HTX hacked again for $13.6M, 100K Koreans test CBDC, Binance 2.0: Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

HTX exchange hacked… again 

In the fourth hack affecting the HTX (formerly Huobi Global) ecosystem in just two months, the exchange lost $13.6 million via a hot wallet hack that occurred on November 22. 

In its November 23 announcement, the exchange promised to “fully compensate for the losses caused by this attack and 100% guarantee the safety of user funds,” as well as restore services within 24 hours of the attack. The day prior, the HTX Eco Chain (HECO) bridge was exploited for $86.6 million. An investigation is ongoing. 

In September, the HTX exchange was hacked for $7.9 million; this was followed by a $100 million hack against the Poloniex exchange, a related entity, in November. Justin Sun, Chinese blockchain personality and de-facto owner of HTX (not to mention the owner of Poloniex, founder of Tron and CEO of BitTorrent etc),stated after the attack that: “HTX Will Fully Compensate for HTX’s hot wallet Losses. Deposits and Withdrawals Temporarily Suspended. All Funds in HTX Are Secure.” Sun previously also madeassurancesthat “all user assets are #SAFU” in the aftermath of the September hack against HTX.

Huobirebranded to HTXduring this year’s Singapore2049 event in September. Although its executives have repeatedly reassured that the exchange is doing well, the exchange ran into a number ofserious incidentsthis year, including analleged employee revolt.

Justin Sun blushes as he shares a stage with Nina on Apr. 11.

Binance pleads guilty, settles criminal charges for $4.3 billion

Crypto exchange Binance has agreed to plead guilty to violating the U.S. Bank Secrecy Act, knowingly failing to register as a money-transmitting business, and willfully violating the International Emergency Economic Powers Act. Consequently, the exchange will pay $4.3 billion in penalties and forfeiture to the U.S. Justice Department. 

According to the November 21announcement, Changpeng Zhao, co-founder and CEO of Binance, has also pled guilty to one count of willfully violating the U.S. Bank Secrecy Act. Zhao has since entered his personal plea in the District Court for the Western District of Washington.

At the time, Zhao was granted a $175 million bond that allowed him to reside in Dubai pending his sentencing hearing on February 24. However, the U.S. Department of Justice has since appealed that decision, asking to confine his residence to the territory of the U.S. pending the said sentencing hearing due to Zhao allegedly possessing an “unacceptable risk of flight.”

In its indictment, the Department of Justicenoted that, in a few noticeable incidents and despite reassurances, Binance facilitated over $1 billion in illicit transactions for Iranian users, the Russian marketplace Hyrdra and cryptocurrency mixer Bestmixer. and it solicited U.S. users without prior registration. Binance was also accused of deliberately masking such actions as “complying with U.S. law would stifle their efforts to grow Binance’s profits, market share, and trading volume.”

The same day, Zhao stepped down as the CEO of Binance. “I made mistakes, and I must take responsibility. This is best for our community, for Binance, and for myself,” he stated. 

“Binance is no longer a baby. It is time for me to let it walk and run. I know Binance will continue to grow and excel with the deep bench it has.”

While Zhao still owns a majority in the exchange, he will be barred from being involved in the exchange’s everyday operations. Richard Teng, Binance’s global head of regional markets, was named the exchange’s new CEO. In his inaugural statement, Tengstatedthat the exchange’s fundamentals were “VERY strong” and that Binance is still “the world’s largest crypto exchange by volume.”

Blockchain analytics firm Nansen has noted that despite the guilty plea, it did not witness any “mass exodus of funds” after the incident. While the exchange witnessed nearly $965 million worth of withdrawals, its total holdings increased to $65 billion. On November 23, CZ’s X account wastemporarily suspended after removing “Binance” from his profile name.

U.S. Attorney General Merrick Garland during the indictment announcement. (DoJ)
U.S. Attorney General Merrick Garland during the indictment announcement. (DoJ)

South Korea invites 100,000 people to test CBDC

The Bank of Korea, South Korea, and Central Bank will invite 100,000 Korean citizens to purchase goods with deposit tokens issued by commercial banks as part of its central bank digital currency (CBDC) pilot test. The first of such trials began in October. 

According to local news reports on November 23, “participants will be restricted to using the currency solely for its designated purpose of payment. Other uses, including personal remittance, will not be permitted at this time.” Although the Bank of Korea has not yet decided to whether or not to implement a CBDC, further trials are expected, including an integration simulation system for carbon emissions trading on the Korea Exchange. It said:

“Recently, the rapid digitalization of the economy has led to a growing demand for a digital form of public currency. This demand is evident in the private sector, where new payment instruments such as stablecoins have been developed and are already widely used in certain sectors.”

Evening in downtown Seoul.
Evening in downtown Seoul. (Source: Pexels)
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No civil protection for crypto in China, $300K to list coins in Hong Kong? Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

Hot week for Hong Kong exchanges 

Hashkey Exchange — one of the first regulated crypto exchanges in Hong Kong — has announced insurance coverage for clients assets stored in its hot and cold wallets. accounts. The policy will cover 50% of Hashkey’s digital assets in cold wallets and 100% of digital assets in hot wallets and pay out anywhere between $50 million to $400 million in the event of a claim.

Hashkey’s partnership with fintech OneDegree will also see the pair co-develop novel crypto security solutions for the exchange to manage server downtime, data back-up, and load control. “Getting insurance cover from OneInfinity by OneDegree not only fulfills the Securities and Futures Commission requirements, we believe the collaboration can also enhance our financial, technical, and service infrastructure to provide our customers with comprehensive protection,” said Livio Wang, COO of Hashkey Group.

Wang also disclosed that the exchange plans to submit four major altcoins for listing approval to the Hong Kong Securities & Futures Commission. Since its license was approved in August, Hashkey has grown to over 120,000 customers with a cumulative trading volume surpassing $10 billion.

Hong Kong cityscape (Pexels)

BC Technology Group, the owner of another licensed exchange called OSL, has announced a $91 million strategic investment from BGX crypto group. BGX CEO Patrick Pan called the investment “a strategic move that reflects our belief in the immense potential of the digital asset market.” Last month, Bloomberg reported that BC Technology Group was seeking to spin off the OSL exchange for $128 million, whcih the company denied at the time.

While Hong Kong crypto exchanges are gaining traction, the barrier to entry for users and token developers alike appears to be high. In an announcement on November 15, Hashkey stated that token developers must pay a non-refundable application fee of $10,000 for listing their coins or tokens on the exchange.

Hashkey also warned that developers should expect a total cost of $50,000 to $300,000 for the listing process, if approved, when combined with due diligence or advisory fees.

Hashkey's crypto insurance partnership with OneDegree. (Hashkey)
Hashkey’s crypto insurance partnership with OneDegree. (Hashkey)

The Block gets a fresh start

Crypto media publication The Block has received a $60 million investment for 80% of its equity from Singaporean venture capital firm Foresight Ventures but will still operate as a separate company.

As told by CEO Larry Cermak on November 13, the deal “gives The Block a fresh start ahead of the bull market and provides us with more capital to build out new exciting products and expand our footprint into Asia and the Middle East.”

Forrest Bai, CEO of Foresight Ventures, told Cointelegraph that “the purchase of The Block marks a crucial milestone, substantially strengthening Foresight Ventures’ position in the cryptocurrency sector.”

The Block became embroiled in the FTX scandal last year when it came to light that former CEO Mike McCaffrey took millions of dollars in loans from FTX founder and convicted felon Sam Bankman-Fried. Much of the capital was used to buy out his shares. The Block reportedly laid off 33% of its staff due to the overall market downturn and the fallout arising from the incident.

No civil protection for crypto in China 

A third Chinese court has voided a crypto investment contract on the basis that cryptocurrencies contravene the spirit of its crypto ban and therefore are not protected by law, at least in civil disputes. 

As narrated by the Liaoning Zhuanhe People’s Court on November 14, the plaintiff, Wang Ping, lent the equivalent of $552,300 Tether (USDT) to a friend, Zhao Bin, for the purposes of investing in altcoins in 2022. The transaction resulted in heavy losses for Wang, leading them to subsequently file a lawsuit demanding the return of principal. The defendant, Zhao, refused.

At trial, the presiding judge ruled that the plaintiff had no right to judicial relief as transactions between cryptocurrencies are classified as “illegal activity.” Therefore, all “virtual currency and related derivatives violate public order and good customs, and the relevant civil legal actions are invalid, and the resulting losses shall be borne by them.”

“Virtual currency does not have the same legal status as legal currency. Virtual currency-related business activities are illegal financial activities. It is also an illegal financial activity for overseas virtual currency exchanges to provide services to residents in my country through the Internet.”

The ruling follows other precedents set by Chinese civil courts earlier this year. However, recently, the Chinese government has clarified that certain criminal acts pertaining to virtual currencies, such as theft of nonfungible tokens, are prosecutable under the penal code. Chinese has enforced its crypto ban since 2021. 

Philippines to issue tokenized bonds 

The Philippines’ Bureau of Treasury (BTr) is seeking to raise the equivalent of $180 million from its domestic capital market through the issuance of tokenized bonds. 

As announced on November 16, the tokenized bonds are one-year fixed-rate government securities that pay semi-annual coupons offered to institutional investors starting next week. The bonds will be issued in the form of digital tokens and maintained in the BTr’s Distributed Ledger Technology (DLT) Registry. “As part of the National Government’s Government Securities Digitalization Roadmap, the maiden issuance of TTBs aims to provide the proof of concept for the wider use of DLT in the government bond market,” the institution said. 

In July, Cointelegraph reported that nonprofit The Blockchain Council of the Philippines partnered with the Department of Information and Communications Technology (DICT) to foster Web3 adoption in the Southeast Asian country. The organizations will be working to educate and collaborate with local stakeholders within the Philippine blockchain ecosystem, including government bodies, Web3 developers, and civil societies. 

Crypto in the Philippines
The Philippines looks like leaping directly from cash to a digital currency future.
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China’s surprise NFT move, Hong Kong’s $15M Bitcoin fund: Asia Express

China to protect NFTs 

In a surprise move, the Chinese government has guaranteed legal protection for NFTs.

In response to a series of often conflicting judicial opinions on the state of cryptocurrency in the country, the Chinese government has officially issued a legal commentary on dealing with cases of nonfungible tokens (NFTs) theft and their status as virtual property protected by law. 

According to a November 9 publication by China’s state-controlled Southwest University of Political Science & Law (SUPL), digital collectibles such as NFTs — unlike ordinary online images — conform to the characteristics of online virtual property due to their non-tamperable features, unique codes, and detailed transaction information.

“This highlights the scarcity of digital collections, which have both use value and exchange value,” jurists write. “According to Article 127 of the Civil Code, it can be seen that from the perspective of civil law, online virtual property is regarded as an object of rights that ‘is different from property rights, creditor’s rights, intellectual property rights, etc. and is protected by civil law’.”

In addition, jurists state that the theft of NFTs therefore carries applicable criminal penalties, which can be evaluated in conjunction with related offenses committed during the course of the theft, such as hacking into computer systems or data theft.

“Digital collections have technical characteristics that cannot be copied, indicating that the holder has exclusive control. If the digital collection is stolen by others, the holder loses exclusive control,” jurists from SUPL say.

“Although our country has not yet opened the secondary circulation market for NFTs, consumers can rely on the trading platform to complete operations such as purchase, collection, transfer, and destruction, and achieve exclusive possession, use, and disposal rights.”

China has seen a rise in civil disputes this year involving cryptocurrencies, with some courts ruling that virtual assets are protected by law, and others not. Last month, Chinese government-owned newspaper China Daily announced a 2.813 million Chinese yuan ($390,000) grant for third-party contractors to design an NFT platform. In May, Chinese prosecutors announced they would crack down on “pseudo-innovations” within its NFT market.

A Chinese judge explains that according to current laws, parties in a crypto lending contract are not entitled to judicial protection.

Bitget’s to invest in India 

Cryptocurrency exchange Bitget will invest $10 million over five years in startups primarily based in India. 

According to the November 7announcement, startups will have the opportunity to pitch to Bitget and venture capitalists including Sequoia Capital, Lightspeed Ventures, and Draper Labs, during the BUIDL for Web3 multi-chain summit in India.

“Bitget aims to identify valuable and promising projects in the crypto space and provide them with comprehensive support, accelerating innovation in emerging technologies,” the exchange says. To qualify, projects must have a minimum viable product and hold multiple layers of security functionalities with auditing transparency.

Gracy Chen, Bitget’s managing director, says that India is “the most wanted place to invest in Asia,” citing its constant advancements in blockchain and overall entrepreneurial spirit. The exchange’s previous investments in Indian Web3 startups include AI-based script generator Grease Pencil, AI resume generator HAIr, and AI dermatological app Derma360.

Linekong’s $15M Bitcoin Fund 

Linekong Interactive, a Chinese tech firm listed on The Stock Exchange of Hong Kong (HKEX), will kickstart a $15 million fund dedicated to revitalizing the Bitcoin (BTC) ecosystem. 

Accordingto founder Wang Feng, the new fund is dubbed “BTC Next” and will accelerate novel projects developing asset issuance, exchanges, virtual machines, NFTs, and GameFi protocols on the Bitcoin blockchain.

“BTC NEXT will participate in the research and investment of Bitcoin network ecological assets as early as possible, publish crypto investment portfolios regularly, and update the list of Bitcoin ecological crypto assets participating in investment,” Wang writes.

The Bitcoin ecosystem has expanded greatly this year with the invention of Ordinals and Inscriptions, two novel data storage methods that, together, allow users to mint unique digital assets on the Bitcoin blockchain. The market cap of Bitcoin tokens minted on the BRC-20 standard, mirrored after the Ethereum ERC-20 standard, has surpassed $1.4 billion since inception.

Linekong was founded in Beijing in 2007 with a focus on video games and cinema. In 2018, Wang Feng resigned as CEO of Linekong to focus on blockchain, founding several projects in the nonfungible tokens, decentralized finance, and Bitcoin mining space. He returned to Linekong as CEO in 2022 after an invitation from the firm’s board of directors to better integrate Linekong products with Web3.

The Ordinals Timeline
The Ordinals Timeline. (Originals Bot)

SEBA Bank approved in Hong Kong 

Swiss fintech SEBA Bank has received a license from Hong Kong’s Securities and Futures Commission. 

The license permits SEBA Bank to conduct regulated activities in Hong Kong and distribute virtual asset-backed securities, advise on crypto assets, and manage crypto investment accounts on behalf of clients. It also permits SEBA Bank to distribute, manage, and advise on traditional securities, such as stocks.

“Hong Kong has been at the center of the crypto economy since Bitcoin’s inception, and we are very pleased to have added this Hong Kong license with the full approval from the SFC to our existing licenses in Switzerland (FINMA) and Abu Dhabi (FSRA),” comments SEBA Bank CEO Franz Bergmueller. Meanwhile, Amy Yu, the firm’s Asia-Pacific CEO, praises the SFC for creating a “facilitative” environment during the licensing process.

Cointelegraph previously reported that SEBA Bank launched institutional Ethereum staking services in September. In early 2022, the firm raised $119 million in a Series C funding round. 

The Hong Kong Web 3.0 Festival gallery hall (Twitter)
The Hong Kong Web 3.0 Festival gallery hall (Twitter)
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$308M crypto laundering scheme busted, Hashkey token, Hong Kong CBDC: Asia Express

Visa completes e-HKD CBDC trial with HSBC and Hang Seng 

Hong Kong is one step closer to a central bank digital currency (CBDC) with the release of its successful e-HKD phase 1 results in collaboration with Visa, HSBC, and Hang Seng Bank.

According to the November 1 announcement, Visa said that it achieved “near real-time” finality with transfers involving tokenized deposits of the digital Hong Kong dollar (e-HKD).

“Tokenized deposits were burned on the sending bank’s ledger, minted on the receiving bank’s ledger, and simultaneously settled interbank via the simulated wholesale CBDC layer,” the payments firm wrote.

“This would provide for settlement in an atomic manner with better streamlining of any operational dependencies imposed by financial institutions and other intermediaries, thus improving liquidity management.”

The payment processor also stated that its e-HKD test pilot was functional 24/7, surpassing the uptime of traditional financial systems, which typically don’t function after hours or on weekends. In addition, the firm wrote that “tokenized deposits can be fully transacted while remaining encrypted, without revealing information about identity, balances, or transaction amounts to non-bank users.”

For its next steps, Visa plans to explore the use of e-HKD in tokenized asset markets and programmable finance to automate real estate transactions. “In this pilot’s Property Payments use case, the payment from a buyer transferring the remaining balance tokens to the property developer may be automated upon reaching the completion date of the contract, minimising lag time in closure of the process,” the company said. Other areas of research interest include expansion of retail solutions and digital cross-border payments.

Despite the promising results, no definite timelines have been given for the full launch of the e-HKD CBDC, or even that such a launch will occur. In its October 30report, the Hong Kong Monetary Authority warned there are still issues to resolve:

“For instance, an rCBDC issued as a programmable money may be more susceptible to cybersecurity risks, as it may present more mediums for external threats to inject malicious code.”

With the silent nod from Beijing’s Central Government, Hong Kong has been striving to become a Web3 hub for blockchain in the Asia-Pacific Region. However, such efforts had been overshadowed by the collapse of the JPEX crypto exchange, resulting in losses exceeding $150 million for Hong Kong investors. Since the incident unfolded, trust in cryptocurrency among local residents has fallen drastically

The new e-HKD pilot results as announced by Visa.

Hashkey’s regulated exchange token 

Hashkey, one of the first crypto exchanges to receive a regulatory license in Hong Kong, will introduce an exchange token in 2024. 

According to therecentwhitepaper, the “HashKey EcoPoints” (HSK) token will be minted on Ethereum with a total supply of 1 billion. Out of this amount, 65% is reserved for users, 30% for Hashkey staff, and 5% for its ecosystem treasury.

The token will be distributed as incentivizes to ecosystem users and distributors and will not be “sold via private or public sales for fund raising purposes.” As for utility, the company states that the token could be used to settle trading fees, along with early access to future token subscriptions and product upgrades on its exchange services.

The exchange also pledges to buyback HSK tokens with up to 20% of profits generated from related Hashkey services. “HashKey implements an offsetting issuance mechanism (burning) to protect HSK holders from the dilutionary impact of rewards-based increases in HSK circulating supply,” the firm wrote. However, regulatory approval is still required for the token design plan:

“The contents of this whitepaper have not been reviewed by any regulatory authority in Singapore or Hong Kong. You are advised to exercise caution in relation to the information in this whitepaper and any transaction that you intend to carry out involving HSK.” 

In August, Hashkey, alongside crypto exchange OSL, received one of the first regulatory licenses for retail crypto trading in Hong Kong. Its trading volume initially stagnated but has sincegainedtraction. Only select coins and tokens, such as Bitcoin, Ethereum, Tether, and Avalanche, are approved to be listed on the exchange.

Hashkey's plan for token utility.
Hashkey’s plan for HSK token utility.

$308M syndicate manipulated crypto markets to launder money: Police 

Nineteen Chinese nationals have been sentenced for their role in a $308 million money laundering scheme involving cryptocurrencies between November 2020 and April 2021. 

According to an October 31 report by the Chongqing Tongliang District People’s Court, Mr. Jiang and Mr. Deng, the principal conductors of the money laundering syndicate, together laundered a total of $308 million worth of Bitcoin and Tether for proceeds of crime related to online gambling and wire fraud.

Police say that to avoid platform monitoring and know-your-customer requirements, the accused individuals orchestrated a sophisticated scheme of using peer-to-peer transactions, where coins were sold at “unusual prices relative to spot markets” for stablecoin Tether and then transferred to exchanges for cash.

“By fabricating pretexts such as withdrawing project funds and migrant workers’ wages, they organized gang members to withdraw cash from bank counters in Chongqing, Sichuan, Shanghai and other provinces and cities. The amount of cash withdrawals ranged from hundreds of thousands to several million yuan each time. After withdrawing the cash, the cash is packaged in trolley cases, backpacks, etc., and transported by plane.”

The 19 individuals, including Mr. Jiang and Mr. Deng, were sentenced to six months to six years in prison. “In recent years, the phenomenon of criminals committing illegal and criminal activities through telecommunications networks has become increasingly rampant, posing a huge threat to the legitimate rights and interests of the general public,” the presiding judge wrote. 

Due to such a rise in wire fraud involving cryptocurrencies, China’s Central Government has cracked down harshly on crypto-related activities in the country, although there have been some signs of relaxation as of late. Nevertheless, such enforcement actions have sometimes resulted in collateral damage for foreign investors using Chinese-based crypto services without criminal intent. 

The culprits as they appeared for sentencing in Chongqing Tongliang District People's Court.
The culprits as they appeared for sentencing in Chongqing Tongliang District People’s Court.
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Australia’s $145M exchange scandal, Bitget claims 4th, China lifts NFT ban: Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

Largest money laundering scandal in Australia unravels

Changjiang Currency Exchange, a money transmitter business based in Australia, has beenbustedin a $145 million ($230 million Aussie dollar) money laundering scandal.

On October 26 a 300-strong police operation spanning Melbourne, Sydney, Brisbane, Adelaide, and Perth arrested seven individuals — four Chinese citizens and three Australian nationals, after a 14-month investigation.

Operating under the front of a legitimate currency exchange business, police say that Changjiang Currency Exchange allegedly helped launder dirty funds and tainted cryptocurrency from investment scams and unregistered crypto exchanges.

