The Commodity Futures Trading Commission (CFTC) has filed a complaint against a Tennessee couple for allegedly defrauding over 100 people in a crypto pool scheme. In a new press release, the CFTC announced that they are filing a complaint against Michael and Amanda Griffis for allegedly running a multi-million dollar pool that defrauded investors. The alleged […]
The post CFTC Charges Couple for Running Illegal Crypto Pool and Commingling With Personal Funds appeared first on The Daily Hodl.
Timothy Massad, the former CFTC chairman, highlighted the benefits of stablecoins and urged regulators not to discredit their utility.
The previous chairman of the United States Commodity Futures Trading Commission (CFTC), Timothy Massad, highlighted the importance of government attention being paid to the stablecoin ecosystem in an interview with CNBC.
On July 24, Massad told the CNBC interviewer that he sees stablecoins as a bridge between “the crypto world and the real world” and that governments should not view them as a fad fated to disappear.
The ex-chairman said he is “concerned” that the risks of stablecoins are not being properly addressed by regulators, rather they are kept out of the conversation due to the thought that they don’t actually work.
“I’m sympathetic to a lot of people in the government saying ... we’re not convinced of the use case here, we don’t really see what the value is in the real world," he said. "But sometimes it takes time to really discover that.”
Massad has been an outspoken advocate for crypto regulation and more cohesive collaboration between the CFTC and the Securities and Exchange Commission (SEC) when it comes to digital assets.
On July 24, the United States Government Accountability Office (GAO), a national Congressional watchdog agency, released a report on the use of blockchain in finance in which it echoed the sentiment for interagency cooperation on crypto regulations.
Related: Korean banks research stablecoin, CBDC alternative
In the same CNBC interview, he highlighted that stablecoins could hold the potential to create faster payment mechanisms in the U.S. and that if the U.S. were to create a stablecoin it could lead other countries to do the same.
“I think the competition from stablecoins could be useful, again, if we address the risks, and they are significant.”
In addition to faster payment systems, he argued that stablecoins are already causing banks to consider their current operating systems and how they can be improved.
Massad has also been one to judge the U.S. in the past for not jumping on the creation of a central bank digital currency (CBDC) fast enough.
These comments come as regulators in the U.S. continue to mull over regulations for the crypto industry, which include multiple bills that would affect stablecoin issuance and usage.
Magazine: Wolf Of All Streets worries about a world where Bitcoin hits $1M: Hall of Flame
Binance, Changpeng Zhao and former compliance chief Samuel Lim intend to file two motions to dismiss a March lawsuit from the CFTC.
Crypto exchange Binance and its CEO Changpeng "CZ" Zhao are planning to file a motion to dismiss a March-filed lawsuit from the United States commodities regulator.
In a July 24 filing to an Illinois District Court, multiple Binance entities, Zhao and former chief compliance officer Samuel Lim said they plan to file two separate motions to dismiss the complaint before July 27.
"The Foreign Binance Entities and Zhao intend to file a joint Motion to Dismiss the Complaint. Lim intends to file a separate Motion to Dismiss the Complaint, and join parts of the motion filed by the Foreign Binance Entities and Zhao," the filing read.
Binance is also seeking permission to exceed a 15-page limit on the brief which would be used to support its motion and requested for it to go up to 50 pages citing the complexity of the lawsuit brought against it.
"Given the complexity of the CFTC’s Complaint and the number of arguments Defendants anticipate making in support of their Motions to Dismiss, Defendants anticipate that their Memoranda of Law in support of the two motions will exceed the fifteen-page limits."
The Commodity Futures Trading Commission (CFTC) sued Binance and Zhao in March alleging the crypto exchange did not properly register with the regulator.
The CFTC claimed despite Binance blocking U.S. residents from transacting on its platform, since at least 2019 it knowingly conducted transactions in multiple cryptocurrencies for people based in the U.S. and intentionally violated U.S. laws.
The regulator also called Binance's compliance process a "sham" and alleged it willingly conducted its activities outside of the U.S. and obscured the location of its headquarters with the aim of evading U.S. regulations.
Related: What criminal charges for Celsius ex-CEO mean for crypto industry
The Securities and Exchange Commission (SEC) also sued Binance and Zhao on June 5 alleging it sold unregistered securities, allowed U.S. customers to use its global platform and claimed Zhao misused customer funds.
