Binance Expects to Pay Fines to Settle With US Regulators for Past Conduct: Report

February 18, 2023 Bitcoin.com

Binance readies checkbook for potential fines from US regulators: Report

February 16, 2023 Coin Telegraph

Binance

The world’s largest crypto exchange wants to resolve outstanding investigations with U.S. regulators.

The world’s largest digital asset exchange, Binance, is preparing to face fines and penalties in order to settle outstanding regulatory and law-enforcement investigations in the United States.

According to a Feb. 15 WSJ report citing the firm’s chief strategy officer Patrick Hillmann, Binance has been working with regulators to remedy past compliance issues.

Hillmann stated that Binance is “working with regulators to figure out what are the remediations we have to go through now to make amends for that.”

He added that the outcome of ongoing investigations will likely be fines but could be more, stating “that is for regulators to decide.”

Binance has been subject to several investigations in the U.S. including one which began in 2018 by the Department of Justice over potential violations of anti-money-laundering laws.

In March 2021, the Commodity Futures Trading Commission (CFTC) also probed whether the company offered crypto derivatives to U.S. customers without registering with the agency.

The Securities and Exchange Commission (SEC) also launched a probe into Binance’s U.S. division in February 2022 regarding trading firms connected to CEO Changpeng Zhao.

Hillmann added that Binance was “highly confident and feeling really good about where those discussions are going,” but couldn’t put a figure on the size of the fines or a timescale for resolution with U.S. regulators.

He said the lack of clarity for crypto in America made it a “very confusing time for us.”

The SEC has recently ramped up what industry observers call a “war on crypto” — which appears to target certain staking services and stablecoins which it has deemed as falling under securities laws.

Referring to the recent enforcement activity, the Binance executive said it “would have a really deep and long-lasting chilling effect in the United States.”

Earlier this week, New York regulators cracked down on Paxos, preventing it from issuing more of the Binance-branded stablecoin BUSD.

Last week, U.S. crypto exchange Kraken was hit with a $30 million fine and ordered to halt its staking services following SEC enforcement action.

Patrick Hillmann concluded that resolving issues with U.S. regulators would be good for the firm and the future.

“It will be a good moment for our company because it allows us to put it behind us.”

Cointelegraph reached out to Binance for further comment did not receive a response by the time of publication.

SEC and CFTC Lawsuits Against Former FTX CEO Paused Until Criminal Proceedings Conclude

February 14, 2023 Bitcoin.com

CFTC and SEC cases against SBF deferred until after criminal trial

February 14, 2023 Coin Telegraph

CFTC

Damian Williams, U.S. Attorney for the Southern District of New York pushed to defer the civil cases due to a major overlap between the CFTC, SEC and DOJ’s cases.

A New York judge has granted a request from prosecutors to defer civil proceedings from the Commodities Futures Trading Commision (CFTC) and the Securities Exchange Commision (SEC) until after Sam Bankman-Fried’s criminal trial in October.

U.S. District Judge of Manhattan Kevin Castel on Feb. 13 granted the motions to stay the civil proceedings “without prejudice,” meaning the cases will now be halted until after the Department of Justice's (DOJ’s) criminal trial concludes.

The motion was first submitted on Feb. 7 by Damian Williams, U.S. Attorney for the Southern District of New York, requesting to defer both civil cases against the FTX founder and former CEO.

both civil cases (one from the SEC and one from the CFTC) have been stayed until the conclusion of the criminal trial against Sam Bankman-Fried https://t.co/3i28naGtnl
— Molly White (@molly0xFFF) February 14, 2023

Citing his reasons for wanting the delay, Williams emphasized that all three cases will most likely be hinged on providing the same evidence against Bankman-Fried, and that the DOJ’s trial in October will have a “significant impact” on these civil cases.

He also suggested that failing to delay the cases may give SBF unfair advantages in the DOJ’s trial, as the FTX founder had the tools to “improperly obtain impeachment material regarding the government’s witnesses, circumvent the criminal discovery rules, and improperly tailor his defense in the criminal case.”

Bankman-Fried’s legal team did not oppose William’s motion to defer the proceedings.

In a related court development on Feb. 9 concerning SBF’s alleged witness tampering antics, Judge Lewis Kaplan of the United States District Court for the Southern District of New York extended the FTX founder’s ban on using all encrypted messaging apps until Feb. 21, as part of his bail conditions.

A week prior, SBF's legal team had negotiated a deal to use certain encrypted apps under strict supervision, however Judge Kaplan ultimately overruled it and suggested that he was more concerned about shutting down any encrypted communication than offering SBF a small convenience.

Crypto, forex platform CEO pleads guilty to $248M fraud scheme

February 13, 2023 Coin Telegraph

Crypto, forex platform CEO pleads guilty to 8M fraud scheme

CFTC

Eddy Alexandre, the CEO of the purported crypto trading platform EminiFX is facing as much as 10 years behind bars for his part in the fraudulent enterprise.

Eddy Alexandre, CEO of purported crypto trading platform EminiFX has pleaded guilty to commodities fraud in a New York district court, agreeing to pay back millions to investors who lost funds to his "cryptocurrency investment scam."