In one single incident, a 37-year-old Chinese national was accused of using Changjiang’s services to launder $63 million (A$100M) worth of funds received from a multinational Ponzi scheme.

Australian Federal Police investigating the Changjiang Currency Exchange (AFP)

The investigation began after law enforcement officials noticed irregular traffic at Changjiang kiosks across Australia during a time of strict COVID-19 related lockdowns. Police have since seized $13.27 million (A$21M) in cash and various luxury items believed to have been purchased using proceeds of crime. The investigation remains ongoing.

Bitget’s colorful Q3

Crypto derivatives exchange Bitget has risen to become the fourth-largest by volume, trailing behind only that of Binance, OKX, and ByBit. 

According to the October 20 report, Bitget claims that its market share has risen to 9.43%, compared to negligible volume just two years ago. During Q3 2023, the exchange says it onboarded over 9,000 traders along with 85,000 followers or copy-traders, who together achieved a net trading profit of $6.7 million. However, the combined industry trading activity fell by 23% year over year to $4.8 trillion in the quarter.

From July to September, Bitget’s user protection fund peaked at $368 million and now stands at $350 million. The exchange claims that it has no debt alongside a proof-of-reserves ratio exceeding 200%. In September, the firm launched a $100 million EmpowerX Fund dedicated to ecosystem development and hosted a namesake summit in Singapore. It also hired 60 staff in July for its Middle East expansion plans. 

Bitget's growing derivatives trading volume year to date.
Bitget’s growing derivatives trading volume year to date. (Bitget)

China partially lifts bans on NFTs

After a year of harsh crackdowns on private blockchain enterprises, it appears that China has softened its stance somewhat. 

According to local news reports on October 25, Xianyu (literally ‘Bored Fish’), Chinese internet conglomerate Alibaba’s flagship peer-to-peer marketplace, has removed its censorship of “nonfungible tokens” related keywords in its search tool and relisted Topnod NFT collectibles minted on Alibaba’s Ant Blockchain.   

Due to regulatory uncertainty, Topnod digital collectibles were prohibited from listing on secondary markets. Last December, Cointelegraph reported the Chinese government’s official NFT trading platform was planned to launch this year. The exchange is still in development at the time of publication. Since 2021, China has officially banned almost all crypto-related activity saved for outright ownership of cryptocurrencies. 

Blockchain connects interprovincial health insurance in China

Residents of Shanghai, Zhejiang, Jiangsu, and Anhui provinces can now submit and validate their health insurance claims using blockchain technology. 

In a partnership with Alibaba’s Ant Insurance, users in the aforementioned regions can submit their claims online, and after blockchain verification for authenticity, receive their reimbursement within hours. 

In one instance, an individual known as Mr. Wang submitted his claim for lung cancer treatment in Anhui, and received the full $17,800 (130,000 Chinese Yuan) reimbursement within two hours. Su Fang, Director of the Financial Insurance Institute of Shanghai University of Finance and Economics, commented:

“This time, all electronic financial and medical bills in the Yangtze River Delta have been opened and applied on a large scale in commercial insurance claims, marking the true application of the digital Yangtze River Delta construction. This not only brings real convenience to the people, but also improves the efficiency of insurance claims and effectively prevents moral hazard.”

Ant Insurance has operated a blockchain-powered claims portal since 2019. For the past four years, the platform has processed over 2.25 billion medical claims and improved information sharing between insurance providers and medical professionals.

Ant Insurance allows claimants to verify their application via blockchain (WeChat)
China softens ban on NFT platforms to allow related searches. (WeChat)

Huaian uses blockchain to improve surveillance 

The City of Huaian’s Jianpu People’s Court is using a combination of AI recognition, big data, and blockchain technology to improve law enforcement surveillance. 

Starting October 25, the Jianpu People’s Court will create an “all-purpose” system for monitoring visitors entering and leaving court premises. As soon as a visitor is identified to be trespassing in an unauthorized area, the system will alert court bailiffs for their immediate apprehension. Officials say that the system can drastically reduce the patrolling of hard-to-monitor areas: 

“Outside the court walls and in the public rest areas outside the courtroom of the main building, etc., intelligent behavior analysis technology can be used to capture and intelligently analyze the behavior of the parties, provide early warning of possible dangerous behaviors such as abnormal gatherings, strenuous exercise, fights, etc., and remind judicial police and other staff to pay attention and deal with it promptly and appropriately.”

Through the system, court bailiffs would gain access to all visitors’ movements and details within court premises. Augmented reality will also enhance hard-to-see areas for better resolution. 

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Bitmain’s revenge, Hong Kong’s crypto rollercoaster: Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

Bitmain allegedly fired staff after salary complaints

Bitcoin application-specific integrated circuit (ASIC) mining manufacturer Bitmain has allegedly fired three of its employees for speaking to the media regarding the withholding of salary payments by their employer. 

According to local news reports on Oct. 17, citing an alleged internal Bitmain memo, the company accused three staff members of breaching various clauses in their employment contracts for sharing their remuneration on social media platforms. The note reads: 

“The EMT [Executive Management Team] has decided: (1) Employee Li of product operations and circuit development, is to be fired immediately and blacklisted. (2) Employee Xie of product operations and circuit development, is to be fired immediately and blacklisted. (3) Employee Ding, administrative intern at strategic development PMT, is to be fired immediately and blacklisted. The intern’s post-secondary institution shall also be informed of the incident.”

“In addition, the company reserves the right to pursue legal action against the individuals above,” Bitmain allegedly wrote. “Without authorization by the company, nothing can be said, nothing can be given [to outsiders!]”

Bitmain’s alleged layoff notice (BlockBeats)

On Oct. 9, Cointelegraph reported that Bitmain allegedly paused September salary payments for its staff members as the company “has yet to achieve a net positive cash flow, especially in the orders of [new] ASICs.” In addition, employees allegedly face a 50% cut to their base salary, with all bonuses and incentives being removed. 

Founded in Beijing, China in 2013, Bitmain is one of the world’s largest Bitcoin mining ASIC manufacturers, with an estimated 70% market share during the previous bull market that ended in 2021. The firm’s Antminer ASIC series currently leads the industry in terms of hash rate computations for mining Bitcoin. Over the past year, several Bitcoin mining operators have gone bankrupt as the price of Bitcoin plunged while electricity costs surged. 

Hong Kong investors spooked by JPEX scandal 

Despite efforts to regulate the sector, it appears that some Hong Kong residents have lost their confidence in crypto after the largest Ponzi scheme in the city’s history, the $175 million JPEX crypto exchange scandal, unfolded last month. 

According to a new study published by the HKUST Business School Central on Oct. 17, 41% of Hong Kong residents are no longer interested in holding crypto assets, a sharp rise of 12% compared to before the JPEX incident. The survey featured 7,900 respondents and was conducted between April and October. 

JPEX booth advertisement posted the day before the exchange was raided by police. (Facebook)
JPEX booth advertisement posted the day before the exchange was raided by police. (Facebook)

The study also revealed that 84% of Hong Kongers have heard of crypto, with 27% of respondents claiming they either hold digital assets now or were previously crypto investors. For those investing in crypto, over 80% said they would not invest over 50,000 Hong Kong dollars ($6,390) into the sector. Interestingly, 57% of respondents said they understood that crypto exchanges must obtain a license before operating in Hong Kong, an increase of 15% compared to before the JPEX scandal unraveled. 

Wu Huang, a professor at HKUST Business School Central, commented: 

“We hope that the results of this survey can provide industry stakeholders with more perspectives to help build a sound virtual asset industry. As virtual assets play an increasingly important role in the digital economy, there is a need to strengthen education efforts to make the public better Understand the risks and potential of this emerging field.”

Last month, JPEX staff fled their corporate booth at Singapore’s Token2049 event after the Hong Kong Securities and Futures Commission issued a warning regarding the exchange’s unregulated activities. Subsequently, Hong Kong police arrested more than 10 corporate executives and influencers connected to the exchange on charges of fraud. The JPEX scandal has since grown to over 2,300 victims, with losses estimated at $175 million. The exchange was unlicensed at the time of the incident. 

“Factually inaccurate” news report wipes out $54 million in market cap

When it comes to reporting, Cointelegraph has seen some blunders over the years. That said, fake news is a problem across the industry. 

On Oct. 16, Bloomberg reported that BC Technology Group, owner of licensed Hong Kong crypto exchange OSL, is contemplating the sale of the latter for 1 billion Hong Kong dollars ($128 million).

On Oct. 17, BC Technology Group issued a clarification stating: “The Board wishes to clarify that the contents and statements in the [Bloomberg] Article are factually inaccurate and highly misleading” and that it was not contemplating a sale of OSL. 

Unfortunately, investors who bought BC Technology stock based on the divestiture euphoria were not so happy. After publishing the clarification statement, shares of BC Technology tanked 22% during the trading day, wiping off $54 million in market capitalization. “Shareholders of the Company and potential investors are advised to exercise caution when dealing in the shares of the Company,” management wrote. 

Bitget’s new crypto credit card

Joining the likes of its peers, cryptocurrency exchange Bitget is launching its own crypto-fiat credit card. According to an Oct. 16 announcement during the Future Blockchain Summit in Dubai, the Bitget Card, issued by Visa and backed by digital assets in users’ accounts and wallets, will be denominated in U.S. dollars and will be accepted in over 180 countries. 

Although many exchanges have rolled out their own crypto debit or credit cards, some have seen pushback from payment processors. On Aug. 25, Mastercard said it would end its cryptocurrency card partnership with Binance in Latin America. Although the firm did not cite a specific reason, experts have pointed to Binance’s recent regulatory scrutiny as the underlying cause. 

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SBF’s alleged Chinese bribe, Binance clarifies account freeze: Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

SBF’s Chinese bribe scandal worsens

According to October 11 testimony from Caroline Ellison, co-founder of FTX-linked hedge fund Alameda Research, her colleague — disgraced FTX founder Sam Bankman-Fried — allegedly paid $150 million in bribes to Chinese government officials in 2021, higher than the $40 million disclosed initially.  

Ellison said during the FTX trial that two years prior, $1 billion worth of Alameda Research’s digital assets on crypto exchanges OKX and Huobi were frozen by Chinese law enforcement as part of a money-laundering investigation. Senior FTX executives, such as chief operations officer Constance Wang and Alameda trader David Wa, were also involved in the incident. The individuals first tried to contact a Chinese lawyer to unfreeze the funds, which didn’t work. 

The disgraced FTX founder will be on trial throughout October. (Wikipedia)

Then, FTX and Alameda staff allegedly created accounts on OKX and Huobi using the identification of a Thai prostitute to negotiate the return of funds. When that didn’t work out, Ellison accused Bankman-Fried of paying a $150 million bribe to unfreeze the accounts. The bribe was recorded as “the thing” in future Alameda balance sheets. According to Ellison’s testimony, the funds were immediately unfrozen following the bribe.

Presiding Judge Lewis Kaplan of the United States District Court for the Southern District of New York reminded the jurors that Bankman-Fried’s alleged bribery of Chinese officials is not within the scope of the ongoing FTX trial. Instead, a second trial relating to SBF’s bribery charges has been scheduled for March 11, 2024. The FTX trial will remain ongoing for the month of October. 

Binance clarifies account freeze

Yi He, a co-founder of Binance, clarified on the Chinese social media app WeChat earlier this week that only accounts of users suspected of violating international sanctions will be frozen on the exchange. 

The statement came after a wave of inquiries in response to local news reports that the exchange froze accounts of suspected Hamas militants per Israeli law enforcement’s request. Yi He explained: 

“Hamas is a designated terrorist organization by the United Nations. Therefore, any organization, including banks and trading platforms, will need to cooperate on the receipt of freeze requests. This is not something Binance can decide on its own.”

The Binance executive commented: “I have no political biases, yet no trading platform can refuse such law enforcement requests. Palestine has an organized government. Hamas is a local militant group. They kill civilians; that’s the problem. Hamas is not Palestine; the freeze is targeted towards Hamas, not Palestine.”

Binance co-founder Yi He’s statement on Hamas account freezes. (WeChat)

In a follow-up post on October 11, Yi He further clarified that “Binance would not confiscate nor freeze assets of ordinary users. Rules are created by the strong; in the face of international regulations, Binance is a nobody.” She also pointed to the fact that, despite the ongoing war between Russia and Ukraine, the exchange has not frozen the accounts of ordinary Russians.

Crypto lending invalidated by second Chinese court

Crypto lending contracts in China are not protected by law because the underlying asset is illegal, a second Chinese court has ruled. 

As narrated by the Nanchang People’s Court on October 10, plaintiff Mr. Ming lent 80,000 USDT to defendant Mr. Gang in April 2021 for the purpose of stablecoin trading. The loan was to be repaid within six months. Mr. Gang subsequently defaulted on the loan, leading to a civil lawsuit by Mr. Ming. Both the lawsuit and its appeal were dismissed. 

In their decision, the presiding judge wrote: 

“There are legal risks involved in participating in virtual currency investment and trading activities. If any legal person, unincorporated organization, or natural person invests in virtual currencies and related derivatives that violates public order and good customs, the relevant civil legal actions will be invalid, and the resulting losses shall be borne by them.”

The judge further explained that according to various legislation forming China’s crypto ban, “virtual currencies only exist in digital form, are not legal tender, and do not have legal compensation, such as Bitcoin, Ethereum, Tether, etc., and cannot be used as currency in the market. Virtual currency-related business activities are illegal financial activities that harm national financial order, financial security and social public interests, and are strictly prohibited.”

The ruling does not extend to the digital yuan central bank digital currency, which the presiding judge said “is a legal currency in digital form issued by the People’s Bank of China. It is operated by designated operating agencies and redeemed by the public. It is equivalent to banknotes and coins.”

Previously in August, a Chinese man lost $10 million worth of Bitcoin after the borrower defaulted on his Bitcoin lending agreement and a court ruled that the contract was invalid, citing similar reasons as the Nanchang People’s Court. 

Chinese judge explains why the Bitcoin lending contract was invalid and therefore denied relief for breach of contract.
Chinese judge explains why the Bitcoin lending contract was invalid and therefore denied relief for breach of contract.

Huobi hacker returns all assets

According to a statement by Justin Sun, de-facto owner of cryptocurrency exchange HTX, formerly known as Huobi, a hacker has returned all of the 5,000 Ether ($8 million) stolen during a security incident last month. 

“We have confirmed that the hacker has fully returned all funds, as promised, and we have also paid the hacker a white hat bonus of 250 ETH. The hacker made the right choice. We would like to express our gratitude to everyone in the industry for their help,” Sun wrote. On September 25, Huobi’s hot wallet was hacked for 5,000 ETH in an incident first detected by blockchain analytics firm Cyvers Alerts. 

Sun subsequently offered a bounty and threatened legal action if the funds were not returned. During the incident, the blockchain personality also claimed that the exchange held around $3 billion in users’ assets. Last month, Huobi rebranded as HTX, raising community eyebrows due to the similarity of the name to the now-defunct crypto exchange FTX. 

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3AC fugitives in disarray as OPNX faces new peril: Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

3AC creditors strike back 

On Sept. 29, Su Zhu, co-founder of defunct Singaporean hedge fund Three Arrows Capital (3AC) — which prior to its collapse last June managed more than $10 billion in digital assets — was apprehended at Singapore’s Changi International Airport while attempting to flee the country following the issuance of a committal order. 

Just days prior to his arrest, Singaporean courts issued an arrest warrant for Zhu after his “deliberate failure to comply with a court order obtained which, in essence, compelled him to cooperate with the liquidator’s investigations and account for his activities as one of the founders of 3AC and its former investment manager.” Zhu, a Singaporean national, was sentenced to four months in prison for the breach. 

Teneo, the appointed liquidator for 3AC, said in an email statement that creditors would “seek to engage with him on matters relating to 3AC, focusing on the recovery of assets that are either the property of 3AC or that have been acquired using 3AC’s funds” during his time in prison.

“The liquidators will pursue all opportunities to ensure Mr. Zhu complies in full with the court order made against him for provision of information and documents relating to 3AC and its former investment manager during the course of his imprisonment and thereafter,” Teneo wrote. 

3AC co-founders Kyle Davies (Left) and Su Zhu (Right). (X/Twitter)

The filing revealed that Kyle Livingston Davies, 3AC’s co-founder and a naturalized Singaporean citizen, was also sentenced to four months imprisonment for contempt of court. However, his current whereabouts remain unknown. Cointelegraph previously reported that Davies had fled to Dubai earlier this year and opened a restaurant there. 

Recently, the Monetary Authority of Singapore barred both Zhu and Davies from conducting enterprise investment activity in the city-state for nine years due to regulatory violations, such as exceeding 3AC’s statutory assets under management limit. 

In July 2022, 3AC filed for bankruptcy after a series of failed leveraged trades on the Terra ecosystem left the hedge fund emptied of assets and left creditors with over $3.5 billion in claims. The event caused a chain reaction that led to the bankruptcy of 3AC’s counterparties, such as Celsius, Voyager and FTX. Prior to the “counterattack,” 3AC creditors had suffered a humiliating setback where over one year of bankruptcy proceedings were halted by a U.S. judge due to a clerical error. 

3AC's AUM letter (Voyager)
3AC’s AUM letter. (Voyager)

At one point in the last year, Davies publicly boasted that there were “no pending lawsuits or regulatory action against him.” After the collapse of 3AC, both Zhu and Davies embarked on alternative entrepreneurial ventures. Aside from Davies’ restaurant, Zhu’s $36 million luxury Yarwood Homestead in Singapore, purchased just months before 3AC’s collapse, had been converted into an eco-farm. Local media writes

“Based on the principles of ecological design and agroecology, the company transformed the garden into a farmland, an ecosystem that includes agriculture and aquaculture, producing local vegetables, herbs, fruits, fish, chickens and ducks.”

The farm is owned by Su Zhu’s wife, Evelyn Tan, through her company Abundunt Cities. “Yarwood Homestead is open to curious gardeners, citizen scientists, and the community on an invitation-only basis. We also run a private dining experience to help us test recipes for native edibles through our Native Edibles R&D Kitchen,” an excerpt from its website reads

The Yarwood Homestead “Tropical R&D Site.” Source:(Abundant Cities)
The Yarwood Homestead “Tropical R&D Site.” (Abundant Cities)

A second wave

When it rains, it pours. 

In January, Zhu and Davies’ novel exchange OPNX — a platform based in Hong Kong for trading bankruptcy claims on fallen crypto companies such as 3AC and FTX — was spearheaded into development after soliciting $25 million from various investors. The platform launched in April with just $13.64 in trading volume on its debut. By June, the firm claimed it had reached nearly $50 million in daily trading volume. 

However, holders of OPNX did not appear to have enjoyed news of Zhu’s arrest and Davies’ indictment. On the day of the announcement, the Open Exchange Token fell nearly 60% in a single day to $0.01. The token has lost 79% of its value in the past month and has a fully diluted market capitalization of just $77 million, compared with over $300 million in June

In July, OPNX announced that it had onboarded tokenized claims of FTX and Celsius. Per design, claims would be converted into collateral in the form of OPNX’s native reborn OX (reOX) tokens or oUSD, its credit currency. Users could then trade crypto futures using reOX as collateral.

However, the firm’s claims dashboard remains dysfunctional at the time of publication. Leslie Lamb, OPNX’s CEO, had tried to distance the firm from Davies and Zhu, claiming that they are “no longer involved in [its] operations.” In August, all three executives were fined the equivalent of $2.7 million by Dubai’s Virtual Asset Regulatory Authority for running OPNX as an unlicensed exchange in the Emirate. 

Prior to Zhu’s arrest, 3AC Ventures, a venture capital fund created by the duo in June, appeared to be doing quite well. Its investments have since expanded to a project called “Gamerlan” since its initial investment in Raise. “3AC Ventures is focused on superior risk-adjusted returns without leverage,” its creators proclaimed. 

Regardless, creditors have made it clear that their priority is in “recovering the assets of 3AC and maximising returns for its creditors,” which could also include former 3AC assets that are used to create new entities. Teneo has since recovered several nonfungible tokens owned by 3AC and auctioned them via Sotheby’s, netting a total of $13.4 million. The proceedings are still ongoing.

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China dev fined 3 yr’s salary for VPN use, 10M e-CNY airdrop: Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

Chinese worker fined $145K over VPN

An unnamed individual in China was fined 1.06 million Yuan ($144,907) for using a virtual private network (VPN) to access restricted websites as part of a remote work routine for a foreign employer. 

According to local mediareportsearlier this week, during his employment as a consultant between 2019 to 2022 the unnamed individual accessed GitHub to view source code, answered questions in customer support, held teleconferences via Zoom, and posted multiple threads on Twitter with the help of a VPN.

Images from the China Digital Times story.

Based on a document issued by City of Chengde Police, the individual’s income earned with the aid of a VPN was deemed as “proceeds of crime.” The police issued a penalty of $144,097, equivalent to three years of the individual’s salary.

Chinese law prohibits the use of VPNs to bypass the country’s “Great Firewall” that blocks popular sites such as Google, Wikipedia, and Facebook. The ruling has spooked many in China’s IT and Web3 circles, who often rely on VPNs for similar remote-work tasks.

City of Hangzhou airdrops 10M e-CNY 

The City of Hangzhou is airdropping 10 million digital yuan central bank digital currency (e-CNY), worth a total of $1.37 million, to incentivize food and beverage spending as it hosts the 19th Asian Games. 

