Binance, U.S. Affiliate, Changpeng ‘CZ’ Zhao File to Dismiss SEC Lawsuit

“Indeed, since 2019, Congress has considered more than a dozen proposals that would provide a coherent and workable framework for crypto assets and their trading platforms,” the filing said. “Critically, none of those proposals would confer sole regulatory jurisdiction over the crypto industry to the SEC. Despite this, the SEC now seeks to expand its authority and filed this lawsuit, asserting claims against Binance Holdings Limited (‘BHL’) and Changpeng Zhao, among others.”

Judge Blocks Sam Bankman-Fried’s Proposed Witnesses From Testifying

Bankman-Fried’s defense team wanted to call seven individuals: Lawrence Akka, a British barrister; Thomas Bishop and Joseph Pimbley, who are with different consulting firms; Brian Kim, a data analytics and forensics expert; Bradley Smith, a law professor at Capital University Law School and Andrew Di Wu, an assistant professor at the University of Michigan.

Here’s How FTX Founder Sam Bankman-Fried’s Trial May Play Out

Though the trial is scheduled to begin next month, there’s still some time before the actual arguments are made. The first step, which may occur as soon as next week, is a final pretrial conference where Southern District of New York Judge Lewis Kaplan will lay out what a final witness schedule may look like, how long the trial date may be and rule on any final outstanding motions. Judge Kaplan may also entertain a few motions after the jury is selected, said Martin Auerbach, an attorney at law firm Withersworldwide.

Crypto Wants a De Minimis Tax Exemption in the U.S.

“Unlike traditional government-issued currencies, property does not enjoy a de minimis exemption. This is in contrast to how foreign currencies are treated, which do enjoy an exemption,” a letter authored by Coin Center said. “… This means that every time you buy a cup of coffee or anything else with bitcoin, it counts as a taxable event. If you have experienced a gain because the price of bitcoin has appreciated between the time you acquired the bitcoin and the time you used it, you have to report it to the IRS at the end of the year, no matter how small the gain. Obviously this creates a lot of friction and discourages the use of bitcoin or any cryptocurrency as an everyday payment method.”

Sam Bankman-Fried Remains Stuck in Jail

Originally, this newsletter was an analysis on whether or not Sam Bankman-Fried would be released from jail ahead of trial. A short while ago, Judge Lewis Kaplan, of the U.S. District Court for the Southern District of New York, ruled he wouldn’t be. So this is now just that article, with some added stuff, basically.

U.S. Judge Denies Sam Bankman-Fried’s Bid for Release From Jail Ahead of Trial

Bankman-Fried’s attorneys tried to argue that he needs to be able to work on his own defense, which isn’t possible without accessing various online databases. The judge was unconvinced, writing that neither Bankman-Fried nor any other defendant has a right to inspect every piece of discovery that is produced.

DOJ ‘Overreaching’ in Trying to Block Sam Bankman-Fried’s Proposed Witnesses, Defense Says

Prosecutors with the U.S. Department of Justice are trying to limit FTX founder Sam Bankman-Fried’s right to a fair trial by moving to block all of his proposed expert witnesses, defense attorneys said. The DOJ, for its part, said the defense mischaracterized a proposed prosecution witness’s planned testimony.

Sam Bankman-Fried, DOJ Propose Jury Questions Ahead of October Trial

“The function of the jury is to decide questions of fact,” the DOJ’s proposed questions suggested the judge say. “You are the sole judge of the facts and nothing that the Court or the lawyers say or do may encroach in any way on your role as the exclusive fact-finder. When it comes to the law, however, you are to take your instructions from the Court, and you are bound by those instructions. You may not substitute your own notions of what the law is, or what you think it should be.”

DOJ Claims About Sam Bankman-Fried’s Laptop Access Are ‘Inaccurate’, Defense Alleges

“Effectively, Mr. Bankman-Fried had no access to the internet for the entire 5-hour period,” the letter said. “… Despite the Government’s efforts, there does not appear to be a way to solve the internet access problem in the cellblock. That means that Mr. Bankman-Fried has no way to review and search documents the discovery database or the AWS database before trial. The defendant cannot prepare for trial with these kinds of limitations.”

