Do Kwon’s Bail Revoked; Terra Execs to Stay in Jail in Montenegro: Bloomberg

Key Takeaways

  • The higher courts of Montenegro annulled the decision of the basic court’s decision to release Kwon and Chang-joon on bail.
  • The two Terra executives are to remain in Montenegrin prison while awaiting their passport fraud trial.

12 days ago, Do Kwon and Han Chang-joon’s bail was accepted. Now, it has been revoked by the higher courts of Montenegro.

A high court in Montenegro annulled the lower court’s decision that would have allowed former crypto giant and co-founder of Terraform Labs, Kwon, to be released on bail, according to Bloomberg.

The announcement came from court spokeswoman, Marija Rakovic, who confirmed during a phone call on Wednesday with Bloomberg, that Kwon and his former chief financial officer, Han Chang-joon will continue to stay in prison in Montenegro for his passport fraud case.

Both had initially been granted approval for release on bail of $430,500, or 400,000 euros, by the Basic Court in Podgorica earlier this month. However, the prosecution challenged this decision, pushing the case back to a higher judge for further consideration.

With the high court’s decision, the Basic Court will be required to draft a new ruling that aligns with the decision made by the higher authority. Rakovic clarified that there is no legal limitation on the number of motions for bail that can be filed for the two former Terra execs.

“The Basic court should now make another decision, taking into account what the High Court ruled,” Rakovic told Bloomberg.

As it stands, the future of both Kwon and Chang-joon remains uncertain as they await the next court decision.

Binance Refutes Reuters’ Claims of Commingling: “Story is so weak”

Key Takeaways

  • Reuters published an article on May 23 that stated that Binance allegedly commingled customer money based on an insider scoop.
  • Binance denies the allegations, stating that despite regulatory shortcomings, Binance keeps customer and personal funds on two separate ledgers.

Binance, the world’s largest cryptocurrency exchange by trading volume, is staunchly denying allegations made by Reuters that it commingled customer funds with its own revenue in 2020 and 2021. Patrick Hillmann, Binance’s chief strategy officer, dismissed the report on Twitter as conspiratorial and lacking substantive evidence, countering accusations sourced from a “former insider.”

The Reuters report claimed that Binance frequently commingled billions of dollars in accounts it held at the now-defunct Silvergate Bank. The news outlet, citing bank records, alleged that in one instance, Binance blended $20 million from a corporate account with $15 million from an account containing customer funds. 

Commingling funds is when a company mixes customer funds with personal funds, preventing the proper tracking of client money in case of unexpected loss or other instances, according to Cornell Law. 

Hillman further stated that “there’s no reason for a respected news outlet like Reuters to continue making stuff up,” as the news publication has been going after Binance a few times for alleged money laundering and other related accusations. 

The allegations come amid a legal battle with the U.S. Commodity Futures Trading Commission (CFTC) that alleged that certain Binance entities commingled funds. In March, the CFTC sued Binance, claiming that “for years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance.”

In a response to Reuters, Brad Jaffe, a Binance spokesperson, clarified that the accounts at Silvergate Bank were not used to accept user deposits but were instead used to facilitate user purchases of cryptocurrencies. Jaffe stated that “there was no commingling at any time because these are 100% corporate funds.” Founder of Bitinning Kashif Raza summarized on Twitter:

Hillmann further defended Binance, insisting that “user and corporate funds are kept on entirely separate ledgers.” While he did not categorically deny the practice of fund commingling, Reuters did, stating: 

“Reuters found no evidence that Binance client monies were lost or taken.”

Bitget Receives Polish Regulatory Licence as Fifth-Largest Exchange Moves Further into EU

Key Takeaways

  • Bitget received regulatory approval in Poland as a virtual asset service provider to operate in and from Poland.
  • This makes Poland the seventh EU country for which Bitget has received regulatory approval.

Cryptocurrency exchange Bitget confirmed its registration as a Virtual Asset Service Provider (VASP) in Poland on May 23, granting Bitget the legal right to conduct operations within the Polish cryptocurrency market.

Gracy Chen, managing director of Bitget, stated that the adoption of regulatory frameworks is crucial for the cryptocurrency sector to become mainstream. She added that recent registrations in Lithuania and Poland strengthen Bitget’s presence in Europe.

Bitget, an exchange with an average trading volume of around $10 billion, acquired a VASP license in Lithuania in April, which makes the Polish registration the seventh EU country where Bitget received registration. The exchange will be able to conduct cryptocurrency-related business from the countries of registration and work with regulatory authorities, ensuring that a part of Bitget’s 8 million users can transact in compliance with regulations.

In Poland, VASP recipients must comply with Anti-Money Laundering and Know Your Customer requirements, while Polish tax laws stipulate that profits from corporate cryptocurrency-related activities are taxed at a standard rate of 19% and not subjected to the value-added tax. For the EU as a whole, the newly approved MiCA laws will take effect in 2024, meaning that exchanges will have to provide further documentation of regulatory compliance and customer protection.

Chen further commented: 

“​​By proactively working with policymakers and regulators across the EU and worldwide, Bitget aims to enable open access to crypto in a safe, responsible and compliant manner.”

Bitget released a transparency for Q1 2023 that showed the exchange’s growth, increasing employees from 1,000 to 1,300 and seeing a rise in its proof of reserves from 223% to 246%. Its native token, BGB, locked in a 120% gain, with the exchange stating in the report that it was “surpassing all other exchange tokens.”

Genesis’ Parent Company DCG Missed a $650M Payment to Gemini, 232,000 Earn Users in Limbo

Key Takeaways

  • Genesis’s parent company Digital Currency Group (DCG) failed to make the $650 million in debt repayment to Gemini.
  • Today, May 22, Gemini will file a Gemini Master Claim to look to return over $1 billion in digital assets for its Earn Users.

The Digital Currency Group (DCG), a leading crypto conglomerate and parent company of Genesis’ lending division, finds itself entangled in the bankruptcy proceedings between Gemini and Genesis. The last few weeks had many fearing that the company might default on a repayment to the bankruptcy estate starting the week of May 9.