Anyone within the municipality of Hangzhou, locals and visitors alike, can receive the e-CNY airdrop for use in food delivery platforms. Individuals can receive up to three vouchers that reimburse merchants, in e-CNY, up to 20% to 30% of the value of food items after purchase.

The airdrop will renew every five days until the balance is emptied. The vouchers, although denominated in e-CNY, are only effective for five days and can only be tendered through select food delivery platforms. Earlier this year, the City of Hangzhou airdropped 4 million e-CNY, worth $590,000, in an effort to boost the CBDC’s adoption.

15 detained over largest alleged Ponzi scheme in Hong Kong’s history

Hong Kong police have detained 15 individuals linked to the collapse of cryptocurrency exchange JPEX. 

As of September 27, Hong Kong Policeclaimthey have received over 2,392 complaints claiming a total loss of 1.5 billion Hong Kong dollars ($191.6 million) in the apparent Ponzi scheme. Since the investigation began mid-September, police say that they have seized 8 million HKD ($1 million) in cash and frozen bank accounts worth 77 million HKD ($10 million) suspected of being proceeds of crime.

On September 13, the Hong Kong Securities & Futures Commission (SFC) issued a warning regarding JPEX being an unlicensed exchange within its jurisdiction. The move led to several arrests of its key executives and the abandonment of its corporate booth in Token2049 Singapore. Prior to its collapse, JPEX was one of the most heavily marketed crypto exchanges in Hong Kong, with corporate ads displayed across the city’s metro lines and taxis.

The incident is shaping up as potentially the worst Ponzi scheme in Hong Kong’s history in terms of monetary loss. Shortly after its discovery, the SFC began publishing a list of crypto exchanges awaiting registration or are unlicensed within the special administrative region of China.

CoinEx resilient despite $70M hack

CoinEx logo.

Hong Kong crypto exchange CoinEx will resume services despite falling victim to a $70 million wallet hack orchestrated by North Korea’s infamous Lazarus Group. 

According to a September 22 statement, CoinEx claims to have resumed deposits and withdrawals on 190 cryptocurrencies, including Bitcoin, Ethereum, USD Coin, and Tether. The firm stated: 

“The wallet system is operating safely and steadily at present. We will gradually resume deposit and withdrawal services for the remaining 500+ cryptos. Since the resuming operations will be processed frequently, there will be no further or separate announcements for each crypto.”

As part of its new wallet system, CoinEx updated the deposit addresses of all crypto assets, rendering old addresses invalid. On September 12, a leak of the exchange’s hot wallet keys led to the theft of over $70 million worth of users’ cryptos. Despite the incident, CoinEx said that cold wallets were not affected and that the CoinEx User Asset Security Foundation would “bear the financial losses from this incident.”

Multiple blockchain security firms, such as Elliptic, have pointed to North Korea’s Lazarus Group as the perpetrator of the exploit. The CoinEx team has since offered a “generous bounty” for the return of stolen funds. Prior to the hack, the exchange disclosed it had around $260 million worth of major cryptocurrencies in its proof-of-reserves report. 

Alibaba moves into digital wallets

Chinese tech conglomerate Alibaba wants to launch its own wallet service. 

According to the September 28 announcement, Alibaba’s Cloud subsidiary has partnered with crypto custodian Cobo to create an enterprise wallet-as-a-service solution for developers and organizations, integrating crypto wallets into software through APIs and SDKs. Cobo says it is incorporating its custodial wallet and multi-party computation technology to build the Alibaba Cloud wallet. 

“This collaboration marks a significant step towards setting new standards in security, performance, and accessibility of the digital wallet infrastructure for Web3,” said Dr. Changhao Jiang, co-founder and CTO of Cobo. The firm claims to hold partnerships with over 500 institutions, with billions of digital assets in custody through its wallet solutions. In June, crypto-friendly executive Joe Tsaibecame the chairmanof Alibaba Group, replacing his predecessor Daniel Zhang.

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JPEX staff flee event as scandal hits, Mt. Gox woes, Diners Club crypto: Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

JPEX scandal grows to over $166M 

Last week’s Token2049 conference in Singapore was a life-changing experience for some; for others the event did not meet expectations, but for a select group of individuals, the imminent prospect of being pursued by law enforcement meant they had to abandon their booths and flee the event.

On September 21, local news outletsreportedthat Hong Kong police had arrested 11 individuals linked to troubled cryptocurrency exchange JPEX on charges of fraud and operating an unlicensed virtual assets exchange. More than 2,000 users are estimated to have been affected by the scandal, with total funds of $1.3 billion Hong Kong dollars involved in the incident ($166 million). Police allege users’ assets have been embezzled by JPEX staff.

In a dramatic raid on September 13 — day one of the conference — Hong Kong police arrested key executives, leading its staff to abandon its corporate booth. The exchange subsequently applied for voluntary deregistration with the Australia Securities & Investment Commission, disclosing that its Australian entity had little assets left. After the news broke, JPEX reportedly raised its withdrawal fees to 999 USDT per transaction to prevent capital flight.

In anannouncementon September 20, JPEX said that 400 million Tether (USDT) worth of users’ deposits would be eligible for redemption. However, the catch is that the funds can only be redeemed starting in late 2025. The firm stated that due to the ongoing law enforcement investigation, its telecom service providers and asset custodians have frozen applicable services.

JPEX booth advertisement posted the day before the exchange was raided by police. (Facebook)
JPEX booth advertisement posted the day before the exchange was raided by police. (Facebook)

In a press conference, John Lee, chief executive of Hong Kong, said, “This incident highlights the importance that when investors want to invest in virtual assets, then they must invest on platforms that are licensed.” Founded in 2019, JPEX heavily promoted its presence in Hong Kong with brand banners on local metro stations and taxis, as well as soliciting the help of celebrities such as singer Julian Cheung. 

Before to its collapse, JPEX’smarketingincluded free vouchers to any users who signed up, offers of up to 300X trading leverage, and stablecoin staking yields exceeding 30% per annum. The firm has since suspended all of its services despite previous assurances that “it will not collapse.”

Mt. Gox trustee creditors, trolled? 

Users of defunct Japanese crypto exchange Mt. Gox were dealt another setback on September 21, when it was announced that bankruptcy trustees would delay payment deadlines by another year. If executed, this means that the bankruptcy process would have stretched out for 10 years (if not more) since a devastating hack obliterated the exchange in 2014. 

Mt. Gox victims protesting over the excruciating delay in repayments (Finance Feeds)
Mt. Gox victims protesting over the excruciating delay in repayments (Finance Feeds)

In April, Mt. Gox set a final deadline for creditors to register a claim against the defunct crypto exchange. A target date of October 2023 was then set for the repayment of users’ assets. The registration process has been extended periodically for several years. Despite previous reassurances, Mt. Gox trustees wrote

“Given the time required for rehabilitation creditors to provide the necessary information, and for the Rehabilitation Trustee to confirm such information and engage in discussions and share information with banks, fund transfer service providers, and Designated Cryptocurrency Exchanges etc., involved in the repayments, which are required before the repayments can be made, the Rehabilitation Trustee will not be able to complete the repayments above by the deadline.”

Mt. Gox was the biggest Bitcoin exchange in the world when it filed for bankruptcy in 2014, after discovering that 850,000 of its customers’ Bitcoin (BTC) had been stolen years of subtle siphoning. The exchange has since recovered around 200,000 BTC. The funds have been held in trust for the creditors, with 162,106 BTC ($4.38 billion) sitting in wallet addresses tracked by Token Unlock. At the time of the hack, the price of Bitcoin was around $580 apiece, meaning that many creditors would have realized gains on investment despite over half of their BTC being stolen. 

In its communication to creditors, the trustee stated that payments could come as soon as the end of this year for registered creditors. However, like for the past decade, a caveat clause was included (as always): 

“Please note that the schedule is subject to change depending on the circumstances, and the specific timing of repayments to each rehabilitation creditor has not yet been determined.”

Singaporean fintech raises $10M 

Singaporean firm DCS Fintech Holdings has received a $10 million investment from Foresight Ventures for creating crypto-fiat on-ramping solutions. 

According to the September 21 announcement, DCS, which originally stood for “Diners Club Singapore,” the first credit card issuer in the city-state nation, will use the capital to develop “new payment solutions that provide a seamless connection between Web2 and Web3.” Its subsidiary, DCS Card Center, is regulated by the Monetary Authority of Singapore for issuing credit cards. CEO Karen Low commented:

“The rapid evolution of Web3 today necessitates the bridging of payments into Web2, while the rise of fintechs is democratizing payments for consumers, creating demand for greater variety and refreshing experiences. These are opportunities that DCS is well-poised to seize.”

As part of DCS’s initial foray into Web3, it has developed a Singaporean-dollar-backed payment token, which is also dubbed “DCS,” for the financial service sector.

Also based in Singapore, Foresight Ventures is a $400 million fund investing in Web3, AI, and blockchain-related entities. In May, the firm pledged an additional $10 million for its Web3 accelerator, bringing the total to $20 million. The firm also backs the $120 million Sei Ecosystem Fund. 

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Token2049 captivates Singapore, Huobi rebrands on 10th Anniversary: Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

Token 2049, one of the largest crypto conferences of the year, attracted a record 10,000 attendees, 300 speakers and 5,000 companies during the two-day event in Singapore.

From Sept. 13–14, attendees entering the majestic Marina Bay Sands Convention Expo and Center were greeted by the energetic beats from the Polyhedra DJ, then to a hall of booths showcasing the latest innovation in the blockchain industry. Aside from the main show, over 400 side events took place this year.

Among the biggest announcements during the event, KXVC, a subsidiary of Kasikornbank, the largest bank in Thailand with 20 million customers, launched a $100 million fund dedicated to Web3, AI and deep tech firms based in Southeast Asia. KXVC wrote:

“For Web3, KXVC targets Web3 infrastructures, nodes validators, RPC providers, middlewares, modularity technologies, privacy, ZKP, wallets, alternative L1/L2s, shared securities, LsdFi and consumerization of NFTs.”

As for AI, the firm said it would prioritize investing in “consumer-focused AI, cybersecurity, AI/ML tools (e.g., deployment platforms, data annotation, model optimization), and problem-specific AI startups.”

The fund will be led by Krating Poonpol group chairman of Kasikorn Business Technology Group, and Jom Vimolnoht, managing director of KXVC. According to KXVC, Poonpol has over 100 investments, four unicorns, and 10 exits across five funds as a venture capitalist. Meanwhile, Vimolnoht has managed $400 million in startup investments and has backed 35 startups in the region.

Token2049 Main Event in Singapore (Cointelegraph)

On Sept. 15, Ethereum layer-two scaling solution Mantle Network,launcheda $200 million development fund for ecosystem acceleration. Among the first recipients are LiquidX, an application layer-focused venture studio building Web3 companies; Valent, a decentralized money market exploring liquid staking derivatives finance (LSDFi); and Range Protocol, an all-in-one on-chain asset management platform and ecosystem.

Previously known as BitDAO, the Mantle Network has been a maverick in reinvigorating blockchain communities, with the launch of a $500 million blockchain gaming fund in November 2021.

In May 2023, BitDAO (BIT) passed a “One brand, One token” unity governance proposal rebranding the network to Mantle with 235 million BIT tokens voting yes and 988 BIT voting no.

Token2049’s OKX Main Stage (Cointelegraph)

CoffeeDAO tokenizes marketing potential of cafes

A new decentralized autonomous organization, dubbed CoffeeDAO, is partnering with cafes around the world to unravel their market potential in exchange for free coffee.

In a live demonstration at Chye Seng Huat Hardware coffee store in Singapore, Cheney Cheng, co-founder of CoffeeDAO, showed Cointelegraph how to receive up to four free coffees at the store with a simple scan of a bar code, yielding four COFFEE tokens minted on Polygon, which could then be directly exchanged for coffee. Not only do customers receive airdrop tokens per visit, but the “loyalty points” can then be spent at other cafes.

According to Cheney, the concept is all about the neighborhood, which would allow community-based mom-and-pop stores to compete with the likes of Starbucks and McDonald’s. Customers aside, a referral program exists where individuals can receive up to 200 COFFEE tokens (200 cups of espresso) for onboarding cafes to the program. So far, over 15 cafes have partnered with CoffeeDAO throughout Singapore and Hong Kong.

CoffeeDAO at the Chye Seng Huat Hardware coffee store in Singapore (Cointelegraph)

Huobi Global changes name to… HTX? 

Cryptocurrency exchange Huobi Global is changing its name to a word where “H” represents the first letter of Huobi, “T” represents Justin Sun’s blockchain project Tron, and “X” represents the exchange’s 10th anniversary; the new name also happens to be eerily similar to the now bankrupt crypto exchange FTX.

According to the Sept. 13announcement, the rebranding coincides with the exchange’s goals in its new era to further “global expansion, thriving ecosystem, wealth effect and security and compliance.”

Justin Sun, de facto owner of HTX, said during a Token2049 press conference that the new name is also designed for non-Chinese users of the exchange, citing the difficulty of pronouncing “Huobi” for foreigners.

HTX has been in turmoil since the beginning of the year, shortly after Sun acquired the exchange and reportedly crushed an employee revolt. Despite touting stellar revenue and profit figures, Edward Chen, managing director of HTX Ventures, revealed that the exchange had cut its staff count down to 900 from 2,500 at the beginning of the year. Last month, the exchange denied it was close to insolvency and that Chinese police had arrested its senior executives. 

Justice’s late arrival for 3AC

It seems that some mild justice has finally arrived for Zhu Su and Kyle Davies, both co-founders of Singaporean crypto hedge fund Three Arrows Capital (3AC), who blew up the $3.5 billion firm in 2022 and then embarked on a game of catch-me-if-you-can with creditors.

In a September 14 statement, the Monetary Authority of Singapore (MAS) reprimanded both Zhu and Davies, barring the two from enterprise activities in the city-state’s regulated capital markets for nine years. As told by the MAS, the misconduct includes:

“(i) Providing false information to MAS [on 3AC]; (ii) failing to notify MAS about changes to Mr Zhu’s and Mr Davies’ directorship and shareholdings; and (iii) exceeding the assets under management threshold allowed for a registered fund management company.”

More than a year later, 3AC’s bankruptcy is still ongoing, and no criminal complaints have been filed against either Davies or Zhu in any jurisdiction. Last month, an embarrassing mistake that assumed Davies was a U.S. instead of a Singaporean citizen invalidated Davies’ court service in U.S. bankruptcy courts, which have cost over $30 million to date. Both Davies and Zhu have now been served in Singaporean courts.

3AC co-founders Kyle Davies (first from left) and Zhu Su (second from left) (Twitter)
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Tencent’s AI leviathan, $83M scam busted, China’s influencer ban: Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

$500B firm partners with Polygon 

South Korea’s Mirae Asset Security Token Working Group, with over $500 billion in assets under management (AUM), is collaborating with Ethereum layer-two scaling solution Polygon (MATIC) for security tokenization initiatives. 

According to a Sept. 7 press release, Mirae Asset Securities has signed a memorandum of understanding with Polygon Labs for “helping domestic and international tokenized securities networks.”

“Mirae’s foray into tokenization will undoubtedly help accelerate the mass adoption of web3 among other financial institutions,” commented Polygon Labs’ executive chairman Sandeep Nailwal.

Meanwhile, Ahn In-sung, head of the digital division at Mirae Asset Securities, wrote: “Through technical collaboration with Polygon Labs, Mirae Asset Securities aims to establish global leadership in the field of tokenized securities.”

Previously, Polygon Labs partnered with the Monetary Authority of Singapore (MAS) and key financial institutions in its Project Garden asset tokenization initiative. Last November, Project Guardian executed foreign exchange and sovereign bond transactions via Polygon.

Tencent launches the largest LLM model ever 

Tencent’s new Hunyuan Large Language Model (LLM) has over 2 trillion parameters. Previously, the largest LLMs have contained upwards of 175 billion training data parameters.

During the Chinese IT conglomerate’s Global Digital Ecology Conference on Sept. 7, Tencent unveiled its Hunyuan AI competitor to ChatGPT which is now available through Tencent Cloud. Users are able to directly connect their software APIs to Hunyuan, or use it as a basis for a variety of applications in mechatronics, customer service and enterprise operations.

Tencent’s 2023 Global Digital Ecology Conference (STCN)

Tencent claims that Hunyuan is capable of processing “tens of trillions” of data per day and can reduce risk analysis procedures in automobile manufacturing from four hours to less than 30 minutes. The company has invested a combined $31.4 billion into cloud and AI research and development within the past five years. The firm wrote: 

“In response to the problem that large models are prone to ‘babbling nonsense,’ Tencent has optimized the pre-training algorithm and strategy, reducing the illusion of the mixed-element large model by 30% to 50% compared with mainstream open source large models.”

Coinbase introduces stricter KYC measures for Singaporean customers

Singaporean clients of cryptocurrency exchange Coinbase must now provide know-your-customer information (KYC) when sending crypto to addresses other than Coinbase. 

In accordance with MAS regulations, Coinbase’s Singaporean customers will need to provide info on recipients’ wallet type, counterparty exchange name, full name and country of residence when sending crypto off the exchange. In addition, users who receive external crypto on Coinbase will need to provide similar KYC information on the sender in order to access their deposits.

The new KYC checks will not affect transfers between Coinbase accounts. MAS’ anti-money laundering requirements for digital asset transactions took effect in January 2020 and were last revised in March 2022. It’s not immediately clear as to why the exchange only implemented the regulations just now. 

Coinbase’s new KYC features for Singaporean users {Coinbase)

Shangdong Province’s Metaverse KPIs

Government officials in China’s Shangdong Province have set key performance indicators (KPIs) for local bureaucrats to expand the province’s metaverse industry to 15 billion Yuan ($2.05 billion) by 2025, or for a cyclically adjusted growth rate of 15% per annum. In addition, the KPIs include the incubation of 100 metaverse ecosystem projects, 3,000 metaverse-related patents, and at least 30 metaverse experiences at public service centers. The Shangdong People’s Government wrote: 

“[It is necessary to] build a Shandong cultural dedicated network, Shandong cultural big data center and cultural database to form a cultural tourism metaverse big data system. Focus on cultural tourism resources such as A-level tourist attractions, cultural centers, libraries, and museums, and develop a number of immersive tourism service products such as VR [Virtual Reality] cloud tours.”

80 Chinese crypto influencer accounts banned

Sina Weibo, one of China’s largest social media platforms with over 580 million monthly active users, has banned 80 Chinese crypto influencer accounts with a combined follower count of over 8 million. 

According to a Sept. 5 announcement, the accounts were banned due to “promotion of crypto trading activities” in accordance with eight legislations that together form China’s “Crypto Ban,” which has been in force since August 2021. One user commented:

“Even more [crypto] groups have been removed. A large part of those who were with me six years ago have now removed as well. Those who have not been removed have also been greatly restricted. Please go and promote them on Twitter. Weibo is no longer a good environment.

Though the Crypto Ban has been in effect for some time, China has only taken a harsh stance on enforcement starting this year. It has resulted in the removal of criminal enterprises, legitimate projects, and caused collateral damages to foreign investors alike.  

$83M crypto scam group busted in South Korea

South Korean police have busted a 110 billion Won ($83 million) crypto scam. 

Authorities say that on Sept. 5, 22 individuals were arrested on charges of deception and fraud. The unnamed group, accused of orchestrating a Ponzi scheme, allegedly solicited $83 million from 6,610 individuals based on promises of investment returns in the crypto markets as high as 300%.

An investigation subsequently revealed that business entities created by the group advocating token listings and entry into digital asset exchanges were falsified. Local news reported that assets linked to the unnamed group have been seized in criminal proceedings. A police official wrote: 

“We will strictly respond to various financial crimes that infringe upon the people’s livelihood by exploiting the desperate psychology of ordinary people who want to improve economic conditions and the virtual asset investment craze.”

OKX in final stages of licensing in Hong Kong 

According to local news reports on Sept. 3, cryptocurrency exchange OKX is in the advanced stages of receiving its virtual asset provider license from Hong Kong regulators. Zhikai Lai, the firm’s CCO, said that he expects OKX to receive the regulatory license by June 2024 and hopes to attract anywhere between 100,000 to 200,000 retail Hong Kong crypto investors within the first year. The executive noted:

“Banks have held a conservative attitude towards the virtual currency industry for many years. It was not until the government promoted Hong Kong as a global virtual asset center last year, and the Securities and Future Commission and the Hong Kong Monetary Authority gave a clear message that banks were required to prepare resources to focus on the industry. After that, their attitude became positive.”

OKX’s Chief Commercial Officer Zhikai (Lennix) Lai (Zhihu)
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Thailand’s national airdrop, Delio users screwed, Vietnam top crypto country: Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

Thailand’s crypto UBI

Thailand may soon have a national airdrop in the works where every citizen 16 years and older will receive 10,000 Baht ($285). 

According to local news reports on August 30, Thailand’s ruling Pheu Thai party will consult the Bank of Thailand in developing a “utility type 1” token necessary for the airdrop. The solution will be a know-your-customer (KYC), blockchain-based infrastructure that sources say will take at least six months to roll out. A 100 Baht fee will also be charged per user for the KYC process. In addition, the solution will require the approval of the country’s Securities and Exchange Commission. 