The SEC's complaint claimed Binance's compliance chief in 2018 — believed to be Lim — said in a message to another compliance officer that “we are operating as a fking unlicensed securities exchange in the USA bro”
Binance is also reportedly under investigation by the U.S. Department of Justice for allowing Russians to use its platform in violation of U.S. sanctions.
Magazine: $3.4B of Bitcoin in a popcorn tin — The Silk Road hacker’s story
Last week was marked by two new legislative initiatives for the crypto industry in the United States.
Last week was marked by two new legislative initiatives for the crypto industry in the United States. Senator Jack Reed sponsored a bipartisan bill that would tighten Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations and sanctions requirements for decentralized finance (DeFi). The bill would subject DeFi operations to the same requirements as “other financial companies, including centralized crypto trading platforms, casinos, and even pawn shops.”
Two major crypto lobbying groups slammed the legislation: Coin Center and the Blockchain Association. The former released separate statements describing the legislation as a “messy,” “unworkable” and “unconstitutional” way of regulating DeFi. Kristin Smith, the CEO of the Blockchain Association, echoed Coin Center’s concerns and described the new legislation as redundant. Smith said federal law enforcement agencies already have the tools and expertise to combat this “relatively small but important issue.”
Republican House Agriculture and House Financial Services Committee members introduced the Financial Innovation and Technology for the 21st Century Act. The bill gives the Commodity Futures Trading Commission (CFTC) jurisdiction over digital commodities, clarifies the authority of the Securities and Exchange Commission (SEC), and creates a process for digital assets deemed initially securities to be sold as commodities. Representatives French Hill and Dusty Johnson, who are among the bill’s cosponsors, sent a letter to SEC Chair Gary Gensler a day before the bill’s introduction criticizing the agency’s so-called “regulation by enforcement” of the crypto industry.
Spot Bitcoin exchange-traded fund (ETF) applications from several firms have been published in the Federal Register, moving them one step along in the SEC process. The Federal Register received notices of proposed rule changes allowing Bitcoin ETF applications from BlackRock, Fidelity, Invesco Galaxy, VanEck and WisdomTree. Publishing the applications in the official journal of the U.S. government gives the SEC a window of opportunity to accept or reject the request, extend the time allowed or open the application for public comment.
The state of Kuwait is the latest jurisdiction to ban virtually all operations involving cryptocurrencies like Bitcoin (BTC). Kuwait’s main financial regulator, the Capital Markets Authority (CMA), issued a circular on the supervision and issuance of virtual assets in the country. In the circular, the CMA confirmed the commitment to “absolute prohibition” on major use cases and operations involving cryptocurrencies, including payments, investments and mining. The circular also bans local regulators from issuing licenses allowing firms to provide virtual asset services as a commercial business.
U.S.-based crypto mining company Marathon Digital is heading to court after its shareholders alleged that its CEO Fred Thiel, alongside other top executives, breached fiduciary duties, unjustly enriched themselves and wasted corporate assets. According to the legal team, the company’s management has been downplaying its problems, artificially inflating Marathon’s valuation, receiving excessive compensation, making lucrative insider sales, and receiving unjustifiably elevated bonuses based on false and misleading statements.
The shareholders aim to correct the company’s governance by strengthening the board’s supervision of operations, nominating at least four candidates from shareholders to the board and eliminating the previous procedure of directors’ elections.
In a report requested by Rep. Maxine Waters, the country’s top watchdog is carefully neutral but dissatisfied with agencies’ abilities to work together.
The United States Government Accountability Office (GAO), a Congressional watchdog agency, has released a report it completed in June on the regulatory framework for the use of blockchain in finance.
The 77-page report was requested by Reps. Maxine Waters and Stephen Lynch before the midterm elections, when they were the chair and ranking member, respectively, of the House of Representatives Financial Services Committee. The report unsurprisingly found that more regulation is needed. The agency has a framework for evaluating regulatory reform proposals developed in 2009.
The report pointed to crypto asset trading platforms and stablecoins as products that lack regulation, but it examined regulators’ policies and activities without straying into “turf war” controversies related to defining securities. Thus, it identified the spot markets for nonsecurity crypto assets as the center of a regulatory gap and stated:
“By designating a federal regulator to provide comprehensive federal oversight of spot markets for nonsecurity crypto assets, Congress could mitigate financial stability risks and better ensure that users of the platforms receive protections.”