This fear was confirmed in a Gemini transparency report when Gemini, a crypto exchange and Genesis creditor, announced on Friday that DCG failed to make a $630 million payment due the week of May 9:

“In the event a deal cannot be reached, Gemini (along with the other parties) is working with Genesis to suggest terms for an amended plan of reorganization that could be advanced without DCG’s consensual participation.”

Earlier in May, Genesis’s creditors agreed to a 30-day mediation period and a court-appointed mediator after a fraction of the creditors distanced themselves from a February reorganization plan. The update read, “Gemini to begin a 30-day process to mediate ‘the contribution to be provided by DCG and its affiliates’ to the Genesis bankruptcy.” 

Gemini is planning to file a claim against Genesis, stating in the update: 

Gemini has been preparing the Gemini Master Claim, which must be filed on Monday (5/22). The Gemini Master Claims seeks the return of over $1.1 billion of digital assets that Genesis has refused to return to the 232,000 Earn users who had active loans as of January 19, 2023.”

Genesis, Gemini and groups representing creditors such as the Unsecured Creditor Committee (UCC) are currently discussing whether to grant DCG forbearance, thus providing an avenue for the company to circumvent a default. According to Gemini, part of this decision is contingent upon the parties’ confidence in DCG’s willingness to engage sincerely in negotiations toward a consensual resolution.

A collaboration between Gemini and Genesis on the proposed terms of a new plan will be planned if mediation cannot be reached, as “terms for an amended plan of reorganization […] could be advanced without DCG’s consensual participation.”

Texas Votes to Require Exchanges’ Proof of Reserves; Next Stop Governor’s Desk

Key Takeaways

  • Both Texas’ House and Senate voted in favor to require digital asset service providers to have audited proof-of-reserves, protecting customers’ assets.

Texas is set to become the first state in the United States to pass a bill requiring digital asset service providers, such as crypto exchanges, to maintain proof of reserves. The bill, House Bill 1666, was approved by the Texas Senate on May 15, passed in the Texas House on May 18 and will head to the governor’s desk for final approval. 

The bill requires crypto exchanges that serve more than 500 customers in Texas and have at least $10 million in customer funds to segregate customer funds from their own operational funds and to provide proof of reserves to the Texas Department of Banking on an annual basis. Along with that:

“A digital asset service provider may not maintain customer funds in such a manner that a digital asset customer may be unable to fully withdraw the customer’s funds.”

The bill is designed to protect consumers from fraud and ensure that they have access to their funds when they need them. A yearly audit will be mandatory, and operational funds shall not be paid for with the customer’s money. This comes right after Texas’ House passed legislation that would add the right to use cryptocurrency in the Texas Bill of Rights. 

The Texas Chamber of Digital Commerce supported the bill upon Bill 1666’s first draft in February 2023, stating in a support letter:

“Chamber has advocated that this standard of transparency, which requires verification that a custodian holds that appropriate reserve backing the digital asset for the customer, must be implemented and enforced.”

Another industry supporter of Bill 1666, President of the Texas Blockchain Council Lee Bratcher, took to Twitter to express his excitement about the bill, saying that “with the passage of HB 1666, Texas is continuing to demonstrate that we are the leader in blockchain and digital asset innovation.”

While Texas Governor Greg Abbot still has to decide on the bill’s fate, it would be a major victory for the crypto industry in Texas. Pierre Rochard, vice president of research at Riot Platforms and among the few who testified in front of Texas State Congress in favor of this bill, supported the passing of the bill, tweeting: 

“Texas is Bitcoin Country!”

SlingShot DAO Launches Platform to Utilize DAO Votes for New Game Onboarding

SlingShot DAO, a gaming idea launchpad, created a platform that aims to democratize game creation — putting users in charge of which game to add to the platform. Anyone can submit their game ideas, which are then voted on via the DAO community of gamers on the SlingShot app. The most popular ideas are then greenlit for development and funded by the SlingShot DAO Treasury. A representative of SlingShot further stated:

“Our platform invites all demographics within the gaming ecosystem to work together, fostering an environment of collaboration and innovation.”

Live on both Roblox and The Sandbox, both Web2 and Web3 players will be able to play on the platform. The DAO enables all players to bring their game ideas to be voted on so that Web3 players can use governance voting to add a new game to the network. 

All subsequent revenue from the game and voting go back into the app’s Web3 community via SLING tokens. SlingShot DAO also rewards voters and creators with SLING, while game studios can earn USDC, SLING and 20% of the game’s revenue, all of which can be used to participate in future game development projects. 

SlingShot DAO was launched on May 5 with the intention to give players a greater say in the games they play, as well as bring users together “to collaboratively ideate, design, and create the next breakthroughs in virtual gaming worlds.” It is backed by a number of crypto gaming industry leaders, including Animoca Brands, Dragonfly Capital, DCG and Sfermion. 

Still in its early stages, SlingShot DAO was created to change the way games are made, decided on and launched. The platform has the potential to empower players and give them a greater stake in the games they play.

Binance Australia Suspends Cash Withdrawals, Loses Banking Partner due to Compliance Shortcomings

Key Takeaways

  • Binance Australia suspended PayID and bank deposit deposits and withdrawals for Australian dollars due to third-party peyment provider.
  • The third-party platform, Cuscal, stated that Binance failed to meet the platform’s compliance regulations.
  • Binance Australia still operates debit or credit on its peer-to-peer marketplace.

Binance Australia, a subsidiary of one of the industry’s largest cryptocurrency exchanges, has announced that it will be suspending deposits and withdrawals of Australian dollars via PayID and bank deposits for Australian users. The company cited a decision made by a third-party payment partner as the reason behind the sudden disruption, but it does not affect credit or debit card transactions on the peer-to-peer marketplace. 