Real estate developer and crypto investor Srettha Thavisin was elected on August 22 as the incumbent prime minister of Thailand. During campaigning, Thavisin promised the exact 10,000 Baht per person basic income stimulus via “digital currency” if elected into power. In 2021, Thavisin’s firm, Sansiri, purchased a 15% stake in Thai asset tokenization provider X Spring for 1.6 billion Baht ($45.7 million). 

The Thailand Development and Research Institute said funding for the Thavisin Airdrop will come from tax collection in the 2024 fiscal year. The total budget estimate for the project is 560 billion Baht ($16 billion). 

The airdrop will not be equivalent to fiat Baht funds, however. Users reportedly can only spend the digitized tokens within four kilometers of their residence. The tokens will only be valid for a period of six months and cannot be converted into cash, nor be used to settle debts. Thavisin’s government is expected to assume office by the end of September.

Thai prime minister Srettha Thavisin (Twitter)

Delio users’ assets slashed in half 

More bad news is coming for users of troubled South Korean Bitcoin lender Delio. 

According to local news reports on August 30, the South Korean crypto lending giant, which holds over $1.2 billion in Bitcoin and Ether, is expecting a recovery rate of just 50% to 70% on its assets. On June 14, Delio suspended deposits and withdrawals after disclosing significant counterparty exposure to fellow South Korean Bitcoin lender Haru Invest. 

On June 13, Haru Invest, too, suspended deposits and withdrawals after allegations of fraudulent activities arose surrounding its operator, B&S Holdings. Haru Invest is currently in bankruptcy proceedings. Likewise, Delio is currently under investigation by the country’s regulatory authorities for allegations of fraud, embezzlement, and breach of trust. The platform previously announced that it would resumes withdrawals, although no updates on such timeline has since been given.

Photo allegedly showing empty Haru Invest corporate offices after the announcement. (Telegram)
Photo allegedly showing empty Haru Invest corporate offices after the shutdown announcement. (Telegram)

Vietnam’s booming crypto market 

Vietnam is currently ranked first in the world in crypto adoption, with up to 19% of its 18-64 adult population using digital assets.

That’s according to an August 30 report authored by Vietnamese venture capital firms Kyros Ventures and Coin 68, together with Animoca Brands. Currently, the Southeast Asian country is the home to around 200 blockchain projects, and is expected to generate $109.4 million in revenue from crypto exchanges this year. The country’s crypto users are estimated to grow to 12.37 million by 2027. 

Among the highlights, 76% of Vietnamese crypto users say that they invest in digital assets based on advice from friends, a number 2.5 times higher than individuals surveyed in the U.S. Nearly 70% of respondents said the crypto bear market would last less than one year or has already ended. Almost half of respondents say that centralized exchanges offer just as much utility as decentralized ones, but 90% of crypto owners use decnetralized exchanges.

Vietnamese investor perspectives on the ongoing crypto winter (Kyros Ventures)

Binance Japan to list 100 coins

On August 30, Tsuyoshi Chino, CEO of Binance Japan, held an online business briefing discussing the exchange’s domestic expansion strategy. During the session, Chino said that Binance Japan would seek to list 100 coins and tokens “as soon as possible.” 

Local news reports note that Binance Japan currently provides spot trading of cryptocurrencies alongside staking “Simple Earn” programs. The use of margin trading is currently not available unless the exchange obtains a regulatory license. The presentation also revealed that its parent exchange, Binance, has surpassed 150 million in user count with an average daily trading volume of $65 billion. Earlier this year, cryptocurrency exchange Coinbase ceased operations in Japan, citing difficult market conditions.

Shenzhen’s 15 million Yuan for airdrops

In a government-sponsored conference promoting the digital Chinese Yuan central bank digital currency (e-CNY CBDC), officials from the City of Shenzhen pledged 15 million ($2.1 million) for municipal e-CNY airdrops over the next three years. Binqquan Wei, vice governor of Agricultural Bank of China Shenzhen, noted that during trials, the e-CNY has proven to be a highly efficient method for consumer transaction receipts via its immutable distributed ledger technology: 

“The platform [Our e-CNY CBDC] currently has more than 200 merchants, involving 11 key industries such as education and training, catering, pet services, elderly care, and sports.”

China’s central government has been heavily promoting the e-CNY CBDC as a means of stimulating the country’s ailing economy amid a looming recession. In its latest figures, the CBDC has surpassed $123 billion in cumulative transactions since 2021, with test sites running in 17 provinces and 26 districts. 

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Bitcoin miner gets life in prison, China offers bounties for crypto firms: Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

HashKey Hong Kong to commence retail trading 

Crypto exchange HashKey, the first licensed virtual asset provider in Hong Kong, will open its doors to residents for retail trading on August 28. 

According to local news reports, investors will only be allowed to invest up to 30% of their net worth into cryptocurrencies when using the platform. A risk control warning will be displayed if the limit is exceeded. However, Xiaoqi Weng, COO of HashKey, mentioned that the exchange “cannot validate users’ net worth,” and the limit is largely based on “self-verification” of assets. 

Weng also disclosed that the exchange will assess users’ investment background based on information submitted during know-your-customer verification. “[Investment] Beginners are limited in what they can purchase,” said Weng. 

At its debut, users can only trade Bitcoin (BTC) and Ether (ETH) on HashKey Hong Kong. The Hong Kong Securities and Futures Commission has not yet allowed margin trading of crypto products, nor crypto derivatives, among regulated exchanges, Weng noted. 

Dark side of China’s crypto crackdown

It appears China no longer wants any private blockchain firms operating within its borders and is on the warpath to get rid of them, no matter the consequences. The move comes amidst an increase in using crypto as a means of capital flight in an economic downturn.

Local media reports suggest that, legitimate or not, blockchain projects in China have literal bounties on their heads. First, third-party tracking firms tip off the police on undercover crypto projects in the country; if the report leads to arrest and asset forfeiture, the tracking firm stands to make millions of dollars in commission, if not hundreds of millions of dollars, for large-scale projects such as Multichain.

An recent tip-off lead to a 400 billion Yuan ($55 billion) crypto money laundering bust by Chinese police.
An recent tip-off lead to a 400 billion Yuan ($55 billion) crypto money laundering bust by Chinese police. (DouYin)

Then, after arrest, crypto executives are reportedly intimidated into handing over the project’s private keys and access to servers. Police then allegedly get third-party payment processors to “dump” the coins and tokens over the counter in exchange for Chinese Yuan.

Crypto executives are then charged with operating a “multi-level marketing scheme,” “pyramid scheme,” or “money laundering.” If convicted, the charges result in the seizure of all protocol-related assets by the state.

Sources claim that a portion of the funds goes into law enforcement agency revenue. Zhengyao Liu, a senior lawyer at the Shanghai Mankuen Law Firm, wrote:

“In fact, in the past two years, the profit-seeking law enforcement in crypto-related criminal cases, especially in crypto-related MLM cases, has been the main reason people do not trust the case-handling agencies. For example, the ‘contribution’ of crypto-related criminal cases to financial fines and confiscation revenues is more than 50% higher than in previous years in the Jiangsu Province.”

The crackdown has led to the termination of several protocols this year, with little recourse for non-Chinese users with funds stuck on these platforms. Unsurprisingly, it has sparked a wave of emigration among Chinese Web3 founders, and overseas law enforcement efforts to try and recover the “stuck” funds.

The last message sent by Chinese exchange BKEX before its entire platform shut down and its staff nowhere to be found. (BKEX)

e-CNY green bonds debut 

Despite the draconian crackdown on private crypto activities, government-led blockchain efforts in China are doing quite well.

On August 18, the first digital yuan central bank digital currency (e-CNY CBDC) green bond was issued with a principal amount of 100 million Chinese Yuan ($14 million), a term of two years, and a coupon rate of 2.6% per annum. 

Facilitated by the Bank of Ningbo, the loans will be used to finance a 1.4 gigawatt (GW) and a 1.0 GW solar panel facility expansion project in Wuxi. 

The e-CNY CBDC has been repeatedly “shilled” for much of this year as a means of stimulating domestic spending amidst a financial crisis within the country. In the City of Tianjin alone, e-CNY transaction volumes have surpassed $17.5 billion in the first half of 2023, with over 302,000 merchants accepting the CBDC as a means of payment. 

FBI tracks $41M in North Korean crypto

On August 22, the U.S. Federal Bureau of Investigation announced the identification of 1,580 BTC ($41 million) stolen from various projects by North Korean hackers. The six displayed wallets include funds stolen from the $60 million Alphapo hack in June, $37 million stolen from CoinsPaid in June, and $100 million stolen from Atomic Wallet in June. The FBI wrote: 

“Private sector entities should examine the blockchain data associated with these addresses and be vigilant in guarding against transactions directly with, or derived from, the addresses. The FBI will continue to expose and combat the DPRK’s use of illicit activities—including cybercrime and virtual currency theft—to generate revenue for the regime.”

The agency said it believes North Korea will attempt to cash out the stolen funds. Criminal investigations into North Korean hackers’ role in the Harmony’s Horizon Bridge and Sky Mavis’ Ronin Bridge exploits last year are still ongoing.

Chinese Bitcoin mining magnate sentenced to life in prison

Yi Xiao, a former vice chairman of the Jiangxi Provincial Political Consultative Conference Party Group, has reportedly been sentenced to life in prison by the Hangzhou Intermediate People’s Court for unrelated charges of corruption and abuse of power in a Bitcoin mining enterprise.

According to local news reports on August 22, Yi Xiao operated a 2.4 billion Chinese Yuan ($329 million) Bitcoin mining enterprise under the corporate name Jiumu Group Genesis Technology from 2017 to 2021. Despite knowing about a ban on cryptocurrencies, Xiao amassed over 160,000 Bitcoin miners with other corporate executives and, at one time, 10% of the City of Fuzhou’s entire electricity consumption. 

Xiao was convicted of using his public office to secure preferential subsidies, capital, and electricity supply for Jiamu Group. The former official also used his position to fabricate statistical reports to conceal the operations’ true nature.

Starting this year, China has been cracking down harshly on crypto activities amid a spree of data theft and money laundering incidences involving digital assets. Earlier this month, a Chinese national was sentenced to nine months in prison for purchasing $13,067 worth of Tether (USDT) for an acquaintance.

Yi Xiao awaiting sentencing on charges of corruption and abuse of power (Hangzhou Intermediate People's Court)
Yi Xiao awaiting sentencing on charges of corruption and abuse of power (Hangzhou Intermediate People’s Court)
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Real reason for China’s war on crypto, 3AC judge’s embarrassing mistake: Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

On Aug. 11, a Chinese individual known only as Mr. Chen was sentenced to nine months in prison after helping his friend, Mr. Lin, purchase 94,988 Chinese yuan ($13,104) worth of Tether (USDT) and earning a commission of 147.1 Yuan ($20.24).

Because Mr. Chen shared his personal bank information for the peer-to-peer fiat-to-crypto transaction, Chinese authorities considered the act to be money laundering and imposed a harsh sentence.

Chinese judge explains in a prior case why a Bitcoin lending agreement was legally invalid even in the event of a breach of contract. (Jstv)

Officially, Chinese authorities attribute the tough-on-crypto approach to a spree of data theft and the use of crypto to launder proceeds of crime. However, sources tell Cointelegraph that the crackdown is more related to the country’s stringent capital control rules, where Chinese nationals are prohibited from buying more than $50,000 worth of foreign currencies each year without a state permit. The same applies to large-sum Chinese yuan transactions with foreign banks.

The capital controls had been almost complete until the advent of crypto, sources say. The problem is further exasperated by a looming recession in China, making senior government officials wary of further money moving out of the country.

In July, Jingmen municipal police were tipped off about an online poker platform operating in the city. Raiding the offices, police discovered the group had “laundered” over 400 billion Chinese yuan ($54.93 billion) worth of gambling funds using cryptocurrencies and involving over 50,000 individuals.

However, the underlying criminal act that resulted in the “tainted money” was never mentioned. Unlike other jurisdictions, the act of gambling itself and the transfer of currencies abroad without applicable permits are deemed to be illicit activities. According to user reports, fiat-to-crypto transactions stemming as far back as 2021 are currently being audited by “special police task forces.”

Crypto projects and their Chinese founders are also disappearing at an alarming rate. The well-known Multichain incident aside, in May, employees of Chinese offshore yuan stablecoin issuer CNHC were detained by police following an office raid. They have not been heard from since. Commenting on the story, Wuwei Liang, a former employee of defunct crypto exchange CoinXP, claimed:

“Suddenly, despite there being no complainants nor victims, the Wuxi police who came to Beijing from across the province took away all the members of the CoinXP team of China’s domestic blockchain entrepreneurial team.”

Liang further alleged that Chinese police would resort to “intimidation” to force a confession and the surrender of a project’s private key. Armed with this as “evidence” police then charge the co-founder with “fraud and multilevel marketing,” bringing about a sham trial where the accused is convicted, resulting in the seizure of enterprise and user funds alike. (These allegations have not been proven in court.) We reported earlier on allegations of intimidation, detention, and even suggestions of the “kidnapping” of the defense counsel at the ongoing CoinXP trial.

CBDC printer goes brrrr

Don’t misinterpret the Chinese government, however; they are quite fond of blockchain, so long as they are the ones in charge.

In the interest of revitalizing China’s ailing economy via consumer spending, government officials have recognized the role of the Chinese yuan central bank digital currency and made its adoption a political priority. On July 27, the city of Suqian airdropped 20 million ($2.75 million) of digital yuan shopping vouchers to residents.

This was followed by a 10 million ($1.37 million) digital yuan food voucher airdrop by the city of Hangzhou, a 40 million ($5.49 million) digital yuan airdrop by the city of Shaoxing, a 30 million ($4.12 million) digital yuan airdrop by the city of Jianyang, and a 3 million ($0.412 million) digital yuan airdrop by the city of Ningbo, all within less than two weeks. At one test site in Chengdu, China’s largest food delivery platform, Meituan, reported a 65.5% daily increase in the number of digital yuan transactions on its platform.

So there are definitely real-world results to help revitalize the economy — something desperately needed right now. On Aug. 15, China announced it would stop reporting its youth unemployment figures after the metric reached a record 21.3% in June. Perhaps we can expect the (blockchain) printer to go brrr in the months ahead?

Chinese president Xi Jinping during the Shanghai Cooperation Summit (CCTV)
Chinese President Xi Jinping explains during the Shanghai Cooperation Summit why ‘”friendly nations” such as Belarus and Iran should develop their own CBDCs. (CCTV)

3AC creditors suffer humiliating defeat 

Lawsuits can be tough, especially when it comes to matters such as liquidating a $3.5 billion Singaporean hedge fund through multi-jurisdictional litigation. This is why a high level of competency is generally required for the attorneys who take part in such proceedings.

And so, creditors of Three Arrows Capital (3AC) were dealt a significant setback on Aug. 11, when United States Bankruptcy Judge Martin Glenn said civil contempt rulings against 3AC co-founder Kyle Davies were invalid.

Judge Glenn explained that the subpoenas issued by law firm Teneo on behalf of creditors to Davies via Twitter starting in December were made on the basis that Davies held U.S. citizenship. However, it emerged earlier this month that Davies’ renounced his U.S. citizenship to acquire Singaporean citizenship a few years prior.

“Because Mr. Davies’ United States citizenship was a prerequisite for valid service on him in the manner effected, he was not properly served with the subpoena issued by this Court.”

As a result, the U.S. court could not exercise jurisdiction against Davies, with Judge Glenn suggesting that creditors’ attorneys bring a motion to a Singaporean court to compel Davies’ compliance instead. It has been over a year since 3AC filed for bankruptcy.

In other words, after one year’s time, creditors have just found out that the jurisdiction where they filed to claim debtors’ assets had no jurisdiction over the debtors. 3AC co-founder Zhu Su, by the way, also has Singaporean citizenship and cannot be compelled by U.S. courts on this matter.

3AC co-founders Kyle Davies (left) and Su Zhu (right). (X/Twitter)

Now don’t get me wrong, everyone makes mistakes, but often trivial mistakes have trivial consequences. Unfortunately, that wasn’t the case here. Since the inception of proceedings, 3AC creditors have reportedly spent millions in legal fees, with some estimates going as high as $30 million. The proceedings have so far led to the recovery of several nonfungible tokens (NFTs) owned by 3AC, which were sold at two Sotheby’s auctions for a combined … $13.4 million.

In another setback, a Singaporean court ruled on Aug. 15 that the city-state would be the convenient forum for hearing 3AC creditors’ $140 million dispute with DeFiance Capital, and not the British Virgin Islands as suggested by Teneo. 3AC creditors allege that funds held with DeFiance Capital belong in the estate of 3AC, while DeFinance Capital says that its assets belong to its independent investors. Commenting on the double whammy, Su Zhu wrote:

“As the current acting liquidator for 3AC, we believe Teneo is repeatedly overreaching in their attempt to seize other investors’ funds. Even on a technical and legalistic approach, the DC [DeFiance Capital] and SNC assets rightfully belong to the feeder funds of 3AC,”

But in the overall context, winning a battle is easy; winning a war is difficult. On Aug. 16, Dubai regulators reminded Davies and Zhu that their new OPNX exchange for trading crypto bankruptcy claims remains unregistered in the Emirate and, correspondingly, faces a 10 million Dirham ($2.72 million) penalty for operating without a proper license.

Unlike in the U.S., Davies and Zhu actually own assets in the UAE vulnerable to seizure, including Davies’ prized chicken restaurant. Whether the co-founders can really keep their assets sheltered from the path of angry creditors (and regulators alike) remains to be seen.

Just before we published Asia Express, 3AC liquidators filed a committal order against Zhu Su in the court of Singapore.

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China’s risky Bitcoin court decision, is Huobi in trouble or not? Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

Chinese man’s $10M loss as court says Bitcoin lending not protected by law

A man in China’s Jiangsu province, identified as Mr. Xu, appears to be out of luck after a court ruled that his 341 Bitcoin loan ($9.9 million) to counterparty Mr. Lin is not protected by law according to local news reports on August 3.

Some time ago, Mr. Xu lent 341 Bitcoins to Mr. Lin after the latter approached him for a peer-to-peer loan. At the time, Mr. Xu lacked fiat funds, and so the parties settled on using Bitcoin for the borrowing through a written agreement. Shortly afterward, however, Mr. Lin defaulted on the loan, prompting Mr. Xu to sue in the Changzhou Zhonglou People’s Court. The case was dismissed. 

Chinese magistrate Ming Wang explains why the Bitcoin lending contract was invalid and therefore denied relief for breach of contract. (Screenshot)

In supporting the judgment, Ming Wang, vice-magistrate of the Changzhou Zhonglou People’s Court, told reporters that Bitcoin is a digital commodity that does not hold the same legal status as fiat currencies. Therefore, the asset can neither be subject to a legal enforcement action, enter circulation, or be used to ” award compensation.”

“The lender bears ALL risks [when lending crypto],” Wang warned. That said, in another ruling dated Nov. 29, the Hangzhou Internet Court wrote that digital assets such as nonfungible tokens are “online virtual property” that should be protected under Chinese law. 

Aside from outright ownership, all forms of cryptocurrencies and transactions are currently illegal in China. The country has been cracking down on private blockchain initiatives in favor of the Central Government’s efforts to promote centralized blockchain, such as via the digital yuan CBDC

China’s disappearing Web3 founders 

Just last month, Chinese cross-chain bridge Multichain was still one of the biggest in the DeFi sector. While its reputation took a hit due to the disappearance of its co-founder, Zhaojun He, the protocol still had around $1.5 billion in total value locked at the start of July.

Then on July 14, investors’ worst fears came true after Multichain developers revealed that Zhaojun had been arrested by Chinese police nearly two months prior. Because Zhaojun held discretionary control of Multichain’s entire server-based and private keys, they said the protocol had to be shut down.

But the question left many readers pondering, how does the arrest of a single individual lead to the shutdown of an entire enterprise and the disappearance of enterprise funds? One anonymous user in the Multichain Telegram chat claimed:

“It’s become a total supply chain. Third-party tracking companies will supply leads to the police to take them into custody as long as the [Web3] co-founder is in China and has money. Where do you think the police’s case came from? Third-party tracking companies make at up to 10 figures [CNY] from such tipoffs.” 

While Zhaojun is currently detained without any revelation of the charges — or any news whatsoever — the Multichain funds supposedly “stuck” in the protocol are on the move. Blockchain security firms, such as Bitrace and PeckShield, have revealed that since Zhaojun’s arrest, assets stored on the Multichain bridge had been swapped for stablecoins and transferred out of the protocol. The move prompted stablecoin issuers such as Circle and Tether to freeze over $63 million of suspicious transactions linked to Multichain.

A man alleged to be Multichain co-founder and CEO Zhao Jun (Telegram)

In a series of screenshots seen by Cointelegraph, exchanges such as Binance are also investigating stablecoin deposits to its platform linked to the Multichain incident. Meanwhile, whoever is making the transfers has appeared to smarten up as well, with swaps of users’ assets now being done through privacy coins as opposed to traceable assets.

Some observers theorize that the circumstantial evidence points to the Chinese police moving the coins. For starters, the In a similar incident, Wuwei Liang, brother of CoinXP co-founder Liang Liang, wrote in regard to the ongoing criminal proceedings against his brother and the firm:

“The virtual currency involved in the case [seized from CoinXP by police] was transferred to other wallet addresses by the Wuxi Public Security Bureau, and 20 Bitcoins disappeared during the transfer process and have not been recovered so far.”