Traditional assets in that category enjoy robust regulation, the report noted. Crypto assets are subject to limited oversight, such as from the Treasury’s Financial Crimes Enforcement Network and through state money transmitter licensing.
Related: US Congress agency recommends 4 key policy options for blockchain
Stablecoins need regulation regarding the composition of their reserves, auditing and disclosures, and redemption rights. The report said current regulation is a hodgepodge of measures by the Securities and Exchange Commission, Commodity Futures Trading Commission and states that does not amount to “consistent and comprehensive prudential regulation and oversight.”
Decentralized finance is capable of being regulated in inverse relationship to the level of its decentralization, the GAO said. When an ecosystem is fully decentralized, there is no individual who can be identified as responsible for developing, operating or governing it. It may also span multiple regulatory jurisdictions in its operations.
Blockchain technology—like #cryptocurrency—could offer faster, cheaper financial transactions. But recent price crashes & bankruptcies have raised concerns about gaps in federal regulations that could put consumers at risk. Our new report & video explore: https://t.co/1vyIgZVaYi pic.twitter.com/nxHrk1g5dQ
— U.S. GAO (@USGAO) July 24, 2023
Moving closer to turf war issues, the report identified a need for greater coordination between regulators and noted complaints from market participants about the slow response of regulators to innovations in the market. The report noted that the Treasury’s Financial Stability Oversight Council was tasked with leading an effort to create a unified approach to crypto asset oversight by the March 2022 Executive Order on Ensuring Responsible Development of Digital Assets.
The report recommended that the seven pertinent regulatory agencies “jointly establish or adapt an existing formal coordination mechanism […] for collectively identifying risks posed by blockchain-related products and services and formulating a timely regulatory response.” Furthermore:
“This mechanism could include formal planning documents that establish the frequency of meetings and processes for identifying risks and responding to them within agreed-upon time frames.”
The National Credit Union Administration expressed agreement with that finding, while the others did not agree or disagree. The GAO is the country’s highest auditor. While its recommendations are not legally binding, the century-old agency’s findings carry considerable moral weight.
Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?
The House Agriculture and Financial Services Committees have been working together all year on a bill to rival Lummis and Gillibrand’s RFIA.
A bill to create a regulatory framework for digital assets has been introduced by Republican members of the Agriculture and Financial Services Committees of the United States House, the result of several months of joint effort by the two committees.
The 212-page bill — called the Financial Innovation and Technology for the 21st Century Act — was introduced on July 20. According to an accompanying explainer, it's intended to address regulatory gaps by creating a framework for the "specific risks of different digital asset-related activities.”
The bill gives the Commodity Futures Trading Commission (CFTC) jurisdiction over digital commodities, clarifies the jurisdiction of the Securities and Exchange Commission (SEC) and creates a process for digital assets originally deemed securities to be sold as commodities.
The bill also sets conditions for a digital asset to be considered a commodity, with decentralization being the main requirement. Digital asset commodities could be sold on SEC-registered digital asset trading systems. Market participants are subject to new and more comprehensive disclosure requirements and could have registration with both agencies.
Introducing the Financial Innovation and Technology for the 21st Century Act. This bill establishes a regulatory framework for digital assets, protects consumers, fosters innovation, and positions America as a leader in finance and technology. #crypto https://t.co/0ihzY3MP0k
— House Committee on Agriculture (@HouseAgGOP) July 20, 2023
The agencies would also be required to work with foreign regulators to create consistent regulatory standards. The Government Accountability Office would be required to complete a study on nonfungible tokens (NFTs) and how they fit into traditional marketplaces.
Reps. French Hill and Dusty Johnson, who are among the cosponsors of the bill, sent a letter to SEC chair Gary Gensler a day before the introduction of the bill criticizing the agency’s so-called "regulation by enforcement" of the crypto industry.
Related: Crypto and securities: New interpretation of US Howey test gaining ground
SEC policy was also highlighted in the bill’s introductory materials. One of the documents stated:
“The SEC’s existing regulatory regime is not designed to accommodate the registration and regulation of digital assets. The SEC has failed to provide the clarity these entities need to operate.”