In an email, Binance Australia said that it was working hard to find an alternative provider to continue offering AUD deposits and withdrawals. The company also noted that credit and debit card purchases were still operational on its peer-to-peer marketplace. Binance further published the news on Twitter: 

The third-party company, Cuscal, said that Binance failed to meet its strict compliance requirements in an effort to reduce scams and frauds, further telling the Sydney Morning Herald that “Cuscal has strict due diligence, onboarding and compliance requirements for our clients and any of their customers and/or merchants… Cuscal has, and will continue to, terminate any clients or their customers and/or merchants that do not meet our strict requirements.”

Binance has yet to state when it expects to resume offering PayID and bank deposits. 

The decision to suspend PayID and bank deposits follows a series of setbacks for Binance Australia. In March, the Australian Securities and Investments Commission (ASIC) cancelled Binance Australia’s derivatives license after a request from the company itself due to the Commission starting a “targeted review” of Binance, according to Reuters. 

Binance CEO Changpeng “CZ” Zhao took to Twitter to further explain the cancellation: 

Binance Woes

This latest setback for Binance comes at a time when the exchange is facing increased scrutiny from regulators around the world. 

In the United States, the New York State Department of Financial Services ordered Paxos, the company that mints BUSD and other stablecoins, to stop minting Binance USD (BUSD) starting on Feb. 21, 2023. While the reason for this decision is still at large, the Wall Street Journal believes that it could be because the SEC is looking to sue Paxos for creating unregistered securities. 

CZ said on Twitter that while Binance does not support the decision, they will stop using BUSD for trades: 

Meanwhile, Binance departed from Canada amid Canadian regulators tightening their crypto regulations. CZ tweeted, “we had high hopes for the rest of the Canadian blockchain industry. Unfortunately, new guidance related to stablecoins and investor limits provided to crypto exchanges makes the Canada market no longer tenable for Binance at this time.”

Ripple Scores Win in XRP Securities Lawsuit: Hinman Speech Stands

Key Takeaways

  • Federal Judge Analisa Torres denies the motion to seal the Bill Hinman speech in the SEC vs Ripple trial.
  • The speech has the former SEC commissioner stating that he doesn’t see Bitcoin or Ether as securities.

Judge Analisa Torres denied the Securities and Exchange Commission’s (SEC) motion to seal documents related to a controversial speech on cryptocurrency by former SEC official Bill Hinman. Judge Torres wrote in the court document: 

They are judicial documents subject to a strong presumption of public access.”

The SEC sued Ripple Labs in December 2020, alleging that Ripple sold XRP as an unregistered security, but Ripple has argued that XRP is not and has not been a security.

However, the driving force that Ripple banked on was the Hinman speech. Hinman, who was then the director of the SEC’s Division of Corporation Finance, said in the speech that he did not believe that Bitcoin nor Ether was a security.

The SEC has argued that Hinman’s speech was his personal opinion and not the official position of the SEC, but Ripple argued that the speech shows that the SEC has no clear definition of what constitutes a security. 

The judge’s decision to deny the SEC’s motion to seal the documents is a win for regulatory transparency and could have implications for the future of cryptocurrency regulation. The SEC has been criticized for its inconsistent approach to regulating digital assets, and the Hinman speech has been seen as a potential turning point in the debate over whether XRP and other cryptocurrencies are securities.

Ripple CEO Brad Garlinghouse welcomed the judge’s decision, saying that it was “another win for transparency.” He also said that he was “confident” that Ripple would ultimately prevail in the lawsuit:

Bitcoin Cash Network Enables Developers to Create Tokens

Key Takeaways

  • Bitcoin Cash upgraded its network to include CashTokens, a token that allows developers to customize tokens for various use cases.
  • Amid the tepid popularity of BCH, this upgrade is expected to lower transaction fees and improve scalability on a secure platform.

At block height 792,772, CashTokens was officially implemented on the Bitcoin Cash network on May 15, 2023. This new upgrade allows developers to create tokens, CashTokens, with the same properties as Bitcoin Cash (BCH) and be issued by anyone using the network. 

CashTokens are similar to ERC-20 tokens on the Ethereum network, and they allow users to create and manage their own tokens that could represent a wide variety of assets, including fiat currencies, stocks and bonds. 

Bitcoin Cash developer Jason Dreyzehner, also known as Bitjson on Twitter, announced the successful implementation of CashTokens, following with a Twitter thread highlighting exactly what this means for the network.

This upgrade provides a more seamless and user-friendly experience for both developers and end-users. “They can be issued by anyone, and they can both represent physical assets and directly serve as currencies, payment stablecoins, commodities, securities,” Dreyzehner tweeted.

With these customizable tokens on the Bitcoin Cash network, the upgrade aims to facilitate a broader range of use cases including DApps and NFTs. Lower transaction fees, improved scalability and a secure and robust platform for token creation will soon follow in an attempt to promote innovation on the network as a way to “show them how free, fair, and resilient money works.”

Bitcoin Cash hard forked from the Bitcoin network on August 1, 2017, because of a disagreement with increasing block sizes. One year later, due to a further disagreement regarding increasing block sizes, another hard fork occurred and split into Bitcoin SV. 

While BTC and BCH hold similar inflation and halving processes, Bitcoin Cash has lower transaction fees at higher speeds. But, it has been having a hard time getting long-term investors.

Despite the upsides that Bitcoin Cash seems to have over Bitcoin, the number of active wallet addresses for Bitcoin Cash has not matched its bullish beginning. Active wallet addresses peaked in January 2018 at 166,000. As of May 16, 2023, that number sits as at around 40,000. It remains to be seen if and how this new update could reignite the interest in Bitcoin Cash.

Source: BitInfoCharts

EU Council Approves Comprehensive Crypto Regulatory Framework

Key Takeaways

  • The European Council has approved Markets in Crypto-Asset (MiCA), the comprehensive regulatory framework for crypto usage in the EU.
  • MiCA’s main focus is consumer protection, requiring crypto-asset service providers to register in the countries of operation and ensuring stablecoin reserves.