SEC Counters Ripple in Effort to Appeal Groundbreaking XRP Ruling

Judge Torres ruled in July that Ripple violated federal securities law in how it sold XRP to institutional investors, but that it had not done so with retail investors. Another judge in the same court, Judge Jed Rakoff, disagreed with the judgment when he ruled on a different case, also brought by the SEC. The regulator pointed to this in its first memo and Friday’s filing as part of its bid to convince Torres to allow the so-called interlocutory appeal, allowing an appellate court to take up some legal questions while the case is still progressing in the original court.

Cboe’s BZX Exchange Files to Launch Ark 21Shares, VanEck Spot Ether ETFs

The exchange filed 19b-4 documents on Wednesday, formally kicking off a review process. Once the U.S. Securities and Exchange Commission (SEC) acknowledges the filings, it will start a 240-day clock for a final decision. The SEC will have a number of intermediary deadlines to make a decision, but has traditionally taken the maximum number of days possible to review applications.

Genesis Global Capital Files for Over $600M in Unpaid DCG Loans: Court Docs

“The May 9 DCG Request for wire instructions for repayment of the Loans at 10:37 p.m. (ET) on May 9, 2023 does not constitute a ‘timely’ request as contemplated in the MLA,” the DCG filing said. “Because Section II(c)(i) of the DCG MLA contemplates that, following DCG’s request for wire instructions, GGC shall provide the wire instructions no later than the day prior to the Maturity Date of a given Loan, the May 9 DCG Request cannot constitute timely notice with respect to the May 9 Loan or the May 10 Loan (given that it was sent on, not before, the Maturity Date for the May 9 Loan, and was sent approximately 90 minutes before midnight on the day prior to the Maturity Date for the May 10 Loan).”

Looking at Uniswap and Crypto’s New Favorite Ruling

“Due to the Protocol’s decentralized nature, the identities of the Scam Token issuers are basically unknown and unknowable, leaving Plaintiffs with an identifiable injury but no identifiable defendant,” the judge wrote. “Undaunted, they now sue the Uniswap Defendants and the VC Defendants, hoping that this Court might overlook the fact that the current state of cryptocurrency regulation leaves them without recourse, at least as to the specific claims alleged in this suit.”

Sam Bankman-Fried’s Laptop Has a New Battery Now, DOJ Says

Twice a week, Bankman-Fried has access to an internet-enabled laptop. Defense attorneys had previously raised issues about the battery life and weak internet connection, but Tuesday’s letter said the defense team had provided a new battery that “has approximately 8 hours battery life,” and the internet speed over the course of a day ranged from 7.5 megabits per second (mbps) to 34 mbps.

SEC Hasn’t Met Requirements to Argue for an Appeal, Ripple Says

July’s ruling did not “present a controlling question of law,” and neither did the SEC’s motion for an appeal, Ripple said in Friday’s filing, which added that the regulator hasn’t proven that different judges might disagree with the ruling, or that an appeal would lead to a faster end for the court case – all of which are requirements for the judge to approve an appeal, according to the filing.

After Grayscale Victory, SEC Kicks the Can on Latest Bitcoin ETF Applications

Judge Neomi Rao, writing for the unanimous court, said the SEC’s denial of the application was inconsistent with the approval of a pair of bitcoin futures ETFs, and did not explain why it viewed these types of products differently given the underlying bitcoin market had a “99.9% correlation” between spot and futures market prices. Grayscale’s argument that its proposed ETF was “materially similar” to the futures ETFs won.

Gemini Opposes Genesis Bankruptcy Plan: ‘Woefully Light on Specifics’

“Debtors have repeatedly promised that a plan that resolves claims against DCG is right around the corner, as they seek extension after extension of mediation periods, hearing dates, and bid deadline,” the Gemini filing said. The harm to Gemini is worsened by the fact, it said, that DCG has “not paid any of the approximately $630 million in loans that came due to the Debtors in May 2023.”

Tornado Cash Indictments May Prove to Be Just a Localized Storm After All

The Tornado Cash indictments could be another tipping point for crypto. How the case plays out could define how the federal government can deal with decentralized trading platforms if they’re seen as broad precedents. But the case may be much more straightforward than initial reactions suggested.

All of Sam Bankman-Fried’s Proposed Expert Witnesses Should be Barred From Testifying: DOJ

All of FTX founder’s Sam Bankman-Fried’s proposed witnesses should be disqualified from testifying because their disclosure filings are insufficient, their experience may be misleading or their planned testimony may not be relevant, prosecutors said in a late Monday filing. The defense team moved to bar one of the prosecution’s proposed witnesses as well.