Liang Liang’s trial is ongoing and the blockchain executive is currently charged with “illegal solicitation of public funds” and running a “multi-level marketing” scheme. The latter, by the way, carries the penalty of civil forfeiture of all personal and enterprise assets if convicted, and the trial is not going well.

The crackdown appears to have started with China’s own state-blockchain centralization efforts this year. On May 31, Cointelegraph reported that offices of the Chinese offshore-yuan stablecoin issuer CNHC had been raided by police. Its executive had been reportedly detained and like Multichain, no news has been heard from them since.

Huobi in trouble once again Everything is just fine

If I could sum up with everything that goes on in blockchain from day to day using one phrase, it’d be “all is not, as it seems.”

On August 6, local news outlets in Hong Kong reported that senior executives of cryptocurrency exchange Huobi had been arrested by Chinese police. The exchange subsequently denied this as “fake news.” Chinese blockchain personality Justin Sun, the de-facto owner of the exchange, also labeled the news as fear, uncertainty, and doubt (FUD). 

But as Adam Cochran, partner of Cinneamhain Ventures, claimed on Twitter that Sun allegedly withdrew $60 million from the exchange after the news broke out. Cochran also claimed that some Huobi staff “are currently under criminal investigation,” citing an insider at Tron (Sun’s blockchain project) who has “first hand knowledge of the investigation.”

However, according to Sun, Huobi is doing just fine. On August 1, Sun claimed that the exchange generated more than $85 million in profits in Q2 2023, with $100 million in profits projected for Q3 2023. Pretty impressive, considering that the exchange suffered an internal revolt just earlier this year after the firm allegedly slashed a vast majority of employment benefits.

But anyway swirling rumors around Huobi may be behind its USDT reserves declining to less than $100 million from $630 million last month, while its total assets have fallen to $2.5 billion compared to $3.1 billion in the same period.

Huobi's total assets vs. inflows (DeFiLlama)
Huobi’s total assets vs. inflows (DeFiLlama)
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Chinese police vs. Web3, blockchain centralization continues: Asia Express

According to one insider, Chinese police are after Web3 co-founders, not to serve and protect, but for their wallets. 

In a recent blog post, Wuwei Liang, the brother of imprisoned CoinXP co-founder Liang Liang, warned that under no circumstances should executives hand over their private keys when detained by Chinese police. Responding to news of Multichain co-founder Jun Zhao’s arrest, he wrote: 

“As long as the police see the money and get the money, they will make up their minds, charge the case with crimes, and confiscate the assets. If you lose the secret key, you will lose everything, you will lose your life and wealth, and you will be imprisoned wrongly.”

Earlier in July, China’s largest cross-chain protocol used by the likes of Fantom and Binance alike, with over $10 billion in total value locked at its peak, closed down for good after developers disclosed that its CEO, Jun Zhao, was arrested by Chinese police in May. Zhao allegedly held control of all protocol MPC nodes, access to private keys and investors’ funds.

Without Zhao, the protocol and users’ assets were as good as gone. While cryptocurrency exchanges, mining and initial coin offerings are illegal in China, outright ownership of cryptocurrencies isn’t illegal, and there is currently a gray area regarding crypto projects outside of prohibited categories.

But Liang says that “profit-driven law enforcement projects are fundamentally after money,” raising the example of CoinXP’s ongoing case. In 2018, Liang Liang founded the CoinXP blockchain and its ecosystem DApp Hubdex after raising 13,000 Ether (around $30 million) from an initial coin offering. 

On April 14, 2021, Liang and other developers were arrested by Chinese police on charges of “illegal use of information networks.” Hubdex was subsequently shut down by authorities shortly after, while the co-founder’s charges were later upgraded to “illegal solicitation of public funds” and “multi-level marketing.” (which carries the possibility of confiscation of all assets if proven guilty) As Liang’s brother Wuwei Liang says: 

“The virtual currency involved in the case was transferred to other addresses by the Wuxi Public Security Bureau, and 20 Bitcoins disappeared during the transfer process and have not been recovered so far.”

The trial has been ongoing since the last week of July; however, multiple sources seem to confirm that things aren’t going that well. First, the presiding judge reportedly said, “The presumption of innocence is not a correct principle of law [in our country]” when questioned by the defense attorney on the opening day. Second, Liang’s defense attorney Zhongwei Li was reportedly “kidnapped” by police at the entrance to the Wuxi People’s Court and held for over five hours without due cause before being released. Meanwhile, one bystander was reportedly detained for 10 days in jail just for, well, listening in to public court procedures. 

A Wuxi Police ad warning against unauthorized solicitations of public funds. (Wuxi Public Security Bureau)

That said, users may expect the worst for Zhao in the ongoing Multichain saga. As one anonymous individual in the Multichain Telegram put it: 

“It’s become a total supply chain. Third-party tracking companies will supply clues to the police as long as the [Web3] co-founder is in China and has money to take them into custody.”

The East is red

Believe it or not, China is actually quite bullish on the outlook of blockchain technology, so long as it is under the control of the central government. 

On July 31, the city of Shanghai laid out a two-year plan for its municipal advancement of blockchain infrastructure. Government officials envision that by 2025, Shanghai’s “Pujiang Digital Chain” will officially launch. It combines a computation layer, a layer for public services and a layer for government affairs. Developers wrote: 

In the case of container shipping MaaS, [the Pujiang Digital Chain] will explore one-stop customs declaration and release inquiry services, promote the popularization of electronic bills of lading, carry out on-chain storage of related data such as ships, crew, risk management and transportation environment, and provide services for shipping insurance pricing, insurance claims, and liability determination. 

In addition to regional initiatives, Chinese President Xi Jinping has emphasized the need to develop central bank digital currencies for local currency trade settlements between “friendly” countries such as Russia and Iran. In cities such as Kunming, local communist party officials must also incubate at least 20 blockchain-specific applications and encourage the development of at least 10 “strongly competitive” blockchain firms by the end of 2024.

Chinese president Xi Jinping during the Shanghai Cooperation Summit (CCTV)
Chinese President Xi during the Shanghai Cooperation Summit. (CCTV)

Korean regulators mandate insurance for crypto exchanges

On July 27, the Korean Federation of Banks announced that crypto exchanges signing contracts with banks for withdrawals and deposits using real-name customer ID must accumulate a reserve of 3 billion won ($2.35 million) to fulfill liabilities to users in events such as hacking or computer failure. The maximum reserve amount is set to 30% of the daily average of deposits, with a compensation limit of 20 billion won ($15.7 million).

The changes are scheduled to take effect in early September. South Korea has been plagued by issues surrounding digital asset operators for much of this year, ranging from scandals at crypto exchange Bithumb to the collapse of crypto lending firms Haru Invest and Delio. 

First regulated Malaysian digital assets fund launches 

Halogen Capital has become the first digital assets fund regulated by the Securities Commission Malaysia (SCM). 

Local news outlet reported on July 26 that Halogen had been granted a full Capital Markets Services license to manage cryptocurrencies, nonfungible tokens and tokenized assets. The firm has since rolled out Shariah (Islamic) law-compliant Bitcoin and Ethereum funds. Customers’ assets are, by law, segregated between accounts owned by SCM trustees.

The Halogen Capital investment team (Halogen)
The Halogen Capital investment team. (Halogen)

Earlier this month, fund managers Hann Liew and Lucas Ooi announced they would be stepping down from their executive roles in fintech firm Jirnexu to focus on building Halogen Capital. “It’s time to get building again. Will share more in posts to come…” the founders said at the time. Digital asset firms are required to register with SCM before operating in the country, with companies such as Huobi being reprimanded for failing to do so. 

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China’s blockchain satellite in space, Hong Kong’s McNuggets Metaverse: Asia Express

Chinese blockchain Sputnik’s maiden voyage

A Chinese satellite has become the first in the world to carry a blockchain imaging and screening system into orbit. 

According to local news outlet Red Star News on July 22, the Tai’an Star Era 16 was successfully launched into orbit from the China Jiuquan Satellite Launch Center. Developed by NationStar Aerospace Technology Co., the satellite features a visual blockchain on-orbit certificate storage system dubbed ‘ADAChain’ (not related to Cardano) developed in-house by NationStar. Researchers wrote: 

“The [ADAChain] can realize functions such on-orbit visual blockchain multi-signature authentication, on-orbit video visual broadcasting, and on-orbit visual remote sensing data storage certificate confirmation.”

The purpose of the satellite’s voyage is to “obtain rich spectral information on the surface of the target area,” in the fields of “precision agriculture, water resources management, mineral resource investigation, environmental monitoring, and emergency safety.” Blockchain technology will also assist in achieving the goals of “high spatial resolution, high spectral resolution, and high temporal resolution” in such satellite imaging. 

The Tai’an Star Era 16 blockchain satellite Launch (RedStar News)

Digital Yuan CBDC expands to Hong Kong 

The Bank of China’s Hong Kong subsidiary has allowed individuals in the Special Administrative Region (SAR) to utilize the digital yuan central bank digital currency (e-CNY CBDC) for retail shopping. 

According to a July 20 report, over 200 merchants, such as shopping centers, pharmacies, convenience stores, and electronic stores have accepted the e-CNY CBDC as a means of payment from shoppers originating in Mainland China. The e-CNY CBDC is currently not available to Hong Kong users. 

As a SAR, Hong Kong maintains separate political, economic and social institutions from Mainland China. Advocates have previously called for the Hong Kong government to issue its own Hong Kong Dollar CBDC to compete with the likes of Tether (USDT) and USD Coin (USDC). Similarly, Chinese President Xi Jinping has emphasized the importance of CBDCs as a means of settling international trade in local currencies.

Terraform Labs struggles to get back on its feet

“Every time we would make a little progress, there would be some accusation or something that would derail us,” said Terraform Labs’ interim CEO Chris Amani in a Twitter Space on July 20. 

According to Amani, the arrest of the entity’s co-founder and former CEO Do Kwon in Montenegro has essentially shattered all momentum that the ailing network is trying to reestablish. In May 2022, the $40 billion Terra Luna (LUNC) ecosystem collapsed due to the implosion of its algorithmic stablecoin TerraUSD (USTC). Shortly afterward, Kwon created the Terra 2.0 (LUNA) ecosystem. The three tokens have a combined market cap of $1.3 billion at the time of publication. 

Do Kwon
Do Kwon faces charges in a variety of countries.

In its next phase, Amani says that nine projects built on the combined Terra Luna ecosystem are scheduled to launch within the next few months. None of the projects will reportedly issue their own tokens. In addition, Amani warned that the projects face stiff competition from other layer-one projects due to lacking a Luna Foundation Guard or protocol treasury for financial support. 

South Korean crypto lender shuts down amid criminal proceedings

South Korean crypto lender Delio says all of its company and customers’ assets have been seized in a raid conducted by prosecutors on July 18.

In the July 22 announcement, Delio announced it would pause all interest payments to users effective immediately after the asset seizures made it impossible for the company to continue normal operations. In June, the crypto lender suspended all withdrawals and deposits on its platform, citing exposure to counterparty and fellow South Korean crypto lender Haru Invest, which in turn suspended all transfers due to an issue with a “consignment operator,” B&S Holdings. 

Haru Invest is currently undergoing bankruptcy proceedings. Meanwhile, Delio is one of the largest crypto lenders in South Korea, with around $1.5 billion in customer Bitcoin (BTC), Ether (ETH), and altcoin deposits. Since June 30, the firm has been under investigation by the country’s Financial Services Commission on allegations of fraud, embezzlement and breach of trust.

The firm previously stated that it would enable the withdrawal of users’ assets without stating a specific timeframe. However, similar to the Multichain saga, it is unlikely the company can do so when customers’ assets have been seized as part of criminal proceedings.

In a July 23 blog post, Haru Invest CEO Hugo Lee wrote that B&S Holdings’ assets have also been seized by authorities and that the company is currently trying to recover the funds. All of the firm’s operations have been suspended, and the company is scheduled to liquidate its remaining assets in phases. Haru Invest currently has more than 80,000 users.

Indonesia’s national crypto exchange goes live

A national cryptocurrency exchange operated by the government of Indonesia will be the only legal venue for trading crypto assets in the Southeast Asian country. 

In a July 20 statement from the country’s Commodity Futures Trading Supervisory Agency, also known as Bappebti, the exchange is currently open for spot trading, with future plans to expand its offering to cryptocurrency futures and derivatives. All cryptocurrency exchange registered within the country could join the national exchange, which serves as a clearing house to ensure transactions abide by relevant regulations. 

Despite official support, Islamic organizations in Indonesia have previously deemed the use of cryptocurrency to be haram, or forbidden, for Muslim users. That said, there is no consensus from Islamic scholars regarding the matter. 

McDonald’s launches McNuggets Metaverse in Hong Kong

On the 40th anniversary of the introduction of chicken McNuggets, McDonald’s Hong Kong is partnering with Sandbox to launch a namesake metaverse to celebrate the occasion.

Dubbed “McNuggets Land,” the metaverse will allow users to interact with McNuggets-themed gaming characters and avatars. Randy Lai, CEO of McDonald’s Hong Kong, commented: 

“Rooted in Hong Kong for 48 years, McDonald’s has always strived to deliver innovative experiences and Happy Moments. To celebrate the 40th anniversary of Chicken McNuggets, we are excited to collaborate with The Sandbox to provide fun-filled Web3 Metaverse game experience.”

A reward pool of 100,000 SAND tokens and 10,000 vouchers for McNugget perks will be distributed to participants. Since its entry into then British Hong Kong in 1975, the franchise currently operates 250 restaurants around the city, serving more than 1 million customers per day. 

The McNuggets Land Metaverse (Sandbox)
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Multichain saga screws users, Binance fires 1,000 staff: Asia Express

Decentralized Web 3 cross-chain router allegedly under control of one-man

Imagine a system where all your money is controlled by one man and his family and when there is cause for concern, the propaganda machine immediately goes ‘brrr’ to put on a facade that everything is just fine despite some alarming withdrawls. Sounds more like a one party state? No, welcome to blockchain, specifically, Multichain.

A man alleged to be Multichain co-founder and CEO Zhao Jun (CryptoRank)

On July 14, Chinese decentralized cross-chain bridge protocol Multichain announced that it would cease operations after three years. The reason? The only person allegedly holding the private keys to over $1.5 billion in users’ crypto stored on Multichain was its co-founder and CEO Zhao Jun and later, his sister (name unknown). Both were arrested by Chinese police — but it’s still not clear why.

Zhao Jun was reportedly arrested as early as May 21, but it appears that Multichain staff did not want you to know that… until now, when one discrepancy after another made it impossible to bury the truth.

The whole ordeal started on or around May 24, when Multichain users reported that funds had not arrived for nearly 72 hours after being sent. Admins immediately responded that the delay was due to a backend node upgrade “taking longer than expected,” and that “all affected transactions will arrive after the upgrade is complete.”

“Most routes are working as usual, as some routes (Kava, zkSync, Polygon zkEVM) are temporarily suspended. All affected transactions will arrive after the upgrade is complete. We sincerely apologize for the inconvenience caused.”

At that time, some users were already aware of CEO Zhao Jun’s arrest by Chinese police. In response, co-founder Alfred Xu decided to step in to quash the “rumors” and save users from “disinformation,” writing in the protocol’s Chinese Telegram channel:“Currently all team members are safe and sound; the main operations are proceeding as normal.”

Despite assurances, worries turned into a full-blown panic on May 25 when local news outlet PANewsLab reported that CEO was unreachable. This time, it was fellow co-founder DJ Qian who stepped in and assured that “user assets and staff are safe.” However, Qian also confirmed Zhao Jun’s disappearance. For the next month, Multichain continued to promote its cross-chain protocol. 

Multichain 2

Fast forward to July 7, users began noticing over $100 million in unauthorized withdrawals from Multichain’s Fantom Ethereum bridge, along with funds from other sidechains. Around $65 million in Tether (USDT) and USD Coin (USDC) were frozen by their issuers, Tether and Circle, after the transactions led to widespread fear that Multichain was hacked. Some security experts began to suspect that the hack may be an inside job.

Movement of Multichain users’ USDC assets by the ‘hacker’ (Chainalysis)

According to Multichain:

“User assets locked on the MPC addresses were transferred to unknown addresses abnormally. Login information from an IP address in Kunming was found on the cloud server platform, along with a series of operations transferring funds from the MPC addresses.”

Developers wrote that on July 9, Zhao Jun’s sister transferred the remaining assets from a router pool to wallet addresses controlled by her as an “asset preservation action.” Four days later, Zhao Jun’s sister was reportedly arrested by police (again it’s not clear why she was arrested). Because Zhao Jun and his sister were the only ones who had access to operational funds, users’ assets, Multichain servers, and even its website (which its own team is trying to shut down) “since inception,” the project’s own development team can no longer function.

“Later, the team established contact with Zhaojun’s family and learned that all of Zhaojun’s computers, phones, hardware wallets, and mnemonic phrases were confiscated by the authorities.”

Unfortunately, the worst may still be yet to come for Multichain’s users…

To this day, we don’t actually know why Zhao Jun was arrested, what he had been charged with, or any details regarding his case (and no, I don’t think Multichain will tell us either). However, under Chinese law, funds seized as part of a criminal investigation may be considered proceeds of crime, opening a pathway to possible seizure by the state. In that case, it would be an absolute tragedy, unlike Multichain’s decision to leave its entire keys and access in the hands of one (or two) person.

Binance’s unusual anniversary gift to employees: Unemployment

On the sixth anniversary of the crypto exchange’s founding, Binance decided to give some its staff a gift to celebrate the occasion. However, most of the recipients wished they had never opened it.

On July 14, Changpeng Zhao (CZ), Binance’s CEO, shilled the sixth year anniversary event, stating, “We will always do what we think is in users’ best interests. We will continue collaborating with regulators. We will also defend what we believe is right,” for the path ahead. The same day, the Wall Street Journal (WSJ) reported that the exchange had reduced its staff count by as much as 1,000 in recent weeks, out of a total count of 8,000 before the layoffs.

According to employees, the layoffs were focused on the global and customer service sectors, with reductions possible of up to one-third of its overall staff count due to ongoing reorganization. The WSJ labels an ongoing U.S. Department of Justice investigation as “the most enduring” challenge facing the exchange.

In response, CZ wrote

“As we continuously strive to increase talent density, there are involuntary terminations. This happens in every company. The numbers reported by media are all way off. 4 FUD.”

The blockchain executive said that despite the layoffs, Binance is “still hiring.” On its website, the exchange currently lists 96 positions available at the time of publication. 

On July 17, the WSJ released a follow-up report claiming that the exchange had ceased employee reimbursements for items such as mobile phones, fitness and working from home, citing “current market environment and regulatory climate,” and the need to slash expenses. Binance is currently undergoing litigation with both the U.S. Securities and Exchange Commission and the U.S. Commodities and Futures Trading Commission on charges of offering unregistered securities and operating an unregistered exchange in the U.S. 

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China expands CBDC’s tentacles, Malaysia is HK’s new crypto rival: Asia Express

Chinese president shills CBDCs

On July 4, Xinhua News Agency, China’s state broadcaster, published a transcript of President Xi Jinping’s address to the Shanghai Cooperation Organisation Summit (SCO). The SCO is one of the world’s largest regional organizations for political, economic and security cooperation, and was established by China and Russia in 2001.

During the speech, President Xi welcomed Iran as a full organisation member, and praised the move for Belarus to join. He also talked up the importance of central bank digital currencies (CBDCs):

“The Chinese side proposes to expand the share of local currency settlements of SCO countries, expand sovereign digital currency cooperation, and promote the establishment of SCO development banks.”

In January, the People’s Bank of China reported that there were 13.61 billion digital yuan (e-CNY) CBDCs in circulation, representing around 0.13% of the monetary supply. Since then, the CBDC’s use has expanded to the country’s Belt and Road Initiative, various consumer airdrops, and as a means of payment for everyday transportation. However, experts have warned that despite the constant promotion, the currency has struggled to gain traction

On July 10, local news outlet East Money reported that a SIM card linked to the e-CNY CBDC will soon be available to Chinese consumers. Because the e-CNY CBDC digital wallet is embedded in the SIM card itself, individuals can pay for their phone bills via a point-of-sale machine even if their phone has no power. 

Chinese president Xi Jinping during the Shanghai Cooperation Summit (CCTV)

Hong Kong crypto licensing costs surge to HK$100M

According to a July 5 report by Tencent News, the combined labor, material, and technical cost associated with obtaining a Hong Kong crypto exchange license has surged to 100 million Hong Kong dollars ($12.77 million) since its inception on June 1.

However, even if the infrastructure is in place, insiders noted that the license application could still be denied or that the business opportunity will disappear once the license is approved. Tencent News wrote:

“Teams that left Hong Kong settled down in Malaysia last month. They can rent a large-floor work space at a monthly rent of 60,000 RMB ($8,296) in the local city center, and there are very cheap IT technicians in the local area. These emigrated teams believe that compared to Hong Kong, it is even more advantageous to do crypto projects in Southeast Asia.

All crypto exchanges in Hong Kong must obtain a regulatory license or cease operations in the administrative region by mid-next year. Since the announcement, exchanges such as Huobi, OKX, BitgetX, Hashkey Pro, and have all applied for licensing in Hong Kong. 