The European Union Council — the financial arm of the EU — approved the Markets in Crypto-Assets (MiCA) regulations on May 16, a landmark piece of legislation that will establish a comprehensive regulatory framework for cryptocurrencies within the borders of the EU.

The MiCA frameworks were first proposed by the European Commission in 2020, with the legislation being formally adopted by the European Parliament in April 2023. After debates and negotiations between EU member states and stakeholders in the crypto industry, the final text of the regulations was agreed upon by all members of the European Council on May 16, 2023.

Scheduled to be implemented in 2024, MiCA will establish a number of requirements for crypto service providers such as licensing, customer due diligence and risk management. The regulations will also create a framework for issuing and trading stablecoins, utility tokens, and other digital assets such as NFTs.

Under MiCA, customer protection is the main focus. Stablecoin issuers must have sufficient reserves to back their fiat-pegged coins in case of a crash, while crypto-asset service providers must obtain a license from regulators in the EU countries where they operate. These will help provide suitable security measures and risk protection for customers. 

MiCA’s framework has been welcomed by some in the crypto industry, who see it as a necessary step to protect investors and promote innovation. Meanwhile, United States SEC Commissioner Hester Peirce stated that “MiCA should serve as a model for us [the United States]” at the Financial Times’ crypto and digital assets summit on May 11, 2023.

Alongside MiCA, the European Council will be formally voting at the end of May to include tax regulations to its new regulatory framework for crypto. Called the Directive on Administrative Cooperation (DAC8), these additional regulations will be an attempt to combat tax evasion from EU residents and provide extra surveillance, especially for those who own over 1 million euros in high-yield assets.

Zimbabwe Sold $39M Worth of Gold-Backed Crypto Amid IMF Warning

Key Takeaways

  • Despite warnings from the IMF, the Reserve Bank of Zimbabwe received 135 applications for gold-backed crypto tokens.
  • The applications amassed 14.07 billion Zimbabwean dollars in gold-backed tokens in hopes of reviving the Zimbabwean economy.

The Reserve Bank of Zimbabwe (RBZ) has sold $39 million worth of gold-backed crypto, around 14 billion Zimbabwean dollars, in an attempt to stabilize the country’s economy and reduce the continued depreciation of the local currency against the U.S. dollar, despite warnings from the International Monetary Fund (IMF).

The RBZ announced on May 12 that it had received 135 applications, totaling 14.07 billion Zimbabwean dollars, to buy the 139.57 kilograms of gold-backed cryptocurrency. The tokens were sold at a minimum price of $10 for individuals and $5,000 for corporations and other entities.

The IMF warned that the introduction of the gold-backed crypto tokens could pose a risk to financial stability, stating that the sale of these tokens could pose a risk to the Zimbabwean dollar volatility and instead should be working to “liberalize its foreign-exchange market,” according to a Bloomberg report on May 9. 

A spokesperson told Bloomberg that “a careful assessment should be conducted to ensure the benefits from this measure outweigh the costs and potential risks including, for instance, macroeconomic and financial stability risks, legal and operational risks, governance risks, cost of forgone FX [foreign exchange] reserves.”

The RBZ has defended the move, saying that the gold-backed crypto tokens will provide a more stable store of value than the Zimbabwean dollar, with the official application stating

“The RBZ Gold-backed Digital Tokens are being issued to expand the value-preserving instruments available in the economy, enhance divisibility of the investment instruments and widen their access and usage by the public.”

The gold-backed crypto tokens are expected to be an important tool in stabilizing the Zimbabwean economy, one that has been under “enormous pressure” to recover from its ever-rising inflation, according to Bloomberg.

Zimbabwe President Emmerson Mnangagwa empathized with the struggles of the poor and marginalized when he promised to revive the economy in a 2019 State of the Nation address, adding:

“Getting the economy working again from being dead will require time, patience, unity of purpose and perseverance.”

Celsius Transfers $75M of Ethereum to Staking Service Figment

Key Takeaways

  • Accounts tied to Celsius moved 40,928 ETH into staking contracts on platform Figment from May 10 to May 12.
  • This 41,000 ETH staked adds to the $300,000 in ETH currently staked by Celsius.

Celsius Network, a defunct crypto lending platform, transferred 40,928 ETH, or $70 million, to staking service Figment last week, according to data from crypto intelligence firm Arkham Intelligence.

The transfer was spread across 14 transactions between May 10 and May 12 and put into staking contracts owned by Figment, according to Etherscan. It is considered the largest movement of funds for Celsius since filing for Chapter 11 bankruptcy protection in July 2022. 

Tom Wan, research analyst for 21co — the parent company of 21shares — further confirmed: 

Wan noted that this was Celsius’ first movement to Figment after one year, stating that Celsius could have used its own staking pool for the 40 thousand Ether. 

Staking is a process of locking up crypto, such as Ether, for a set amount of time in order to earn rewards for validating transactions and creating blocks on the network. 

While Figment offers around 5.6% of annualized staking rewards, according to its website, Celsius has a staked Ether portfolio and even withdrew some of its funds in April 2023. Celsius has almost $300 thousand in staked ETH at the time of writing, according to Dune Analytics.

Celsius legal battles

The embattled crypto lender filed for bankruptcy on July 14, 2022, and has been exploring plans for restructuring and recovery amid reports that Celsius operated in a Ponzi-scheme manner. Meanwhile, former CEO Alex Mashinsky has been in some legal hot water. 

In January 2023, Mashinsky was sued by New York Attorney General Letitia James — the judge notable for suing Tether and Bitfinex — for defrauding investors. In February 2023, Mashinsky was again sued by creditors, who claimed that the executives cashed out before the platform collapsed. 

While it is too soon to tell what Celsius plans to do with the results of the staked ETH both on and off Figment, the Southern District of New York approved a restructuring plan that allows around 85% of customers to receive 72.5% of their crypto back from the Celsius. 