Sam Bankman-Fried’s Defense Renews Push for ‘Temporary Release’ Ahead of October Trial

“We do not believe that anything short of temporary release will properly address these problems and safeguard Mr. Bankman-Fried’s right to participate in his own defense,” a Friday letter authored by defense attorney Christian Everdell said. “At the very least, however, we respectfully request that the Court reconsider its previous decision and order the Marshals to produce Mr. Bankman-Fried to the proffer rooms at 500 Pearl Street five days a week, where defense counsel can provide him with an internet-enabled computer that will permit him to review, edit, and share documents and work product with his attorneys. Defense counsel will be present with Mr. Bankman-Fried the entire time and will take back the laptop at the end of the session.”

Tornado Cash Devs Arrested on Money Laundering, Sanctions Violation Grounds Over Alleged $1B Moved

Tornado Cash developers Roman Storm and Roman Semenov were arrested and charged with money laundering and sanctions violations tied to their work with the privacy mixer which “facilitated more than $1 billion in money laundering” for North Korea’s Lazarus Group.

FTX Founder Sam Bankman-Fried Intends to Blame Fenwick & West Lawyers in His Defense

“Evidence of the defendant’s reliance on counsel is relevant to the question of intent and is not limited to situations where the defense can establish that the defendant formally sought out the advice of counsel, received legal advice, and followed the advice given,” the letter said.

Privacy Mixer Tornado Cash Is an Entity, Judge Says

“It is undisputed that Tornado Cash uses smart contracts to provide a layer of privacy for its users by allowing them to deposit crypto assets in one wallet and then withdraw assets from a different wallet. Plaintiffs claim that as of 2020, the smart contracts are immutable, autonomous software applications with no custodial operator that automatically check the inputs necessary for a valid transaction, allowing withdrawals without human intervention,” he noted. “However, the government states that these smart contracts are created by Tornado Cash developers and then approved and deployed by the DAO, to provide customers with virtual currency mixing services on multiple blockchains.”

Prosecutors File Proposed Jury Instructions for Sam Bankman-Fried Trial

Prosecutors filed the document, titled “the government’s requests to charge,” late Monday, adapting from various previous sets of jury instructions including past statements from Judge Lewis Kaplan, the Southern District of New York judge overseeing Bankman-Fried’s case. The FTX founder faces seven different charges, ranging from wire, securities and commodities fraud conspiracy to money laundering allegations.

Sam Bankman-Fried Due Back in Court as He Asks for Daily Releases

“The Government is left to guess whether it is the defendant’s assertion that he received legal advice relating to his deletion of Slack and Signal messages – a defense he alluded to at the August 11, 2023, conference … or that his fraudulent misappropriation of billions of dollars was somehow laid fully before legal counsel, who approved of the conduct, or that the defendant received legal advice on any other particular aspect of the conduct at issue, or a combination of these defenses, or something else entirely,” the DOJ said in a Friday filing.

XRP Ruling Needs Appeals Court Review, SEC Says

“The rulings that the SEC seeks to appeal were legal determinations about the existence of investment contracts based on undisputed facts. The undisputed facts (e.g., Order at 23 (Programmatic Sales are ‘blind bid/ask transactions’)) present a legal question – can an issuer’s offers and sales on crypto asset trading platforms create a reasonable expectation of profits based on the efforts of others? This legal question is at issue in a number of pending cases, and a Second Circuit ruling will have ‘precedential value,'” the filing said.

Coinbase-Backed Group Loses Lawsuit Arguing Tornado Cash Sanctions Overstepped U.S. Treasury’s Authority

“The DAO is an entity unto itself that, through its voting members, has demonstrated an agreement to a common purpose. As the government notes, the structure is not unlike that of stockholders of a corporation who may not intend to vote in a shareholder meeting, without this affecting the structure of the entity,” he wrote.

U.S. Senator Lummis, Crypto Lobbyists Urge Court to Dismiss SEC’s Coinbase Lawsuit

“It’s about that common enterprise and that entrepreneurial effort which is the hallmark of investment contracts, which are securities. So I think that’s where we are, that most of the tokens meet the traditional standards that our Supreme Court has laid out, and that we, the SEC, have a role to help protect investors and instill and enhance trust in these markets,” he said. “They don’t just resemble securities, they are securities.”