Chinese cross-chain protocol hacked yet again 

On Jul. 7, the developers of Chinese cross-chain bridge protocol Multichain shared a worrying message, stating: “The Multichain service stopped currently, and all bridge transactions will be stuck on the source chains. There is no confirmed resume time. Please don’t use the Multichain bridging service now.” The same day, blockchain security firm PeckShield warned that over $126 million in funds had been drained from Multichain.

Circle promptly froze $63 million USD Coin (USDC) in suspected stolen funds, while Tether (USDT) froze $2.5 million in USDT. Changpeng Zhao, CEO of cryptocurrency exchange Binance, said that the hack did not affect its users as the firm had withdrawn all funds a while back.

CZ Twitter

It appears that malicious actors breached the protocol’s private keys and subsequently moved protocol assets elsewhere, although it took until July 10 for the funds to make another move, with a wallet address identified as “Fake_Phishing183873 ” receiving a stunning 10.2 million USDT and 67.76 wrapped Bitcoin (wBTC) from the Multichain address. Immediately after the hack, the price of Multichain tokens dropped by 20% from its highs and now trades at $2.62 apiece.

Multichain was previously hacked for $7.9 million in July 2021, due to another private key exploit. Interestingly, Zhao Jun, CEO of Multichain, has been missing for nearly two months after rumors surfaced that he had been arrested by Chinese police back in May. Around the same time, users reported that the on-chain transactions had abnormally long transaction times following a recent backend node upgrade. The protocol currently has a total value locked of $1.26 billion.

Multichain was one of the largest cross-chain protocols before the onset of the 2022 crypto bear market.
Multichain was one of the largest cross-chain protocols before the onset of the 2022 crypto bear market. (DeFi Llama)

Singapore tightens grip on crypto activities

The Monetary Authority of Singapore (MAS) will require Digital Payment Token (DPT) providers to place clients’ assets in a statutory trust by the end of the year. In addition, DPTs will be prohibited from issuing crypto lending and staking services to retail investors. The MAS wrote:

“These measures are introduced following an October 2022 public consultation on regulatory measures to enhance investor protection and market integrity in DPT services. The consultation received significant interest from a wide range of respondents, with broad support.”

Crypto lending and staking services will still be allowed for institutional and accredited investors. Despite the new regulations, the MAS warned that “while the segregation and custody requirements will minimize the risk of loss of customers’ assets, consumers may still face significant delays in recovering their assets in the event of insolvency of the service providers.” The regulator is seeking public feedback on the proposed rule changes until Aug. 3. 

Thai crypto exchange raises $17.1 million

According to a recent filing, Thai cryptocurrency exchange Bitkub has sold 9.22% of its equity, amounting to 600 million Baht ($17.1 million), to Thai conglomerate Asphere Innovations PLC. During the transaction, it was disclosed that Bitkub held 31.9 billion Baht ($910 million) in assets and customer deposits, as well as 31.4 billion Baht ($890 million) in liabilities. The company recorded a total gross profit of 314.87 million Baht ($8.97 million) in the first quarter of 2023. 

Bitkub is Thailand’s largest cryptocurrency exchange, with nearly 90% in market share in 2021. Thai-based Siam Commercial Bank had previously signed an agreement to acquire 51% of the company that year for 17.85 billion Baht ($510 million). However, the bank canceled the deal in August 2022. Bitkub’s total assets decreased by 64% from Dec. 31, 2021, to Dec. 31, 2022.

Japanese video game conglomerate moves into blockchain gaming

On July 10, South Korean nonfungible tokens firm Line Next revealed it had signed a memorandum of understanding with Japanese video game giant Sega to remake one of Sega’s classic games on its Web3 gaming platform Game Dosi.

Launched in May, Game Dosi currently has six titles, including its in-house game “Project GD.” Through the platform, players can buy and sell NFT heroes and challenge other players.

Founded in 1960, Sega is one of the largest video game conglomerates in Japan with nearly $2 billion in annual video game sales. Its most iconic franchise is Sonic the Hedgehog, which also serves as the company’s mascot. 

A Game Dosi NFT image (Twitter)
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HK crypto ETFs on fire, Binance warns on Maverick FOMO, Poly hack: Asia Express

Hong Kong crypto ETFs’ rise to popularity

During a June 28 interview with Hong Kong’s public broadcast agency Radio Television Hong Kong, Peishan Li, chief executive and board member of Hang Seng Investment Management, disclosed that digital asset ETFs listed in the Special Administrative Region (SAR) of China have now surpassed $12 billion Hong Kong dollars ($1.532 billion) in assets under management (AUM). Li noted:

“At present, there is no clear goal [from our firm] to create an ETF with the theme of virtual assets, but it has paid close attention to the development of related asset classes, and is examining the possibility of deploying virtual currencies in existing investment products.”

According to figures provided by Li, the total AUM of Hong Kong crypto ETFs grew by 80% compared to Dec. 2022, with a daily trading volume of $1.7 billion HKD. This represents 6% of the daily trading volume of all stocks on the Stock Exchange of Hong Kong. The SAR previously allowed the listing of crypto ETFs in July 2022, which initially struggled in traction.

Binance co-founder warns of altcoin rout

On July 2, Binance co-founder and former Chinese television host Yi He warned “please don’t trust the community’s trading signals [that] blindly chase higher prices,” noting the price of major altcoins “have fallen by 80% to 90%” in recent times. The warning came just days after the exchange listed MAV, a permissionless decentralized finance token, and offered perpetual MAV contracts at 20x leverage.

Launched in March of this year, Maverick boasts an advanced automated market maker liquidity provider network, securing a $9 million founding round in June. The protocol is backed by prominent names such as Jump Crypto, Pantera Capital, Circle, and Gemini. Since its launch, the protocol has reached nearly $55 million in total value locked.

Shortly after the listing, MAV skyrocketed to $1.98 a piece on Binance before slumping to $0.43 apiece at the time of publication, which is still significantly above its initial listing price of $0.05. She wrote:

“According to the history of previous cycles, the first day of IEO [Initial Exchange Offering] is several times [return], and it is not in line with the current market situation to pull it up to 10 times or 20 times [return]. Please DYOR [Do Your Own Research]

Amid the retail frenzy, the Binance co-founder also warned, “The price of tokens is not controlled by Binance. The price is affected by both buyers and sellers. Please pay attention to investment risks.” Despite a thaw in crypto markets, the marketcap of coins and tokens excluding Bitcoin, has remained stagnant over the past year at around $550 billion.

Though not nearly as popular as her counterpart, Changpeng Zhao, Yi He is responsible for the overall marketing strategy and the brand image of Binance and is credited with the exchange’s rise to prominence, now serving the additional role of director of Binance Labs. She also happens to be Zhao’s partner, both on a business and a romantic level and they have two children together.

Yi He appears in a Binance advertising campaign (Binance)

Chinese DeFi protocol hacked yet again

On July 2, Chinese DeFi protocol Poly Network announced it had been hacked yet again, with the breach affecting as many as 57 different asset types across 10 blockchains.

According to DeFi security analyst @0xArhat, hackers allegedly exploited a smart contract vulnerability allowing them to mint an unrestricted amount of tokens from Poly Network’s multi-chain pools. An estimated $42 billion worth of tokens were minted, although only $5 million have been reportedly cashed out. Developers wrote:

“We kindly request the assistance of cybersecurity professionals and individuals with relevant knowledge. If you possess any information that could aid us in this endeavor, we encourage you to actively contact us.”

Shortly after the hack, the total value locked on Poly Network plunged from $277 million to $176 million. Previously in August 2021, hackers stole at least $600 million from Poly Network in what cybersecurity firm SlowMist called “a long-planned, organized and prepared attack.”

Just two days later, however, the hacker returned almost all of the stolen funds and refused a $500,000 white hat bounty, saying, “I will send all of their money back,” and that the hack was just “for fun” because “cross-chain hacking is hot.”.

Poly Network hacker explaining his alleged rationale in a Q&A (Elliptic via Twitter)

Hong Kong launches Web3 Task Force

Hong Kong's Financial Secretary Mr. Paul Chan
Hong Kong’s Financial Secretary Mr. Paul Chan.

On June 30, Hong Kong announced the establishment of a Web3 Task Force spearheaded by Paul Chan Mo-po, the SAR’s Financial Secretary. The team is comprised of 15 industry veterans, along with regulators and government officials, all with a term of two years. According to officials, the Web3 Task Force will be dedicated to the sustainable and responsible development of emerging Web3 technologies in Hong Kong, along with the submission of proposals to the government.

Chan commented: “The blockchain technology behind Web3 has the characteristics of disintermediation, security, transparency and low cost, and can solve many difficulties and pain points in finance, transactions, business operations and even life.” He continued that “an international financial center” and a “metropolis” such as Hong Kong should embrace the development of Web3, though albeit under “suitable regulation.”

On July 3, Animoca Brands’ CEO Yat Siu was appointed to the Task Force. Previously, the crypto executive stated that crypto VC [Venture Capital] is only struggling “from an American perspective” and that the industry is actually “very vibrant” in both the Middle East and Asia.

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Huobi sues… Huobi? 3AC rises from ashes, Korea crypto contagion: Asia Express

Huobi co-founder sues own company for copyright infringement

According to local news reports on June 21, Leon Lin Li, former co-founder of cryptocurrency exchange Huobi Global, has filed a copyright infringement lawsuit against the company in Hong Kong. Li claims that despite selling his majority stake to an entity controlled by Chinese blockchain personality Justin Sun last November, his company, X-Spo, still possesses trademark rights associated with the term “Huobi Global,” and that “Huobi Global,” the actual exchange, has been using the trademark without authorization. 

Former Huobi co-founder Leon Li (Twitter)

Though it’s not immediately clear why Li seeks litigation against the very company and brand he previously built, a series of heated exchanges between Li and Justin Sun last month may offer some hints.

On May 16, Sun published a series of allegations against Wei Li, Lin Li’s brother. In the Twitter post, Sun accused Wei Li of “receiving millions of Huobi (HT) tokens through “abnormal means” at zero cost and of “consistently selling off these HT tokens and cashing out.” To which Lin Li replied: “I hope Huobi can provide evidence. If it is confirmed that it is zero-cost HT was obtained through illegal means, I will personally pay 10 times the HT [amount] to Huobi company.”

Hodlnaut’s last voyage? 

According to a recent court filing, the fate of whether troubled Singaporean crypto lending firm Hodlnaut is to be dissolved or restructured will be sealed on August 7. Last August, Hodlnaut halted operations after disclosing that it lost over $300 million of its client’s assets from the implosion of the $40 billion Terra Luna ecosystem in May 2022. 

Holdnaut team members before the onset of the crypto winter (SMU)

The firm faces approximately $300 million in claims from creditors, who mostly wish to see the firm dissolved. That said, both co-founders Juntao Zhu and Simon Lee want to continue Hodlnaut’s operations, even though the company had reportedly lost 69% of users’ deposits. Last November, Singaporean police began a probe into Hodlnaut’s activities as the firm initially denied exposure to the Terra Luna ecosystem. 

South Korean crypto lending contagion

On June 22, South Korean crypto lending firm Haru Invest announced that it would be terminating a portion or all of its current staff count just days after suspending users’ deposits and withdrawals. The move comes after the firm accused its consignment operator, B&S Holdings, of fraudulent operations. 

“It comes with a heavy heart to inform you that we will be minimizing the operations of Haru Invest and its affiliated companies to prevent further damages that are likely to be incurred.”

Last week, fellow South Korean crypto lending firm Delio, with over $9 billion in self-reported assets under management, also announced it would suspend withdrawals, citing exposure to Haru Invest. The firm has since clarified it will resume withdrawals, albeit with no schedule disclosed. During an extraordinary investors’ meeting on June 17, CEO Jung Sang-ho disclosed for the first time that Haru Invest is claiming bankruptcy.

Photo allegedly showing empty Haru Invest corporate offices after the announcement. (Telegram)
Photo allegedly showing empty Haru Invest corporate offices after the announcement. (Telegram)

In addition, Haru also claims that it has filed a criminal complaint against B&S Holdings as well as civil litigation. But it appears that Haru itself does not know exactly what is happening. In a letter to investors on June 20, CEO Hugo Lee wrote:

“We’ve been explaining about the current situation and progress through the company statement three times so far, but we understand that it’s still far from enough. We are sorry about this as well.”

3AC co-founders stage unlikely comeback

While some firms’ (and individuals’) reputations may be devastated by bankruptcy, it can be a simple nothingburger for others. On June 21, Kyle Davies, co-founder of bankrupt Singaporean hedge fund Three Arrows Capital (3AC), wrote in a tweet:

“3AC is dead, long live 3AC Ventures.”

The same day, OPNX, a platform for trading claims against bankrupt crypto entities founded by Davies and fellow 3AC co-founder Su Zhu, said that 3AC Ventures had become the firm’s “new ecosystem partner.” Interestingly, given that the use of leverage by Zhu and Davies played a pivotal role in 3AC’s $3.4 billion downfall last year, 3AC Venture’s website states:

“3AC Ventures is focused on superior risk-adjusted returns without leverage.”

On June 24, 3AC Ventures introduced its first investment, an inaugural project dubbed “Raiser,” that allows users to borrow funds based on their on-chain creditworthiness. “Borrowers raise funds by issuing zero-coupon bonds. Lenders buy these bonds to earn a fixed income. Traders can trade these bonds in the secondary market,” the developers wrote in an introductory thread.

Almost one year later, 3AC is still undergoing bankruptcy proceedings, but it appears that clawing money back has become harder than ever. On June 15, 3AC creditors filed a motion to hold Kyle Davies in contempt of court; however, the motion would only apply to Davies, and not Su, as the latter’s Singaporean citizenship does not subject him to U.S. jurisdiction. The two’s current whereabouts are unknown, and no criminal complaints have been yet filed against the two blockchain personalities. 


OPNX: Aspiring blockchain underdog

On April 5, Su Zhu and Kyle Davies’ crypto derivatives claims exchange OPNX, which is based in Hong Kong, saw a meager $13.64 volume traded on its first day of debut. By late-June, that number had (apparently) risen to $34.1 million. Following the traction was a near 200% rise in the price of OPNX’s native OX tokens to $0.03 in the past month, pushing its fully diluted market cap to nearly $300 million.Heck, the firm even has its own stablecoin now.

Let’s face it, nobody, perhaps not even Davies or Zhu themselves, expected OPNX to succeed from the get go. But successful underdogs often have a deep grudge against those who “punched down” the hardest while they were out on their luck. Which may be why on June 22, OPNX filed a defamation lawsuit against venture capitalist Mike Dudas, alleging the publication of defamatory comments against the exchange from February to March 2023.


Around the same time, the exchange unveiled its new “Justice Tokens,” (JT), citing “one of the biggest challenges the industry faces is the current prevalence of defamation,” Based on its tokenomics, one JT will exist for each defamation case, it will be an ERC20 token with a maximum supply of 1 billion. Three quarters will be distributed to OX stakers, 20% will be given to JT-OX liquidity providers, and 5% will be airdropped to Milady nonfungible tokens holders. At the time of publication, it’s unclear if Davies plans to issue tokens to build rapport against review bombers of his Dubai restaurant during possible litigation proceedings.

“The resulting defamation and harassment greatly deters entrepreneurs and innovators. The presence of these people is a clear net good to the industry.”

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Korean crypto contagion, Bank of China on Ethereum, HK’s exchange red carpet: Asia Express

Hong Kong lays out the red carpet for crypto exchanges

While some jurisdictions (cough: America) have adopted a regulation-by-enforcement approach toward crypto, others are doing the opposite. According to a June 15 report from The Financial Times, the Hong Kong Monetary Authority is pressuring major financial institutions to accept crypto clients. But it’s not just regulators laying down a red carpet to boost the special administrative region’s (SAR’s) Web3 industry. In one instance, Johnny Ng Kit-Chong, Member of the Legislative Council of Hong Kong, wrote on June 10:

“There have been a lot of news about international virtual asset exchanges in the past two days. I send forth an invitation to welcome global virtual asset exchanges, including @coinbase, to come to Hong Kong, apply for a compliant exchange, and negotiate a listing plan. I am willing to provide assistance!”

Similarly, Joseph Chan Ho Lim, Hong Kong’s Under Secretary for Financial Services and the Treasury, revealed in an interview that The Hong Kong Monetary Authority has conducted public consultations on the launch of stablecoins and is in the process of establishing a regulatory framework by the end of the year.  “Hong Kong will continue to support the development of the industry in the future and welcomes the industry and talents to come to the SAR,” the politician said.

The Hong Kong Web 3.0 Festival gallery hall (Twitter)

On Jun. 1, Hong Kong Securities Regulatory Commission issued regulations stipulating the requirements for cryptocurrency exchanges to apply for a license to operate in Hong Kong. For regulated trading platforms, a license application must be submitted to the Securities Regulatory Commission within nine months, or before Feb. 29, 2024. If not, their business in Hong Kong must be terminated before May 31, 2024.

Bank of China mints debt notes on Ethereum

On Jun. 12, BOCI, the investment banking subsidiary of Bank of China, revealed the tokenization of 200 million Chinese Yuan ($28 million) in digitally structured notes on the Ethereum blockchain. The move is reportedly the first act of a Chinese financial institution tokenizing a security in Hong Kong. The notes are governed by both Hong Kong and Swiss law as per their origination by the Swiss investment bank UBS. Ying Wang, deputy CEO at BOCI, commented: 

“Working together with UBS, we are driving the simplification of digital asset markets and products, for customers in Asia Pacific through the development of blockchain-based digital structured products. We are encouraged by the evolution of Hong Kong’s digital economy and are committed to promoting the digital transformation.”

Previously, UBS had issued a $50 million tokenized fixed-rate note in Dec. 2022. Meanwhile, the government of Hong Kong issued an 800 million Hong Kong dollar ($100 million) tokenized green bond on Feb. 16, 2023, underwritten by four banks and priced with a yield of 4.05% per annum. 

Do Kwon: In and out of jail

On June 15, The High Court of Montenegro in Podgorica ordered Terraform Labs CEO Do Kwon and CFO Han Chang Joon back to jail pending extradition proceedings to South Korea for charges relating to their role in the $40 billion collapse of the Terra Luna ecosystem.

Earlier this month, Kwon and Joon were released on 400,000 euros bail each in their ongoing passport fraud case after a Montenegrin Basic Court dismissed an appeal by prosecutors.

Their brief period out on bail was not a happy time either. During their respite from prison, South Korean prosecutors announced they would apply to freeze Kwon and associates’ $13 million held in Swiss bank accounts. A new hearing on charges of falsifying documents is scheduled for June 16 in the same Basic Court.

Do Kwon
Do Kwon faces a long stretch in jail in a variety of countries.

According to local sources, Kwon and Joon will be detained for a period of six months as the court decides on their extradition case. Kwon and Joon also face extradition to the U.S. on 11 charges relating to fraud, breach of trust, and embezzlement.

And if that wasn’t enough, there is yet another legal proceeding against Kwon. On June 16, Kwon will be questioned by the Special State Prosecutor’s Office for a letter he sent from detention to government officials, disclosing his connections with the leader of the Europe Now Movement (PES), Milojko Spajić.

According to the country’s National Security Council, Kwon and Spajić have been friends for five years, and last met in Belgrade in Dec. 2022. Investigators claim there is evidence of financing the PES campaign from Kwon’s laptop. If convicted, Kwon not only faces further jail time in Montenegro but could also serve up to 40 years in a South Korean prison, and even more jail time potentially awaits in the U.S.

Korean blockchain firms daisy chain contangion

On June 14, South Korean yield platform Haru Invest filed a criminal complaint against its consignment operator B&S Holdings, alleging “fraudulently provided management reports containing false information.”

Haru had paused deposits and withdrawals the day before, stating, “We have discovered through our internal inspection process that certain information provided by a consignment operator was suspected to be false.” Previously, concerned investors took pictures of allegedly empty corporate offices and accused the firm of orchestrating a “rug pull,” which Haru says is inaccurate.

Photo allegedly showing empty Haru Invest corporate offices after the announcement. (Telegram)
Photo allegedly showing empty Haru Invest corporate offices after the announcement. (Telegram)

The move immediately affected South Korean Bitcoin lending firm Delio, which quickly announced the temporary suspension of customer withdrawals “in order to safely protect the assets of customers currently in custody,” citing issues at Haru Invest. Delio is one of the largest of such entities in South Korea, holding an estimated $1 billion in Bitcoin, $200 million in Ether, and $8.1 billion in altcoins. 

A curious commentary regarding the matter came from Jun Du, the co-founder of cryptocurrency exchange Huobi Global, who wrote:

“With the detonation of Delio, the thundering of [crypto] lending platforms is basically over.”

However, Du warned that contagion related to centralized trading platforms, which started with FTX, is just the beginning. “Not only the newcomers are confused, but also the OGs in the industry. When will the thundering of the black box of centralized crypto entities end?” the former blockchain executive asked, while also expressing his doubts on whether the industry will witness a “slump” or be “ushered into a new bull market” after such issues are resolved. 

Last year, Huobi co-founders Jun Du and Leon Li reportedly sold 100% of their stake in the exchange to an entity controlled by Chinese blockchain personality and Tron founder Justin Sun. The latter claims that the exchange is now profitable after a period of reorganization, which by the way, included crushing an employee revolt

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Binance humilated, HK needs 100K crypto workers, China’s AI unicorn: Asia Express

Alibaba NFTs… censored?