The right to use digital assets to be added to Texas Bill of Rights

Key Takeaways

  • Texas legislature voted positively to add the right to use digital assets as “a mutually agreed upon medium of exchange” to Texas’ Bill of Rights.
  • If contested by the federal government, this could spark a nation-wide precedent to add the use of digital assets to the United States Bill of Rights.

The state of Texas has made a historic move by voting on an amendment that includes the possession, retainment and utilization of cryptocurrencies in its state Bill of Rights, signaling a major step toward digital-asset adoption. This new addition called House Joint Resolution 146 (HJR146) and backed by the Texas state legislature on May 10 and May 11, passed with 139 votes for and two votes against. The official bill states: 

“The right of the people to own, hold, and use a mutually agreed upon medium of exchange, including cash, coin, bullion, digital currency, or privately issued scrip, when trading and contracting for goods and services shall not be infringed.”

The Texas Bill of Rights mirrors the United States Bill of Rights, meant to protect human rights such as freedom of religion, speech and others stated in the U.S. Bill of Rights. Texas’, however, includes additions such as the human right to own guns and protection from being imprisoned due to debt.

Tom Glass, founding memeber of the Texas Constitutional Enforcement group, went to Twitter to state the next steps of HJR146: 

The forthcoming House vote on HJR 146 marks an important step towards solidifying the right of Texans to utilize digital currencies within their state. If the amendment is successfully added as an amendment and gains popular support, it could set a precedent for other states to follow suit because of the 9th Amendment, as explained in the tweet above.

The 9th Amendment of the U.S. Bill of Rights states that “the enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people,” essentially putting into writing that rights not listed in the other amendments exist. If the Federal courts decide to contest this decision, the 9th Amendment could help bolster the mainstream acceptance of cryptocurrencies across the United States.

Lawyers of Kwon, Chang-joon Request $400K+ Bail and House Arrest

Key Takeaways

  • Lawyer’s of Kwon and Han Chang-joon asked for a $436,000 bail for each and house arrest in Montenegro.
  • This trial is one in many, with South Korea and the United States charging Kwon for multiple criminal charges each.

The attorneys representing co-founder of Terra Do Kwon and Terra executive Han Chang-joon proposed that they be put under house arrest upon posting bail of 400,000 euros each, approximately $436,000, according to a notice from the Basic Court in Podgorica, Montenegro on May 11. Under such circumstances, Kwon and Chang-joon would be restricted to a Montenegro apartment and obligated to periodically report to the designated state authority.

Montenegro authorities are progressing with charges for attempting to travel with false documents against Kwon and Chang-joon as their lawyers negotiate bail conditions.

Kwon and Chang-joon were apprehended at Podgorica airport by Montenegrin authorities on March 23, 2023, allegedly using falsified passports to attempt to travel to Dubai. The notice, translated further stated: 

“At the main hearing, the defendants denied the commission of the criminal offense they were charged with and presented their defense.”

Through their legal representatives, Kwon and Chang-joon have pleaded not guilty to these charges while prosecutors have contested the proposed bail conditions. Their criminal trial is set for June 16.

Despite efforts from U.S. and South Korean officials to extradite the Terra co-founder to their jurisdictions, it is expected he will first face legal proceedings in Montenegro before the two other countries fight for extradition.

One year ago, on May 11, 2022, algorithmic stablecoin Terra Classic (USTC) pegged to Luna Classic (LUNC) suffered a massive depegging and fell over 80% after LUNC lost value, triggering a significant crypto market downturn. As his criminal case progresses in Montenegro, South Korean authorities seized over $2 million of Kwon’s personal assets on May 10.

EU to Crack Down on Crypto Tax Evasion with Greater Surveillance: Impending Legislation

Key Takeaways

  • All EU member states are now in support of the Directive on Administrative Cooperation (DAC8), a crypto-tax framework to decrease tax evasion.
  • The proposed framework would increase surveillance of crypto exchanges, marketplaces, and other crypto-related services.
  • DAC8 will be consistent with other EU crypto legislation, as well as OECD guidelines on proper implementation of crypto-tax regulation.

The European Commission is making progress toward an EU-wide agreement, called the Directive on Administrative Cooperation (DAC8), to curb tax evasion and better track crypto transactions within EU borders.

Building on top of existing legislation, the new amendment will “expand the reporting and exchange of information between tax authorities within the European Union to cover income or revenue generated by users residing in the EU while operating with crypto-assets.”

EU Commissioner and director of taxation Benjamin Angel took to Twitter on Wednesday to celebrate the overwhelming support of DAC8:

First developed and presented to the EU Commission on December 8, 2022, the framework proposes “new tax transparency rules for all service providers facilitating transactions in crypto-assets for customers resident in the European Union.” Final negotiations will take place in the European Parliament later in May 2023.

DAC8 will help EU tax authorities monitor EU residents who hold crypto⁠ in hard-to-find places, usually overseas, which would otherwise be unknown to EU authorities. The legislation will also require crypto-asset services providers, such as exchanges and marketplaces, to report customer transactions⁠, as well as grant EU authorities additional powers to monitor those who hold over 1 million euros in high-yield assets.

The amendment is consistent with previous crypto-tax policies proposed by the Organization for Economic Co-operation and Development (OECD), which seeks to regulate crypto-tax reporting based on the suggestions of EU member countries.

The OECD released a proposal on new crypto tax reporting rules on March 22, 2022, called the Crypto-Asset Reporting Framework (CARF), in an attempt to standardize the international exchange of crypto-related transaction data between tax authorities and crypto-asset service providers.

The OECD approved the CARF in August 2022 and presented the amended standard to central bank of governors of the G20.

Do Kwon’s Luxury Cars, Apartments Seized as Courts Freeze $2B of His Assets

Key Takeaways

  • Korean courts have frozen $2 billion of Do Kwon’s assets and seized luxury cars and apartments.
  • Await Kwon is still passport fraud trial in Montenegro and eight criminal fraud charges in the United States

South Korean authorities have frozen around $2 billion worth of assets tied to Do Kwon, the CEO of blockchain firm Terraform Labs, as they continue their investigation into the catastrophic crash of cryptocurrencies Terra Classic (USTC) and Luna Classic (LUNC). 