The other cosponsors of the bill were Glenn Thompson, Tom Emmer and Warren Davidson. The two House committees began working together on a digital assets bill earlier this year and held more than one joint meeting in preparation for it.
Last week, Sens. Cynthia Lummis and Kirsten Gillibrand introduced a new version of their bipartisan Responsible Financial Innovation Act (RFIA), which this bill will compete with.
Magazine: Opinion: GOP crypto maxis almost as bad as Dems’ ‘anti-crypto army’
The former chairs of two top US financial regulators think their old agencies need to work hand in hand to regulate crypto. Jay Clayton, the former chair of the Securities and Exchange Commission (SEC), and Timothy Massad, the former chair of the Commodity Futures Trading Commission (CFTC), co-wrote an opinion piece about domestic crypto policy […]
The post Former SEC and CFTC Heads Say Both Agencies Should Work Jointly To Regulate Crypto: Report appeared first on The Daily Hodl.
CFTC Commissioner Caroline Pham says recent court opinions around digital assets and securities are a first step to crypto regulatory clarity.
Caroline Pham, one of five commissioner of the Commodities Futures Trading Commission, believes the path to United States crypto regulatory clarity has been laid out following Ripple’s partial victory.
Speaking on Bloomberg TV on July 17, Commissioner Pham said recent big court decisions regarding the classification of crypto assets will eventually lead to regulatory clarity.
“You know, last year I said that we were going to see regulatory clarity first in the courts around the definition of a security, and I think we’ve seen that with some very big court opinions that have been released.”
Pham said that she was looking forward to participating in regulatory working groups and hoped other United States regulators, such as the Securities and Exchange Commission, would work together to come up with a “holistic approach” to crypto regulation.
Pham's comments come a few days after San Francisco fintech firm Ripple won a key partial victory in an ongoing court battle in which the SEC accused it of selling unregistered securities.
Judge Analisa Torres of the Southern District of New York ruled on July 14 that XRP (XRP) was not a security when sold to retail investors on digital asset exchanges.
Thank you @BloombergTV for the opportunity to talk about our important GMAC initiatives! Beyond crypto, institutional markets & central banks are looking at tokenization of real assets like bonds. Today, we heard about international, US & EU developments & key takeaways. https://t.co/cWTShDy2Bf
— Caroline D. Pham (@CarolineDPham) July 18, 2023
The ruling was not well received by SEC Chair Gary Gensler, who called it disappointing at a July 17 press conference. Gensler has previously suggested that every digital asset aside from Bitcoin is a security, though his agency has not gone as far as to say the same.
Despite this, Gensler has vowed to continue with enforcement actions following the recent Ripple triumph.
Related: Ripple court ruling makes call for regulation 'more compelling and more urgent' — former CFTC chair
Commissioner Pham also highlighted the importance of real-world asset (RWA) tokenization. She said there were “real opportunities” to modernize financial markets through the tokenization of money market funds on the blockchain.
Traditional finance companies have been increasing their engagement with real-world asset protocols, resulting in several RWAs outperforming DeFi assets recently.
Collect this article as an NFT to preserve this moment in history and show your support for independent journalism in the crypto space.
Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?
Ripple Labs scored a partial victory in its lengthy legal battle with the United States Securities and Exchange Commission, which dates back to 2020.
Given the current push for crypto regulation, the industry breathed a sigh of relief on July 13 as Ripple Labs scored a partial victory in its legal battle with the United States Securities and Exchange Commission (SEC) dating back to 2020.
Judge Analisa Torres of the U.S. District Court for the Southern District of New York ruled that Ripple’s XRP (XRP) token is not a security, but only regarding programmatic sales on digital asset exchanges. However, the SEC also notched up a victory of its own, with the judge ruling that XRP is a security when sold to institutional investors, as it met the conditions set in the Howey test.
Immediately after the news, Ripple became the fourth-largest cryptocurrency by market capitalization. Mere hours after the ruling, XRP’s market cap surged a whopping $21.2 billion to reach a new yearly high of $46.1 billion, pushing it up from seventh position to beat out Circle’s USD Coin (USDC) and Binance’s BNB (BNB) token in the process.