On June 8, AliExpress, the online retail subsidiary of Chinese tech conglomerate Alibaba, announced that it had joined forces with Web3 developer The Moment3! to create a series of NFTs based on shopping themes.

The upcoming collection will feature 5,555 NFTs and is scheduled to debut on June 25, 2023. Less than one day after the announcement was made, AliExpress’ tweet was deleted. Nevertheless, AliExpress’ dev partner, posted a statement confirming the drop.

While no reason has been provided for why AliExpress deleted its original announcement, Chinese authorities have been cracking down on anything crypto-related and forcing firms to remove keywords related to “nonfungible tokens” from their products.

In April, Bitcoin price quotes were added to Douyin, which is the Chinese version of TikTok with over 1 billion users, for less than 48 hours before it was removed by authorities. Cryptocurrencies-fiat transactions, mining, and exchanges (but not outright ownership) are currently banned in China.

The deleted AliExpress NFT announcement (PANewsLab)

Binance humiliated on Chinese TV

If there is anything that the U.S. and China, the world’s two largest competing superpowers, have in common, it is their mutual hatred for cryptocurrency exchanges. On June 6, one day after the U.S. Securities and Exchange Commission sued Binance over allegations of operating an unlicensed exchange and selling unregistered securities in the U.S., Chinese Central Television (CCTV) reported on the lawsuit for its one billion viewers. Curiously, the CCTV broadcast also acknowledged for the first time that Binance is the world’s “largest cryptocurrency exchange.”

The CCTV segment on the SEC lawsuit against Binance (Binance ZH)

Previously, CCTV broadcast a program about new cryptocurrency exchange rules in China’s special administrative region of Hong Kong that took effect on June 1. The segment was notable for not having anything particularly negative to say about crypto in a country where it is currently banned, which is probably why it’s believed that authorities took down the segment just one day later. Given Chinese authorities’ contempt for crypto exchanges such as the likes of Binance, it is likely that this report will stay up for good.

Hong Kong needs 50K-100K Web3 professionals

In a June 7 fireside chat between local news outlet Chaincatcher and Johnny Ng Kit-Chong, a member of the Legislative Council of Hong Kong, Ng said that the SAR would need at least 50,000 to 100,000 Web3 positions to be filled in the next few years based on conservative estimates.

During the interview, Ng revealed that Hong Kong’s plans to incubate 1,000 Web3 firms in three years have already exceeded expectations, with more than 400 firms registering at the time of publication, four months since its launch. Speaking with regard to Hong Kong’s new crypto rules, Ng said:

“So, in fact, Hong Kong’s policies are relatively open. If you plan to make a game and issue a Token, there is no problem in Hong Kong. The key is whether the form of token sale involves securities or futures’ components, and this part will be regulated. In fact, Hong Kong’s supervision has always existed and is relatively clear, with almost no gray areas.”

Ng first became an investor in the Web3 space in 2010. He came in contact with Satoshi Nakamoto’s Bitcoin white paper seven years later and “completely understood blockchain’s functions and its core values” shortly thereafter. Ng became a member of the Legislative Council of Hong Kong in January 2022 and has since pushed for pro-Web3 regulations in the SAR.

Do Kwon vs. the world

When a man is having a hard time, it’s usually not cool to punch down. However, for law enforcement officials across multiple jurisdictions, as well as hundreds of thousands of investors/victims of last year’s $40 billion Terra Luna collapse, the last thing they probably want to see is for Terraform Labs co-founder Do Kwon to get back on his feet again.

Earlier this week, Kwon scored a minor victory in his ongoing passport fraud case in Montenegro after an appeals process by prosecutors was dismissed by a Montenegrin court, setting himself and former Terraform Labs CFO Han Chang-Joon back out on 400,000 euros bail each once again. But before the two had time to celebrate, South Korean prosecutors announced that they would apply to freeze Kwon and associates’ $13 million held in Swiss Bank accounts.

Around the same time, a scandal broke out in Montenegro relating to Kwon’s alleged connections to the Balkan nation’s former minister of finance, Milojko Spajić. According to local news outlet Balkan Insight, Kwon sent a hand-written letter to Montenegro’s incumbent prime minister, Dritan Abazović, claiming that he had financed the “Europe Now” opposition party movement led by Spajić. The move came just days before Montenegro’s scheduled parliamentary elections on June 11.

Anyways, Kwon’s troubles in Montenegro are just the beginning. The blockchain executive faces criminal proceedings from both U.S. and South Korean authorities for his role in the Terra Luna implosion and could serve 40 years if convicted, in South Korea alone, before extradition to the United States.

Do Kwon visibly distressed as he is escorted by police on arrival to Montenegrin court. (Boris Pejovic)

Chinese AI startup reaches unicorn status in less than 100 days

On June 5, Huiwen Wang, co-founder of Chinese food delivery giant Meituan Dianping, raised $230 million at a $1 billion valuation for his AI startup Guangnian Zhiwai, or “Lightyears Away.” The round was led by notable Chinese venture capital firm along with Chinese internet conglomerate Tencent. According to media reports, Lightyears Away seeks to become the OpenAI of China, mirroring the success of its American counterpart.

If anything, the raise taught us that ambition and reputation triumph all. The firm achieved its unicorn status just 100 days after its debut and does not appear to have a minimum variable product. In its last update before the fundraising announcement on May 5, the firm is still seeking core front-end and back-end developers and interns.

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Yuan stablecoin team arrested, WeChat’s new Bitcoin prices, HK crypto rules: Asia Express

RMB stablecoin team allegedly arrested

On May 31, local news outlet PANewsLab reported that the developers for the offshore Chinese RMB and Hong Kong dollar stablecoin issuer CNHC had allegedly lost contact or had been taken away by law enforcement officials. A photo shows what appears to be an empty office building at CNHC’s Shanghai division with the following message posted:

“The building’s assets have been seized by law enforcement; vandalism is prohibited.”

In March, CNHC raised $10 million in its Series A, led by KuCoin Ventures, Circle, and IDG Capital. The team said back then that it planned to use the funds for “expansion in the Asia Pacific Region” and was in the process of moving its headquarters from the Cayman Islands to Hong Kong.

The reported move appears to be part of a wider crackdown on cryptocurrencies by Chinese authorities. On May 24, Asia Express reported that tokens of Singaporean inter-blockchain communications protocol Multichain had plunged 30% on a delayed backend upgrade and rumors of Chinese police arrest of its core developers.

Though Multichain says that it is still operational, it stated on June 1 that it is still “unable to contact CEO Zhaojun and obtain the necessary server access for maintenance,” and as a result, the protocol will need to suspend a number of affected cross-chain services.

Hong Kong opens up retail crypto licensing

Despite censorship and bans on the Mainland, the adoption of cryptocurrency exchange regulation in Hong Kong proceeded as scheduled. On May 31, the Hong Kong Virtual Asset Consortium was formed to approve the top 30 cryptocurrencies by market cap for listing and to conduct quarterly reviews of registered digital asset exchanges to ensure compliance with licensing regulations that took effect on June 1.

On another front, according to a research report published by multichain wallet provider BitKeep, notable crypto projects such as Avalanche, Conflux, EOS, and Fantom have all joined Hong Kong’s Web3Hub ecosystem fund unveiled in April. With a budget of $10 million, the fund will incentivize Web3 projects to set up subsidiaries or headquarters in the special administrative region of China (SAR). The fund is headed by Paul Chan Mo-Po, financial secretary of Hong Kong SAR.

Despite the growing traction, BitKeep researchers reminded that HK regulations remain strict for the time being:

The new regulations clearly limit the types of tokens that can be traded and the types of services that exchanges can provide. Cryptocurrencies must meet the Securities and Futures Commission (SFC) strict regulations, which emphasize that only non-security tokens can be traded, have a history of at least 12 months, and the token has been included in two cryptocurrency indices.

In addition, exchanges are prohibited from providing wealth management products, as well as the provision of lending and deposit services, along with derivative transactions such as perpetual crypto contracts. “However, the regulator recognizes the importance of derivatives trading in the encrypted market and will conduct further research and consideration,” researchers noted.

WeChat allows BTC price quotes

As of June 1, WeChat, China’s largest social media app with over 1 billion users, has indexed Bitcoin price quotes in its search queries. The move is significant, considering that China has pretty much banned all crypto-related activities such as exchanges, crypto mining, and fiat-crypto on-ramping since 2021.

However, if history is any guide, the WeChat Bitcoin search query probably won’t last for long. Formerly, billion-user platforms China Central Television and Chinese TikTok variant Douyin have allowed something similar, only to have authorities pull them down just days after launch.

Bitcoin price quotes are now publicly available (WeChat)

All Nippon Airways launches NFT marketplace

On May 30, All Nippon Airways (ANA), the largest airline in Japan with over $12.2 billion in revenue in the last fiscal year, launched its aeronautical-themed NFT marketplace dubbed “ANA GranWhale” Developers wrote:

“NFTs have been used mainly in fields such as art and music as a technology for expressing ownership of digital assets. This time, the ANA Group will apply NFT to the aviation industry.”

As its inaugural step, ANA GranWhale will debut aerial photographer Luke Ozawa’s first-ever digital photo in his career as an NFT with an asking price of 100,000 Yen. The second installment, starting on June 7, will feature a 3-D model NFT conversion of the first special paint Boeing 787 aircraft launched by ANA. The NFT marketplace’s development began last August as part of ANA’s vision of building a Web3 virtual travel platform.

“With a view to commercializing NFTs as specialty products from various parts of Japan, we aim to improve the value of customer experience, including local and overseas, through the ‘GranWhale NFT marketplace.’”

An ANA GranWhale NFT (All Nippon Airways)

Fed inspires Astar Network to revamp tokenomics

On May 28, Sota Watanabe, the founder of Japanese blockchain Astar (ASTR) Network, expressed his desire to revamp the protocol’s tokenomics, saying that even the U.S. government was targeting an inflation rate of 2%, compared to levels of around 8.4% currently. Drawing further inspiration from the Federal Reserve, Watanabe proposed mirroring the Fed’s meeting decisions every quarter or every six months and updating the blockchain’s token inflation rate on a variety of factors, writing:

“Decentralizing one of the roles of the FED can be a challenge but also an interesting trial.”

The crypto executive said he wished to either fix ASTR’s total supply and make the inflation rate smaller and smaller such as in Bitcoin, or automatically decide the inflation rate based on network usage, as in Ethereum, or use a mix of both models.

A multichain decentralized application proposal, Astar recently launched the second iteration of its smart contracts supporting both Ethereum Virtual Machine (EVM) WebAssembly Virtual Machine (WASM VM) on its mainnet for developing new cross-chain apps.

bitFlyer and the Travel Rule

According to a recent announcement, Japanese cryptocurrency exchange bitFlyer will comply with the country’s Financial Services Agency’s new Travel Rule starting June 1. The Travel Rule states that a crypto asset exchange operator sending crypto assets at the request of a user shall provide specific information about the sender and the recipient to the exchange operator receiving the transfer.

In addition, further restrictions are imposed on crypto transfers to any of the 21 countries, such as Japan, Switzerland, Canada, Bahamas, Hong Kong, and the U.S., utilizing the Coinbase-led Travel Rule Universal Solution Technology (TRUST).

bitFlyer clients who wish to transfer crypto to any of the 21 TRUST countries can only send Bitcoin or Ethereum and select ERC-20 tokens. Such requirements do not apply to transfers to addresses identified with any of the remaining non-TRUST countries. As told by bitFlyer:

“The purpose of the travel rule is to prevent the ability for terrorists and other criminals from using digital fund transfer systems as well as track unauthorized use.”

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Chinese TV’s crypto ‘bull run’ report censored, Multichain crisis: Asia Express

Crypto embraced then forgotten by China’s state television

On May 23, China Central Television (CCTV), the country’s government-owned broadcasting corporation creating programming for over 1 billion viewers in Mainland China, aired a short, 98 second segment regarding the adoption of cryptocurrencies in Hong Kong.

During the session, state news anchors briefed its audience on how Hong Kong regulators “have made final preparations” for the trading of virtual assets in the special administrative region (SAR) and will accept applications from virtual asset trading platforms. Interestingly, nothing overtly negative about cryptocurrencies was mentioned during the broadcast – a sharp contrast to China’s official policy that banned cryptocurrency mining and exchanges elsewhere in the country.

For some viewers, such as Binace CEO Changpeng Zhao, the programming represented a “big deal.” Zhao reports that “the Chinese speaking communities are buzzling. Historically, coverages like these led to bull runs.”

Unfortunately, the euphoria was short lived as Chinese authorities appear to have taken down the link just two days after the program aired. This wasn’t the first time such incidents have occurred. Last month, Douyin, the Chinese version of TikTok with over 1 billion users, began publishing cryptocurrency price quotes within its in-app search index. The move stirred a major bullish frenzy among Chinese crypto users before the price quotes were removed from the app just one day later with a message stating: “Unofficial digital currencies do not possess the same legal standing as fiat currencies. Please invest cautiously.”

The now deleted CCTV HK crypto segment (Web3 dongxiang)

Hong Kong finalizes cryptocurrency regulations

In addition to allowing virtual asset trading platforms to obtain proper licensing, SFC officials stated on May 23 that exchanges could also provide services to retail investors, in contrary to its guidance last May that focused on an institution-only approach.

Shortly after the announcement, cryptocurrency exchange kickstarted its Gate.HK platform for registration and trading services in the SAR. Then, Hong Kong virtual bank ZA Bank said it would launch a virtual asset trading services for retail investors under new HK licensing regime. Now that the rules are crystal clear, the SFC wrote:

“Operators of virtual asset trading platforms who are prepared to comply with the SFC’s standards are welcome to apply for a licence. Those who do not plan to do so should proceed to an orderly closure of their business in Hong Kong.”

Do Kwon’s bail revoked

Before the collapse of the $40 billion Terra Luna (LUNC) ecosystem in May 2022, Terraform Labs co-founder and CEO Do Kwon was known for making fun of critics based on their level of wealth compared to himself (“your size is not size.”)

However, it appears that Kwon has finally gotten into some trouble that cannot be solved by money. On May 25, the High Court of Montenegro revoked both Kwon’s, and former Terraform Labs CFO Han Chong-joon’s 800,000 euro bail and ordered their return to jail from previous house arrest. The blockchain executives were apprehended on Mar. 23 in Podgorica Airport over allegedly falsified documents after being on the run for roughly six months from an Interpol Red Notice.

Kwon faces up to 40 years’ imprisonment in the criminal proceedings against him in South Korea and five years in prison on the falsified charges in Montenegro. Court filings state:

“In the renewed proceedings, the court will proceed according to the High Court’s grounds for termination and after that make a decision based on the proposal of the defense counsel for the defendants to accept bail. By the decision of this court, the defendant’s detention was extended. The main hearing is scheduled for June 16.”

Do Kwon taken away by Montenegrin Police for detention (Twitter)

Cross-chain token plunges 30% after arrest rumors

On May 24, the token price of Singaporean cross-chain router protocol Multichain (MULTI) fell by 30% over 24 hours to trade at $4.97 apiece. The sell-off began after users reportedly abnormally long transaction times following a recent backend node upgrade that caused certain routes, such Kava, zkSync, and Polygon zkEVM to become “temporarily suspended.”

While the project promised that “all affected transactions will arrive after the upgrade is complete” investor alarm turned into a full-blown panic after one user tweeted arrest rumors. The tweet, which garnered 820,000 views, alleged without evidence, that Multichain developers had been arrested by Chinese police “with $1.5 billion dollars of contract funds under control.” Multichain is currently headquartered in Singapore with around $1.6 billion in total value locked.

Alfred Xu, a Multichain co-founder, quickly stated thereafter in the protocol’s Chinese Telegram chat that: “Currently all team members are safe and sound, the main operations are proceeding as normal.”

However, on May 25, Chinese blockchain news aggregator PANewsLab reported that Multichain co-founder and CEO Zhao Jun is currently “unreachable.” At the same time, DeJun Qian, another co-founder of Multichain, said on Twitter that while he is personally “safe and sound,” he too, could not reach fellow co-founder and CEO Zhao Jun.

On May 25, Binance announced that it will be suspending 10 bridge-networks associated with Multichain until it receives clarity from the development team. It has since resumed the Fantom to Ethereum Multichain bridge. The same day, Andre Cronje’s Fantom protocol ceased providing liquidity with MULTI on decentralized exchange Uniswap due to uncertainty surrounding the development team but said funds have not been sold. Approximately $777 million worth of Ethereum funds, $405 million worth of BNB Chain funds, and $100 million worth of Fantom funds are currently held with Multichain.

Multichain’s total value locked over time (DeFiLlama)

Memecoins come, memecoins go

After a period of crazy returns on investment and joint listings on Asia Pacific-focused crypto exchanges, the price of memecoins such as Pepe Coin (PEPE) and Milady (LADYS) have fallen by over 50% within the past two week. Though, in hindsight, this shouldn’t have come as a surprise to anyone as developers of such tokens have warned that the coins they created have “no intrinsic value,” and are “completely useless.” According to a report published by cross-chain wallet developer BitKeep:

“It is important to recognize that memecoins derive their value primarily from short-term hype and speculative fervor. Consequently, the likelihood of these coins retaining any significant value over the long term is relatively low. Memecoins typically exhibit remarkably short life cycles, and their popularity tends to wane relatively quickly. Therefore, it is prudent to approach memecoins as short-term investments that are best bought and sold during periods of peak popularity.”

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Ripple, Visa join HK CBDC pilot, Huobi accusations, GameFi token up 300%: Asia Express

Hong Kong partners with 16 companies to build CBDCs

On May 18, the Hong Kong Monetary Authority (HKMA) announced the launch of the cyber Hong Kong dollar pilot project. According to officials, 16 selected companies from the financial payment and technology sectors will conduct the first round of trials this year on the feasibility of a Hong Kong dollar central bank digital currency (e-HKD). Companies included in the pilot include Alibaba Group’s Alipay Financial, Mastercard Asia, Ripple Labs, Visa, and HSBC.

The digital Hong Kong dollar will start off with six potential uses cases; comprehensive payments, programmable payments, offline payments, tokenized deposits, Web 3.0 transaction settlements, and tokenized asset settlements. The CBDC is scheduled for a three-stage approach, with the novel pilot program being an important aspect of the second stage.

However, the HKMA has not yet decided whether to officially launch the CBDC. It expects to share the results of the trials at Hong Kong Fintech Week 2023 in Q4. Yue Wai-man, chief executive of the HKMA, commented:

“Although the HKMA has not decided whether or when the CBDC will be launched, we are pleased to launch the Cyber Hong Kong Dollar Pilot Scheme. This is a good opportunity for the HKMA to join hands with the industry to explore innovative use cases and prepare for the possible launch of the CBDC in the future”

Back in Oct. 2021, Mastercard said that it would be preparing its payment infrastructure for integration with CBDCs. Likewise, Visa believes that stablecoins and CBDCs will play meaningful roles in payments and has an ongoing blockchain interoperability project related to the matter.

Senior company representatives at the unveiling of Hong Kong’s second phase of CBDC tests (HKMA)

Bitget’s comfy run in Q1

According to its first quarter update published on May 17, cryptocurrency exchange Bitget reached $59 billion and $658 billion in spot and futures traded respectively, representing growth rates of 8% and 27% from Q4 2022. In other metrics, the book value of the exchange’s Protection Fund surged to $380 million from $300 million during the same period, aided by a bullish rally in the price of major cryptocurrencies.

The exchange says that its proof-of-reserves increased from 223% on December 20, 2022, to 246% on April 03, 2023, as it completed listings for 105 coins, bringing the total to over 500 listings. The exchange’s native token, BGB, rallied by 120% during the quarter to $0.47 apiece at the time of publication.

Biget is committing $10 million over five years in a novel Blockchain4Youth initiative to offer blockchain courses and certifications through Bitget Academy and will host campus lectures in partnership with universities worldwide. In April, the exchange received its regulatory license in Lithuania, allowing it to provide crypto services both in and from the Baltic nation.

Bitget’s website traffic has also grown significantly during the same period (Bitget)

Huobi’s latest drama

On May 16, Justin Sun, founder of Tron blockchain and relatively new de-facto owner of cryptocurrency exchange Huobi Global, published a series of allegations against Wei Li, the brother of Huobi Global’s co-founder Leon Li. In his statement, Sun accuses Wei Li of “receiving millions of Huobi (HT) tokens through “abnormal means” at zero cost and of “consistently selling off these HT tokens and cashing out.”

“We plan to engage with Li Wei to negotiate a refund and arrange for the destruction of his remaining HT tokens. This action is not only a matter of justice but also serves the best interests of everyone in the HT DAO community.”

Sun claims that “Li Wei has not made any substantial contributions to our community.” and would therefore seek disgorgement of any profits related to Wei Li’s sale of the tokens and send them to the null address for token burn. In response, Wei’s brother and Huobi’s co-founder Leon Li wrote:

“I hope Huobi can provide evidence. If it is confirmed that it is zero-cost HT was obtained through illegal means, I will personally pay 10 times the HT [amount] to Huobi company.”