Local legal insiders disclosed that Seoul’s Southern District Court approved a pre-indictment asset seizure request by prosecutors targeting Kwon’s wealth on May 10, according to local news outlet Hankyung. The request sought to freeze around 2.33 trillion Korean won (approximately $2 billion) in assets that Kwon allegedly accrued through criminal activities. This pre-indictment seizure prevents the disposal of assets or profits obtained by a defendant before a conviction is finalized.

The court’s decision puts a halt on Kwon’s disposal of various high-value assets, including the luxurious “Galleria Foret” apartment complex in Seoul’s Seongdong-gu district, the rights to newly constructed office-tels in Nonhyeon-dong and several imported luxury vehicles. In addition to these physical assets, financial holdings such as securities held with Mirae Asset Daewoo, deposits in Woori Bank, and cryptocurrencies in various exchanges are also now frozen. The court rejected requests to freeze some of Kwon’s other unspecified financial assets.

Kwon, currently indicted without detention, and Hyun Sung Shin, former CEO of Chai Corporation, co-founded Terraform Labs in 2018 and launched the USTC stablecoin and LUNC cryptocurrencies. Following the project’s collapse, Terraform Labs rebranded its cryptocurrencies: dollar-pegged TerraUSD (UST), which is now defunct, turned into Terra Classic; and the more speculative Terra (LUNA) rebranded to LUNA2 while the original LUNA blockchain was renamed Luna Classic (LUNC). 

 In May 2022, a drastic plunge in the value of these coins inflicted global investors with losses approximated at a staggering 50 trillion won, or around $44 billion.

Following the Terra crash, Kwon left South Korea and had been elusive until he was arrested in Montenegro on March 23, 2023, facing charges of using a counterfeit Costa Rican passport on his way to Dubai. Kwon is now awaiting trial in Montenegro for passport fraud charges, while the United States charged Kwon with eight criminal charges of fraud. Korean and United States prosecutors are uncertain when they will be able to secure his extradition.

Sam Bankman-Fried Wants 10 Charges Dropped, Not Guilty on All Counts

Key Takeaways

  • Sam Bankman-Fried of FTX wants 10 counts of criminal charges dropped due redundant and improperly made charges.
  • This comes after SBF pleated not guilty on all counts

Sam Bankman-Fried (SBF), the former CEO and founder of collapsed crypto exchange FTX and research group Alamada Research, seeks to have 10 criminal charges dropped because “rather than wait for traditional civil and regulatory processes following their ordinary course to address the situation, the Government jumped in with both feet, improperly seeking to turn these civil and regulatory issues into federal crimes,” according to the first motion to dismiss submitted on May 8. 

The former CEO’s legal team added two more counts to be dismissed were added on May 8 and is seeking dismissal based on the redundancy of charges.

The Southern District Court of New York received the motion of dismissal for all charges except for three counts: conspiracy to commit commodities fraud, conspiracy to commit securities fraud and conspiracy to commit money laundering. The legal team brought up one charge, “conspiracy to defraud the United States,” based on a violation of campaign funding laws, and wants it to be dropped because “extradition was granted solely on the first seven counts referenced in the Diplomatic Note—not the final count for conspiracy to defraud the United States and violate the campaign finance laws.” SBF’s lawyers argue that “none of the factual allegations [are] supporting that charge.”

The official court document detailing why charges should be dropped read: 

“Mr. Bankman-Fried had not defrauded anyone, nor intended to defraud anyone.”

Bankman-Fried was arrested in the Bahamas in December 2022 and eventually booked with 13 counts of criminal charges, many referencing defrauding customers and bank fraud linked to the eventual collapse of the FTX exchange. He was promptly expedited to the United States on eight charges of fraud and money laundering, with more charges added as investigations uncovered more evidence.

He was additionally charged with allegedly bribing one or more Chinese officials with $40 million on March 28, specifically that SBF “directed and caused the transfer of at least approximately $40 million in cryptocurrency intended for the benefit of one or more Chinese government officials,” according to the docket:  

“SBF stole FTX customers’ deposits, and used billions of dollars in stolen funds for a variety of purposes.” 

Bankman-Fried has pleaded not guilty on all counts. Prosecutors have until May 29 to respond, and the hearing for dismissal will be on June 15.

Crypto Whale Loses $500K+ Speculating on Pepe Memecoin

Key Takeaways

  • PEPE memecoin was listed on Binance on Friday and went from $0.00000420 to $0.00000211, resulting in huge losses for investors
  • One whale is seeing huge losses — up to $500,000 after investing $2.46 million into PEPE

Following its Friday launch on Binance, the PEPE memecoin dropped 38% after three days, resulting in steep losses for speculators.

Pepe Coin (PEPE), the memecoin launched on April 15, has experienced a significant price drop recently, losing 38% of its value in just a few days.

PEPE was recently listed on Binance on May 5, 2023, peaking at $0.00000420. It boasted a $1 billion market cap when the token price rose 67% on Saturday after its listing on Binance. However, PEPE’s price fell from around $0.00000420 on May 5 to $0.00000259 on May 7. PEPE sits at $0.00000211 at the time of writing, according to data from CoinGecko. 

The Binance team noted, “PEPE has no token utility or value support mechanism. Also, there are signs that certain insiders or team members were able to buy 7% of the total token supply minutes after TGE [token generation event].” Memecoins usually have no real utility and operate on the virality of the meme itself. Those who are early investors and sellers could see large profits, while those mistiming these sales could result in huge losses. 

This was the case for one whale. This hopeful investor bought 962.3 billion PEPE for $2.46 million. At the time of the below tweet by data firm Lookonchain, the whale lost $541,000 and counting. 