Industry heavyweights believe the decision will aid crypto exchanges Coinbase and Binance in their respective SEC lawsuits. Tyler Winklevoss, the CEO of cryptocurrency exchange Gemini, said the ruling “decimates” the SEC’s case against Coinbase. His twin brother, Cameron Winklevoss, referred to the ruling as a “watershed moment” that will make it difficult for the SEC to claim authority over cryptocurrencies. United States Senator Cynthia Lummis stated that the verdict reinforces the immediate requirement for Congress to provide a thorough crypto framework that prioritizes the safeguarding of consumers.
South Korea’s Financial Services Commission (FSC) announced a new bill requiring all firms that issue or hold cryptocurrencies like Bitcoin (BTC) to disclose their holdings. The new measures aim to enhance transparency in the accounting and disclosure of crypto assets in line with supervision guidelines that require accounting for each transaction involving crypto. The initiative also targets revising accounting standards that obligate disclosure of virtual asset transactions.
Argentina welcomed its first Bitcoin futures contract on July 13, three months after the country’s securities watchdog approved the underlying index as part of a strategic innovation agenda. The Bitcoin futures contract will be based on the price of BTC quoted by several market participants providing BTC/ARS trading pairs. All trades will be settled with Argentine pesos, and traders are required to make deposits through bank transfers. According to local media reports, the product will initially be available only to institutional investors. There’s no clear timeline for when retail investors can trade Bitcoin futures contracts in the country.
The former CEO of now-bankrupt crypto lender Celsius, Alex Mashinsky, was arrested after a probe into the company’s collapse. On the same day, the SEC filed a lawsuit against Mashinsky, charging him for raising “billions of dollars” through unregistered and fraudulent offers, as well as selling “crypto asset securities.” The criminal charges came parallel to those from the Commodity Futures Trading Commission, which announced a complaint against Celsius and Mashinsky on July 13. According to the commission, Celsius allegedly acted as an unregistered commodity pool operator, while Mashinsky was an unregistered associated person of the said operator, which are violations of the Commodity Exchange Act.
Authorities said they had reached a “non-prosecution agreement” with Celsius, but former CEO Alex Mashinsky will face criminal charges related to fraud and misleading users.
The United States Attorney for the Southern District of New York and Federal Bureau of Investigation have announced fraud charges against the former CEO of bankrupt crypto lender Celsius, Alex Mashinsky.
In a July 13 announcement, the U.S. Justice Department said it had charged Mashinsky with securities fraud, commodities fraud, and wire fraud related to allegedly defrauding customers and misleading them about Celsius’ “success, profitability, and the nature of the investments” the platform made with user funds. However, authorities said they had reached a “non-prosecution agreement” with Celsius, which “agreed to accept responsibility for its role in the fraudulent schemes”.
“If you rip off ordinary investors to line your own pockets, we will hold you accountable,” said U.S. Attorney Damian Williams. “Whether it’s old-school fraud or some new-school crypto scheme, it doesn’t matter one bit. It’s all fraud to us. And we’ll be here to catch it.”
Today Ian McGinley, @CFTC Director of Enforcement, will participate in a press conference at 11:30 a.m., EDT with @SDNYnews, @FBI, and @SECGov to announce the enforcement action against Celsius Network and Alexander Mashinsky. Watch live: https://t.co/XajNGYcV3y
— CFTC (@CFTC) July 13, 2023
Former Celsius chief revenue officer Roni Cohen-Pavon and Mashsinky will also face charges of conspiracy, securities fraud, market manipulation, and wire fraud related to manipulating the price of the CEL token. Authorities reportedly arrested Mashinsky on July 13 as part of the indictment.
The charges came amid a slew of legal actions against Celsius and Mashinsky following the collapse of the platform and financial difficulties in 2022. Celsius suspended withdrawals on its platform, and many U.S. state securities regulators had also been investigating the firm.
The New York Attorney General’s office filed a suit against Mashinsky on Jan. 5, alleging that the former CEO misled Celsius investors, resulting in billions of dollars in losses. The U.S. Securities and Exchange Commission (SEC) followed with its own lawsuit on July 13, citing similar allegations against Celsius and Mashinsky, but also charging the firm with violations of securities laws.
This is a developing story, and further information will be added as it becomes available.