Leon Li followed up by saying that “I hope that Huobi will return the user’s legal assets,” if the allegations are found to be false. In Oct. 2022, Huobi’s co-founders Leon Li and Du Jun reportedly sold 100% of the exchange’s stake to an investment firm controlled by Justin Sun. Since changing owners, the exchange has seen its fair share of woes, although Sun claims that Huobi has returned to profit and things have settled. If you’re curious, this wasn’t the first “abnormal” action surrounding the Huobi token either…

No news is good news as GameFi token surges over 300%

On May 17, the token of NFT multiplayer online battle arena game Superpower Squad (SQUAD) surged by over 300% to a high of $0.017 apiece within a single day before its pullback. No material news was associated with the development, and the token’s price has mostly been on losing streak since March.

Superpower Squad’s developers tells Asia Express it has two game modes in development. The first is a “Zombie Crisis” survival mode where top surviving players would receive NFT props (items used to kill enemies) upon round completion. In the second game mode, players would receive unique buffs (temporary powers) depending on clan composition of NFT heroes, which each clan requiring one NFT hero of legendary rarity.

The devs stating things are still moving comes after community speculation that the game had ceased development as the price of SQUAD dropped on also seemingly no news. The game previously surpassed 100,000 downloads in January.

Superpower Squad is by no means the first blockchain project to have high price variance for no particular reason. On April 14, shares of Singaporean Bitcoin (BTC) mining operator SAI.TECH surged by over 360% in one day to a high of $7.42 before giving back much of its gains. Like Superpower Squad, SAI.TECH had no material announcements either before or after the wild price action.

Superpower Squad’s mysterious rally on May 17 (CoinMarketCap)
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Bitcoin glory on Chinese TikTok, 30M mainland users, Justin Sun saga: Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

Bitcoin’s day of glory on Chinese TikTok

On Apr. 10, Douyin, the version of Tiktok exclusive to Chinese users, began publishing price quotes related to Bitcoin (BTC) and other cryptocurrencies such as Ethereum (ETH), Dogecoin (DOGE), and Ripple (XRP). The move sparked rampant speculation among the Chinese media and users alike related to a potential change of policy by the country’s central government on cryptocurrency regulation.

Unlike its Western counterpart, content on Douyin is heavily monitored and sometimes censored by Chinese authorities. Since Sept. 2022, Douyin has been cracking down on content relating to cryptocurrencies, NFTs, and Metaverse.

Hence, many individuals were genuinely surprised to see cryptocurrencies discoverable on the government-curated platform. For around 24-hours, any of Douyin’s estimated 730 million mainland Chinese users could freely view crypto price quotes on the app. However, dreams of a relaxation in the country’s strict crypto laws were crushed shortly thereafter. On Apr. 11, Bitcoin and cryptocurrencies price quotes were removed from Douyin, with a message stating:

“Based on relevant national regulations, unofficial digital currencies do not possess the same legal standing as fiat currencies. Please invest cautiously.”

Since 2021, China has banned all forms of crypto exchanges, crypto-fiat transactions brokered by financial institutions, and initial coin offerings. That said, the country stopped short of banning the ownership of cryptocurrencies altogether and the Chinese controlled territory of Hong Kong has unveiled plans to become a crypto hub.

Bitcoin on Douyin before and after the crackdown. (GamerSky)

Bruce Lee lives again via NFTs

On Apr. 12, the Bruce Lee Foundation announced it would partner with NFT video platform Shibuya to launch a collection of genesis NFTs featuring the late legendary martial arts actor, who died in 1973 at the age of 32 under mysterious circumstances. The House of Lee collection is one sale on Manifold from Apr. 12 to Apr. 14 and is minted on the Ethereum network, with digital image storage on Arweave.

The Bruce Lee Genesis NFT (Arweave)
The Bruce Lee Genesis NFT (Arweave)

There is no limit to the number of NFTs minted during the sale. At the time of publication, over 19,592 House of Lee digital collectibles have been minted with a current floor price of around 0.008 Ether. The Bruce Lee NFT was drawn by artists Maciej Kuciara and Emily Yang, with its design inspired by Shannon Lee, daughter of Bruce Lee and president of the Bruce Lee Estate. An Ethereum Name Service address has also been registered for the collection at bruceleeofficial.eth.

China’s 30M crypto users despite ban

According to a joint research report published on Apr. 10 by Foresight News, CoinNess, and BlockTempo, China still has around 30 million crypto users, representing around 2.12% of its population, compared to 12% for the U.S. and 11% for Taiwan. Researchers cited the Sept. 2021 People’s Bank of China ban on crypto-fiat transactions as “the nail in the coffin” for the industry in China.

China's crypto user count has dwindled but still thriving (Foresight Ventures)
China’s crypto user count has dwindled but still thriving (Foresight Ventures)

That said, the report also noted Hong Kong is becoming a rising hub of blockchain technology in Asia. In Feb. 2023, the Hong Kong Securities and Futures Commission (SFC) proposed a pathway for exchanges to obtain regulatory licenses through fulfilling the custody, know-your-customer, record-keeping, and risk management requirements. The policy is scheduled to come into effect on June 1, 2023.

Interestingly, Foresight wrote that despite tailwinds from a spending campaign during the 2022 Beijing Winter Olympics, only 13.61 billion of China’s digital yuan central bank digital currency (CBDC) were in circulation, representing just 0.13% of China’s M0 or outstanding monetary supply. “Trade settlement applications are still in development and are only accepted by very limited partners,” the firm noted.

Despite headwinds, three major venture capital firms, Hashkey Capital, Dragonfly, and Foresight Ventures, are still active in the mainland China region. Notable projects tracing their origins from China include Conflux, Alchemy Pay, Animoca Brands, and CertiK.

Hong Kong’s rising Web3 power

The Hong Kong Web 3.0 Festival gallery hall (Twitter)
The Hong Kong Web 3.0 Festival gallery hall (Twitter)

On Apr. 12, more than 10,000 crypto enthusiasts and 300 guest speakers gathered in Hong Kong for the special administrative region’s annual Web3 Festival. During its debut, Lee Ka-Chiu, chief executive of Hong Kong, pledged to allocate 700 million Hong Kong dollars ($89.17 million) from this year’s budget to accelerate the development of digital assets and Web3 technologies in the region. Chan Mo-Po, the financial secretary of Hong Kong, also commented:

“Web3 is in its infancy, and the current common applications include cryptocurrency, decentralized exchanges, digital identity verification, DeFi, blockchain games, and even NFT but it is conceivable that in the future there will be many more new applications and opportunities. From a historical point of view, the development of Web3 will grow rapidly again after going through the shock stage.”

Justin Sun’s dream rendezvous with socialite overshadowed by legal woes

For Justin Sun, founder of Tron and de facto owner of cryptocurrency exchange Huobi Global, the 2023 Hong Kong Web3 Festival appears to be the pinnacle of his blockchain career. First off, before his arrival, Sun claims to have successfully turned around Huobi’s operations after years of stagnation, posting an impressive profit of $30 million in Q1 2023.

Then, with an aura of awe, the blockchain personality dispelled rumors that he was arrested in Hong Kong on arrival. In 2019, Sun allegedly hired a smuggler to help him bypass mainland China’s border controls and escape the country. This has been linked to exit restrictions due to his involvement in the initial coin offering (ICO) of Tron, which took place days before China banned ICOs. Sun has been out of mainland China ever since. Interestingly, no extradition agreement exists between China and Hong Kong, after a bill for such measure was quashed by a pro-democracy student uprising in 2019. The protests, in turn, were quashed by China’s central government.

Thanks to the sacrifice of the students, Sun was able to land in Hong Kong safely and meet face-to-face with Nina, an iPollo community ambassador whom Sun wants to feature in a Huobi beauty pageant and “[personally] guarantee as a final contestant in the Top 20.” Unfortunately, not everyone appears to be dazzled by Sun’s attempt at flirtation. As Sun’s euphoria reached its peak whilst partying onboard a Binance yacht, the U.S. Securities and Exchange Commission issued a subpoena for Sun on Apr. 12, kindly reminding him of his obligation to appear in court on charges of fraud and securities law violations.

“If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court.”

The SEC complaint, filed on Mar. 26, alleges Sun and his companies, Tron and BitTorrent, “fraudulently” manipulated the secondary market for Tron tokens through “extensive wash trading,” conducting more than 600,000 such trades, and also paid numerous American celebrities to promote TRX and BitTorrent (BTT) tokens with zero disclosure.

Sun has since stated that the SEC complaint “lacks merit” and that the regulatory body is “still in its infancy and is in need of further development” with regards to digital assets. The lawsuit is ongoing. Around the same day of the subpoena, Binance.US announced that it would be delisting TRX from its platform.

Justin Sun blushes as he shares a stage with Nina on Apr. 11, oblivious to the looming legal threat that will materialize the day after.
Justin Sun blushes as he shares a stage with Nina on Apr. 11, oblivious to the looming legal threat that will materialize the day after. (Twitter)

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Zhu Su’s exchange did $13.64 in volume akshually, Huobi in crisis: Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

Blowing up a Singaporean crypto hedge fund worth an estimated $10 billion at its peak was, by all means, a life-changing event for its co-founders Kyle Davies and Zhu Su. It appears that the trauma from the incident had been so severe that the two executives embarked on a series of spiritual journeys starting mid-2022 to transcend the effects of Three Arrow Capital’s (3AC) bankruptcy.

The voyage appears to have been fruitful. From escaping the pursuit of creditors, to making philosophical observations after witnessing the deaths of German tourists, to discovering the grace of Allah through Islam, to reigniting their passion for life through the culinary arts, to finding companionship in Japanese NFT avatars, Davies and Su may have finally found the answer to overcoming life’s hardships: If you don’t get it right the first time, keep trying until you succeed.

After reportedly soliciting $25 million from investors in January, the former 3AC co-founders launched the OPNX exchange on Apr. 5. The exchange is designed to trade bankruptcy claims of fallen crypto entities, such as their own bankrupt hedge fund. It is unclear how the highly personalized and private nature of bankruptcy claims can allow them to be traded on a public exchange without prior approval from bankruptcy trustees or courts.

Nevertheless, Davies and Su decided to press forward with the idea anyway. On the first day of trading, the total trading volume on OPNX in the previous 24 hours was reportedly $1.26. The report drew swift condemnations from OPNX, which clarified that the exchange’s 24-hour trading volume was actually $13.64, or 982% more than stated.

OPNX clarifies to users that the exchange’s trading volume had been grossly understated in the CoinDesk report (Twitter)

On the second day, Zhu Su claimed that the exchange facilitated $373 in trading volume after a media blitz brought much attention to the lackluster results. However, with great power comes great responsibility. Despite improving the exchange’s trading volume by 2,634% in one day, OPNX’s traction was partly derailed by Twitter suspending its official account due to terms of use violations.

Su has since created a Chinese Telegram channel for official OPNX communications. Meanwhile, the two were kindly reminded by critics once again that despite their continued entrepreneurship, creditors are still claiming an estimated $3.5 billion from their defunct hedge fund.

Huobi’s liquidation controversy

In a letter submitted to Chinese news aggregator, cryptocurrency exchange Huobi Global appears to have presented its side of the story regarding a flash crash that affected its native Huobi Token (HT) on Mar. 10.

On the date of the incident, HT plunged to as low as $0.31 apiece from a high of $4.85 before subsequently recovering most of its losses. It currently trades at $3.58 at the time of publication.

Huobi Tokens suffered a flash crash that liquidated many leveraged users on Mar. 10. (Huobi Global)
Huobi Tokens suffered a flash crash that liquidated many leveraged users on Mar. 10. (Huobi Global)

According to Huobi, the incident was caused by “industry-wide macro events” relating to the recent failure of American tech banks. “Under such downward pricing pressures, repeated selling by big investors, and lack of liquidity with the HT token, led to margin liquidations, and in turn caused many leveraged investors to suffer losses,” Huobi wrote.

The event led to big losses among users who pledged HT as collateral for loans or were simply holding the token with leverage. Amid the guidance of self-proclaimed “adviser” and de facto owner of Huobi, Justin Sun, Huobi rolled out a compensation program for users affected by the HT flash crash and claimed that “more than 98% of affected users have negotiated a satisfactory solution with the platform and received compensation.”

However, one user, @lantian666, who claims to have lost nearly $4 million during the incident, alleges that his losses are yet to be fully compensated by Huobi. In the Odaily letter, Huobi acknowledged that one user lost an estimated $2.9 million after the flash crash caused liquidations. lantian posted a series of screenshots and claims that Huobi’s customer service had only agreed to waive a portion of liquidation fees, which are nowhere close to his loss on trading positions.

Sun has stated that Huobi will “bear all leverage-through position losses on the platform resulted from this market volatility event of HT.” Huobi has stated that it seeks to “reach a consensus as soon as possible with the remaining users who still have doubts about the current solution and negotiate a more satisfactory solution.” However, the exchange also wrote it did not want such compensation to “encourage users to engage in high-risk leveraged transactions.”

Justin Sun’s troubled acquisition

According to purportedly leaked employee screenshots on Apr. 4, Huobi Global plans to cut it staff count by a further 200 and the exchange is apparently not yet profitable. Last November, blockchain personality and Tron founder Justin Sun reportedly acquired 100% of a co-founders’ stake in the exchange through his entity About Capital.

There have been issues ever since — but the exchange had issues before as well. Early this year, Huobi reportedly slashed its employee benefits and laid off as much as 20% of its staff. The exchange’s market share had fallen from an estimated 5.4% in the first quarter of 2022 to 2.2% in the final quarter. On Apr. 5, Sun denied that he was in talks to sell his Huobi stake to Binance.  

Huobi was one of the largest cryptocurrency exchanges in the world, holding 19% market share in 2020 before China’s crypto exchange ban took effect and it had to say goodbye to much of its userbase. Sun apparently has a plan to get around the ban as part of its turnaround. The proposed scheme involves leveraging Huobi’s digital identity partnership with the Carribean island of Dominica. Mainland Chinese users can register for Dominica’s digital citizenship, then reportedly use their new “citizenship documents” to create a Huobi account.

Sun is currently facing a lawsuit from the U.S. Securities and Exchange Commission over allegations of market manipulation related to the Tron and BitTorrent tokens. Recent reports also suggest that Sun was stripped of his status as Grenada’s ambassador to the World Trade Organization in June 2022, depriving him of the fancy title “his excellency” and access to a diplomatic passport which grants him theoretical immunity against prosecution.

Microsoft’s new blockchain partnerships

According to a recent announcement, Singaporean gaming studio Metagame Industries has joined the Microsoft for Startups Founders Hub through the ID@Azure Program. The partnership with Microsoft will explore the use of AI and cloud computing in Web 3.0 game development.

Metagame Industries will receive Azure credits, OpenAI Services, technical support, and business development resources as part of the agreement. “We’re excited to work with Microsoft’s tools and technology to create innovative and immersive gaming experiences,” said Joe Zu, CEO of Metagame Industries.

Abyss World gameplay (Metagame Industries)
Abyss World gameplay (Metagame Industries)

The firm is the developer behind Abyss World, a third-person, dark fantasy action role-playing game scheduled to launch on Mysten Labs’ Sui blockchain in Q4 2023. Abyss World will feature an in-game NFT factory that enables the minting of digitized weapons and heroes via monster drops.

Token rewards will also be available to players who complete special tasks in the PvE section, climb the game leaderboard, and win PVP arena seasons. Developers also plan to implement an Abyss World decentralized autonomous organization (DAO) to regulate game tasks such as new systems and introduction of new character sets.

Asia Express previously reported that Microsoft has partnered with decentralized blockchain infrastructure provider Ankr on Microsoft Azure. Rashmi Misra, Microsoft’s general manager of artificial intelligence and emerging technologies, commented that its partnership with Ankr will allow projects to access “blockchain data in a reliable, scalable, and secure way.” The tech conglomerate is also reportedly testing a Web 3.0 wallet integration for its native internet browser Microsoft Edge.

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US and China try to crush Binance, SBF’s $40M bribe claim: Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

Binance’s secret U.S. users

On Mar. 27, the U.S. Commodity Futures Trading Commission (CFTC) charged Binance and its founder Changpeng Zhao with alleged willful evasion of federal law and operating an illegal digital assets exchange. In the 74 page complaint, the CFTC claimed that despite the exchange’s public position of banning U.S. users, internal documents suggest that at least 20% to 30% of the exchange’s traffic came from U.S. customers. That equates to almost three million alleged U.S. users by mid-2020.

Crypto exchanges are required to register with either the CFTC or the U.S. Securities and Exchange Commission before soliciting U.S. customers. However, the CFTC allege that Binance ignored such ruling as its executives claimed that the regulations were “not reasonable” in the context of Binance’s corporate structure and that it was more “profitable” to simply bypass them.

Since the allegations surfaced, Chicago quantitative trading firm Radix Trading has confirmed that it is one of the three high-volume trading firms onboarded by Binance and listed in the CFTC complaint. In an official statement, Binance called the CFTC lawsuit “unexpected and disappointing.”

Founded in China by CZ in 2017, Binance quickly became the world’s largest crypto exchange through its low-fee trading mechanisms and wide range of product offerings. However, the exchange also came under intense scrutiny by regulators over allegedly lax know-your-customer and anti-money-laundering measures. Among many items, the CFTC seeks disgorgement of revenue generated by U.S. users’ trading activities, civil monetary penalties and permanent injunctive relief.

Interestingly, a screenshot cited by the CFTC shows that Binance’s top 2019 revenue came from the U.S. and Chinese geographical segments, both being countries where is not authorized to operate.

USA’s unexpected ally in the fight against Binance

From heated diplomatic arguments on human rights issues to ruffling feathers in the South China Sea, the U.S. and China, two major superpower, often find little common ground in everyday global affairs. However, it appears the two have finally found an entity worthy of mutual disdain — Binance.

Around the same time the CFTC unveiled its investigation of millions of allegedly undisclosed U.S. users on Binance, a Mar. 23 report by CNBC found that Binance employees or volunteers allegedly shared techniques for Mainland Chinese users to evade the exchange’s KYC verification.

Techniques shared include the use of fake residential addresses, VPNs, non-Chinese affiliated email addresses to create an account and then backlink it to a Chinese national ID.

Cryptocurrency exchanges have been banned in China since 2017 with its websites blocked and major social platforms banning keyword searches containing “Binance.”

The same week, an investigation by The Financial Times alleged that Binance had significant ties to Mainland China despite its relocation in 2017. Speaking on the matter, a Binance spokesperson told Cointelegraph that Binance “does not operate in China nor do we have any technology, including servers or data, based in China,” and “we strongly reject assertions to the contrary.”

Despite their differences, the U.S. and China has finally found common ground in the fight against Binance.
Despite their differences, the U.S. and China has finally found common ground in the fight against Binance. (Magazine via Imgflip)

SBF alleged $40M bribe to Chinese officials

In a new series of indictments filed against Sam Bankman-Fried (SBF), founder of bankrupt cryptocurrency exchange FTX, by the U.S. District Court Southern District of New York, prosecutors alleged that SBF paid $40 million to one or more Chinese government officials to unfreeze accounts related to Alameda Research, which was based in Hong Kong.

In 2021, Chinese authorities alleged froze $1 billion in cryptocurrencies from Alameda Research’s trading accounts on Chinese exchanges as part of an ongoing investigation into a counterparty. Exchanges were banned in China in 2017 but actual enforcement and offboarding of users did not come until a later time.

After months of failed attempts to unlock the accounts, the self-proclaimed effective altruist apparently concluded the wheels of justice needed a little grease. Prosecutors say that under direct orders from SBF, an Alameda employee allegedly transferred $40 million from one of the firm’s accounts to a private wallet in Nov. 2021. Shortly thereafter all Alameda trading accounts were unfrozen and SBF quickly went back to his routine trading activities. The criminal trial for the disgraced crypto executive is scheduled for Oct, 2, 2023 and he faces up to 115 years in prison if convicted on all charges.

Chinese blockchain executive’s rape charges

According to local media reports on Mar. 28, Jun Yu, founding partner of Web 3.0 fund A&T Capital and former investment director at cryptocurrency exchange OKX, is currently under criminal investigation by Chinese authorities over allegations of sexual misconduct.

Yu has reportedly left his role at A&T Capital following the accusations. According to the criminal complaint, the event started when Yu’s car slammed into a vehicle driven by the alleged victim, Ms. Wan, at an unspecified time during the year in Hangzhou, China. Captivated by her “beauty,” Yu then asked Ms. Wan for her WeChat contact to “discuss compensation”.

Afterwards, Yu repeatedly made requests to ask Ms. Wan out to dinner, to which she agreed. Authorites say that during the meetup, Yu allegedly pressured Ms. Wan into drinking excessive amounts of alcohol whilst bragging about his connections to senior Chinese Communist Party officials. Later Yu called a taxi and took the woman to a nearby hotel where she was allegedly raped.

Yu fled to Singapore shortly after the alleged incident, a country that, perhaps unbeknownst to Yu, has an active extradition agreement with Mainland China. Hangzhou police reportedly found evidence at the scene which resulted in his prompt arrest.

A&T Capital was founded in 2021 and closed $100 million in funding in 2022. The fund has invested in notable crypto projects such as Mysten Labs, or Sui Network, Scroll, and BitKeep.

The firm has since stated it had “zero tolerance” for illicit or immoral activities and will be launching its own independent investigation in addition to cooperating with law enforcement regarding the incident. Jun Yu previously worked at OKX as an investment director from Mar. 2018 to July 2019.

Jun Yu's Twitter account.
Jun Yu’s Twitter account with professional descriptions. (Twitter)

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