With popular memecoin such as Dogecoin, the price was often indicative of the actions of Tesla CEO Elon Musk. For example, when Musk announced that Tesla was accepting DOGE as payment, the price shot up 35.7%. With the price based on nothing concrete, DOGE and other memecoins such as SHIB or PEPE are akin to gambling. Binance’s CEO Changpeng “CZ” Zhao followed up the sudden PEPE price breakout with some helpful trading advice:

With PEPE’s current price of $0.00000211, at the time of writing and a market cap of $874,128,193, PEPE still has a significant following and is expected to experience the usual high and lows normal for a “token [that] has no utility and it is created by an anonymous team,” according to the Binance report.

SEC Reluctant to Define Digital Assets, Crypto Regulatory Uncertainty Continues

Key Takeaways

  • The SEC does not want to define “digital assets” in relation to hedge funds and private equity funds.
  • This is not the first time the SEC is undecided on defining notable crypto terms, referring back to the Ether as a security speculation.

Despite proposing a definition for digital assets less than one year ago, the SEC needs some extra time for deliberation.

The United States Securities and Exchange Commission (SEC) is not prepared to define “digital assets” for hedge funds and private equity funds, a phrase commonly used as an umbrella term for assets such as cryptocurrency, NFTs and more. Nine months ago, the SEC detailed a proposal to define digital assets in regard to hedge funds and private equity funds, despite backtracking on its decision today.

Back in August 2022, the SEC proposed: “We are adding Question 66 to section 4 to collect information about private equity fund investment strategies.” This proposal would be defining digital assets and adding the word to the official definition of the above funds.

Instead, the SEC went down a different route, writing in its May 3 proposal, “We propose to define the term ‘digital asset’ as an asset that is issued and/or transferred using distributed ledger or blockchain technology (‘distributed ledger technology’), including, but not limited to, so-called ‘virtual currencies,’ ‘coins,’ and ‘tokens,’” with the commission considering these terms interchangeable.

It would have been the first time the SEC has actually used and defined digital assets, but “the commission and staff are continuing to consider this term and are not adopting ‘digital assets’ as part of this rule at this time.”

Further proposals are constantly being negotiated, such as last month’s new definition that added “DeFi” and cryptocurrency “exchanges” to a proposal that defined market platforms. Chair of the SEC Gary Gensler said in response:

“Make no mistake: many crypto trading platforms already come under the current definition of an exchange and thus have an existing duty to comply with the securities laws.”

SEC woes

The SEC has been slow to define common terms used in crypto and even has been accused of working against the industry by not establishing a clear regulatory framework. A clear example is the suit against the SEC in November 2022, where Hodl Law sued the commission after the SEC “failed to clarify its jurisdictional authority over digital assets and failed to define whether it views digital assets as securities.” A lawyer who provides insight about legal issues in the crypto space and the metaverse, took to Twitter to comment on the suit:

MetaLawMan further tweeted: “But somehow, the SEC has taken 8 years to analyze whether Ether is a security—and it’s still officially undecided.” It is true: The SEC still has been unable to define Ether as a security, with the Chair Gary Gensler refusing to discuss it even one year later.

According to the Howey test’s framework for digital assets, defining Ether as a security will allow holding ETH to be defined as an investment and subject to federal laws that will make it difficult for Ethereum users. It will require disclosure agreements and registration of those listing Ether, causing issues for exchanges that list ETH and for DApps on the Ethereum Network.

Six months after questioning ETH’s security status, the SEC labeled nine cryptocurrencies as securities, an action criticized by many in the industry as “regulation by enforcement.”

Will AI Elevate Crypto Technology? Next to Leverage AI

Key Takeaways

  • launches new user assistant Amy powered by ChatGPT for real-time industry updates.
  • Other companies such as Binance, Solana Labs, and OKX have been testing and using AI models to improve their UX.

On May 2, announced the release of a personal crypto named Amy, an artificial-intelligence powered companion intended to “serve as a crypto expert resource for the average user, anchored in deep learning and data to help capture opportunities in the fast-moving sector,” according to the official release.

Powered by ChatGPT, Amy will aid in the education and general awareness of the industry, providing price listings, historical events, and real-time information about market prices and project releases, as well as helping to push the use of AI innovation in the industry. Amy will not, however, provide financial or investment advice and should not be considered an absolute expert on crypto, as Amy is still constantly learning and will be in testing mode for further expansions.

Despite skepticism surrounding AI, Abhi Bisarya, EVP and product of, said, “We are bullish on the innovation of AI in crypto, and we look forward to continuing to enhance the utility of Amy and deploy additional AI-powered capabilities.” exchange was founded in 2016 and boasts over 80 million customers, including its token, CRO.

The industry and AI

While is not the first to use AI to its advantage, many others in the industry have embraced the use of AI to power education in the industry.

In October 2022, cancer researchers using AI teamed up with blockchain technology on Ethereum to use smart contracts for an innovative advantage. Research by a team of 27 authors published in Nature Medicine stated that “Artificial intelligence (AI) can predict the presence of molecular alterations directly from routine histopathology slides.”

The team used Ethereum smart contract technology to share updates between themselves, allowing better synchronization of the AI model they had developed. Their research noted that updates to their AI models based on smart contracts were fulfilled without the need for a central coordinator.

Recently, Binance Sensei joined the Binance team to provide an education-based AI learning platform integrated with Binance Academy to better educate users on crypto in an easily readable and understandable way. Also powered by ChatGPT, “this user-friendly approach makes it easier than ever to dive into complex topics or quickly grasp new concepts, catering to a wide range of learning styles and preferences,” the announcement reads.

Solana Labs, a blockchain platform for scalable DApps, has created and is testing a ChatGPT plug-in that allows users to interact directly with Solana Labs. With this, users would be able to “check wallet balances, transfer tokens, and purchase NFTs” directly with the plug-in.

In March, the OKX exchange announced an integration with EndoTech to use AI algorithms to track crypto volatility designed to “analyze vast amounts of data and identify profitable trading opportunities in real-time.”

