’s affiliate in the Bahamas, where many of the executives including former CEO Sam Bankman-Fried were based prior to the company’s bankruptcy. Bankman-Fried has pleaded not guilty to 12 criminal charges, which he will address in two trials scheduled to begin on Oct. 2, 2023 and March 11, 2024.

This is a developing story, and further information will be added as it becomes available.

Following SEC delays, Ark Invest and 21Shares file for spot Ether ETF

Amid the United States Securities and Exchange Commission (SEC) delaying a decision on Ark Investment Management’s spot Bitcoin (BTC) exchange-traded fund, the firm has proposed an investment vehicle with exposure to Ether (ETH).

In a Sept. 6 filing, Ark Invest and 21Shares requested the SEC approve the listing of shares of a spot ETH ETF on the Cboe BZX Exchange. The investment vehicle, called the ARK 21Shares Ethereum ETF, will have crypto exchange Coinbase act as a custodian and measure the performance of Ether based on the Chicago Mercantile Exchange CF Ether-Dollar Reference Rate.

The proposal from Ark Invest and 21Shares is one of many spot crypto ETFs that will be reviewed by the SEC. Following asset manager Grayscale winning an appeal to have the SEC reconsider allowing the listing of its Bitcoin Trust converted into a BTC ETF, many firms seem to have been hopeful of regulatory approval.

On Aug. 31, two days following the decision on Grayscale’s ETF, the SEC announced it would delay deciding whether to approve or deny spot Bitcoin ETF applications from 7 firms including BlackRock — the largest in the world. The spot Bitcoin ETF from Ark Invest and 21Shares was not included in the delay as its next deadline on approval, denial, or delays isn’t until Nov. 11.

Related: Crypto market ‘dramatically underestimates’ bullishness of spot Bitcoin ETFs

The current iteration of Ark Invest’s and 21Shares’ Bitcoin investment vehicle is the firms’ third attempt to launch a spot Bitcoin ETF since 2021. In August, the companies also proposed listings of two ETH futures ETFs — ETFs linked to crypto futures have had more success with the SEC following several approvals in 2021.

The price of ETH briefly surged following news of the ETF filing. According to data from Cointelegraph Markets Pro, the ETH price rose roughly 3% from $1,623 to $1,669 before returning to between $1,620 and $1,640.

Magazine: SEC delays BTC ETF decision, Grayscale triumphs over SEC and BitBoy gets the boot: Hodler’s Digest, Aug. 27 – Sept. 2