While there have been calls to pause AI experiments, with Future of Life Institute questioning in their petition, “Should we develop nonhuman minds that might eventually outnumber, outsmart, obsolete and replace us? Should we risk loss of control of our civilization,” top crypto companies embracing AI will help integrate one experimental technology into an experimental finance industry well prepared for the bearish, bullish, and regulatory future of AI.

Coinbase Sued by California for Mishandling Biometric Data

Key Takeaways

  • Coinbase has allegedly violated of Illinois’ Biometric Information Privacy Act (BIPA) and is being sued by the state of California
  • The suit alleges that Coinbase did not receive written consent from its customers regarding the storage and destruction of its users’ biometric data

Coinbase has been sued by the state of California in violation of Illinois’ Biometric Information Privacy Act (BIPA). The popular crypto exchange is accused of “unlawful collections, obtainments, use, storage, and disclosure” of users’ biometric data, specified as fingerprints and facial images, used in KYC confirmation. 

While biometric data is required for KYC, companies must disclose to customers why and for how long they will store that data. The company must also disclose how it will destroy collected biometric data, which the suit alleges Coinbase did not do.

“In fact, Coinbase made no mention of biometric information, collection of biometric information, or storage of biometric information.”

Michael Massel, the plaintiff, claims Coinbase is in direct violation of the BIPA. He seeks $5000 for each violation and another $1000 for other undisclosed violations “in the event the court finds that Coinbase’s violations of BIPA were not willful.”

The BIPA establishes that “individuals are in control of their own biometric data and prohibits private companies from collecting it” unless these companies obtain written consent from their customers. The ACLU of Illinois passed this law back in 2008 to prevent discriminatory and harmful misuse of people’s biometric data. 

Past Coinbase issues 

The industry has seen Coinbase in other legal struggles over the past few years. 

Back in January, Coinbase settled a $50 million lawsuit with the New York Department of Financial Services for $100 million because of its weak compliance program including deficiencies in its KYC processes, its transaction monitoring system, OFAC screening and AML risk assessments. 

Only six months earlier, the SEC investigated Coinbase over “at least nine” coins listed that could be classified as securities. As of May 2, 2023, Coinbase could be charged with securities violations, according to CNBC. The exchange received a Wells notice, which “typically precedes an enforcement action,” in March from the SEC.

These previous investigations have not stopped the SEC from issuing Coinbase further subpoenas for other potential listing violations. The SEC has already requested information on the exchange’s “processes for listing assets, the classification of certain listed assets, its staking programs, and its stablecoin and yield-generating products,” the exchange’s Q1 2022 report read

Hundreds of Bitcoin Wallets Controlled by Russian Intelligence Agencies Exposed: Report

Key Takeaways

  • Hackers found a way to mark the alleged 986 BTC wallets of Russian state intelligence agencies
  • The vigilante gained control of some of the private keys of these wallets and donated those funds to Ukrainian aid organizations
  • Three wallets of the 986 are confirmed to be linked to the Russian Foreign Military Intelligence Agency (GRU) and Foreign Intelligence Service (SVR)

Hackers revealed that 986 unique BTC wallets have allegedly been used by Russian state intelligence groups, amid the complicated relationship between crypto and the Russian government. 

A recently deleted Chainalysis report from April 26 revealed that by using the blockchain feature OP_RETURN, which allows senders to attach messages on transactions, Bitcoiners could trace the more “aggressive usage of BTC” by Russian State intelligence groups. Almost 1000 wallets were linked to Russia’s Foreign Military Intelligence Agency (GRU), Federal Security Service (FSB), and Foreign Intelligence Service (SVR).

The OP_RETURN feature, according to the Bitcoin Wiki, allows a user to void the transaction and “has at times been used to convey additional information needed to send transactions,” meaning that burned transactions can also broadcast and keep added messages on the blockchain forever. The so-called “OP_RETURN vigilante” burned over $300,000 in BTC to send messages via BTC transactions to these addresses between February 14, 2022 and March 14, 2022—putting the start of Russia’s Ukraine invasion right in the middle of the informant’s quest. 

The transactions included the four following texts in Russian: 

  • “GRU to SVR. Used for hacking!”
  • “GRU to GRU. Used for hacking!”
  • “GRU to FSB. Used for hacking!”
  • “Help Ukraine with money from the GRU Khakir”

What’s more, the vigilante is suspected to have gained access to the private keys of these wallets marked with the above four messages because the vigilante returned in April 2022 to send money from these wallets to Ukrainian aid addresses.

“The possibility that the OP_RETURN sender acquired private keys for Russian-controlled addresses also suggests that the Putin regime’s crypto operations aren’t secure,” Chainalysis reported.

At least three of these wallet addresses are confirmed to be owned by Russian agencies, according to the report. Wallets …ytPm and …2uPf are owned by the SVR, cybersecurity firm HYAS confirmed in a now-archived post. Wallet …4hDH is owned by the GRU, which was confirmed by the wallet’s connection to that had spread disinformation about U.S. politicians leading up to the 2016 U.S. presidential election.

While the Russian government agencies have yet to respond to the validity of the claims above, blockchain sleuths and hackers found a way to hypothesize how Russia has been using crypto to its advantage in its war against Ukraine.

“Those OP_RETURN message will be there forever — no government or corporation can take them down,” the Chainalysis report reads, highlighting how government officials can have trouble grasping basic principles of blockchain technology. 

Crypto’s relationship with Ukraine and Russia

Ukraine has fully embraced the use of crypto since the start of the war as an easy way for people to donate to Ukrainian war efforts. The Ukrainian government managed to collect $600,000 in donations in a matter of days and over $70 million within a few weeks of the war, with notable names such as Vitalk Buterin, the Canadian-Russian head of Ethereum, tweeting in support of Ukraine. 

Over the border, the Russian government has been uncertain about crypto adoption. In July 2022, Russian President Vladimir Putin signed into law a crypto ban on the payment of goods and services. Meanwhile, the Russian Duma expressed interest in developing a digital ruble CBDC for 2023 to be used only for specified goods and services.