The United States Department of Justice (DOJ) announced on Feb. 10 that Alexandre submitted a guilty plea to one count of commodities fraud, and will pay over $248 million in forfeiture along with restitution yet to be specified.

Alexandre was arrested and charged in May 2022 over his role in EminiFX and originally pleaded not guilty, but changed his plea on Feb. 10. He faces a maximum sentence of 10 years in prison.

*An image of Alexandre appearing in an April 2022 video for EminiFX. Image:* *DOJ*

According to U.S. Attorney for the Southern District of New York, Damian Williams, from around September 2021 to May 2022, Alexandre ran the crypto and forex trading platform and “solicited more than $248 million in investments from tens of thousands of individual investors.”

Williams said Alexandre purported EminiFX could give “weekly returns of at least 5%” but in reality, the CEO didn’t invest a “substantial portion” of the funds and “even used some funds for personal purchases.”

He touted EminiFX as a platform for passive income that used a secret new technology to automate trading in crypto and foreign currencies that “guaranteed” the stated returns on investment.

Alexandre refused to state to investors what the technology was and promised they would double their money within five months. Investors in the scheme were falsely presented with information that they had earned the stated 5% returns.

In reality, Alexandre lost millions of dollars on the funds he did invest — which he didn’t disclose to investors.

He also directed around $14.7 million to his personal bank account and used around $155,000 to buy a BMW and more on payments to a Mercedes Benz.

Some of the EminiFX investors were supportive of Alexandre despite the fraud he committed.

A handful traveled from abroad to attend an August 2022 plea hearing according to an Aug. 10 Bloomberg report. One supporter claimed the case against Alexandre was racist.

He also faces a separate civil suit from the Commodity Futures Trading Commission (CFTC) which is suing Alexandre for “fraudulent solicitation and misappropriation” relating to crypto and foreign exchange trading.

Ethereum co-founder Joe Lubin says no chance ETH is classed as security

February 10, 2023 Coin Telegraph

CFTC

The ConsenSys founder and Ethereum co-founder said it’s as unlikely as ride-sharing service Uber becoming illegal.

Ethereum co-founder and crypto entrepreneur Joseph Lubin is confident that Ether (ETH) won’t be classified as a security in the United States.

Cointelegraph spoke with Lubin, Ethereum co-founder and founder of blockchain tech firm ConsenSys, in Tel Aviv at the Web3 event, Building Blocks 23.

Asked if ETH could be classed as a security in the U.S. after Ethereum’s transition to a proof-of-stake (PoS) consensus model, Lubin said:

“I think it's as likely, and would have the same impact, as if Uber was made illegal.”

“There would be a tremendous outcry from not just the crypto community but different politicians and certain regulators,” he added.

In September, Securities and Exchange Commission Chairman Gary Gensler suggested that the blockchain’s transition to PoS might have brought ETH under the regulators’ beat.

Gensler believed staking coins gave “the investing public” anticipation of “profits based on the efforts of others.”

Lubin said he was privy to discussions with the SEC and the Commodity Futures Trading Commission “for many years.”

*Joseph Lubin speaking with Cointelegraph at Building Blocks 23 in Tel Aviv, Israel in February.*

He said around five years ago the regulators were “just trying to wrap their heads around what tokens were.”

“They thought back then that everything was a security. We — I think — helped them significantly understand lots of tokens are not securities, and then they went away and Gary and team now think almost everything's a security.”

Lubin, however, believes that ETH continues to be “sufficiently decentralized” and pointed to its “many use cases that don’t implicate it as a security.”

“There is no centralized set of promoters or builders that is specifically trying to raise the value of Ether and enrich investors,” he added.

“There's a court system in the United States of America that I think would be supportive of arguments that would be made that it is not.”

Lubin said that regulators appear to be more focused on another aspect of Ethereum at the moment, noting that people he knows close to the action in Washington D.C. say “most of the focus is on stablecoins right now.”

“Everybody's talking about it, freaking out. Calling for things to be done.”

In a Feb. 9 Twitter thread, Coinbase founder and CEO Brian Armstrong responded to “rumors” that the SEC was thinking to ban retail consumers from staking crypto.

“Staking is not a security,” he said, adding it would be a “terrible path for the U.S.” if a staking ban was passed noting it was “a really important innovation in crypto.”

“Hopefully we can work together to publish clear rules for the industry, and come up with sensible solutions that protect consumers while preserving innovation,” Armstrong said.

US Attorney requests SEC and CFTC civil cases against SBF wait until after criminal trial

February 7, 2023 Coin Telegraph

CFTC

Lawyers for Sam Bankman-Fried said he consented to staying the SEC and CFTC civil cases, while those for Caroline Ellison and Gary Wang did not objec to staying the CFTC case.

Damian Williams, United States Attorney for the Southern District of New York, has petitioned the court to delay civil proceedings against former FTX chief executive officer Sam Bankman-Fried “until the conclusion of the parallel criminal case”.

In Feb. 7 filings, Williams requested that the court issue an order staying civil proceedings as well as discovery from the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission against Bankman-Fried until after his criminal case, scheduled to go to trial in October. According to Williams, the criminal case against Bankman-Fried was “likely to have a significant impact” on the SEC and CFTC civil cases.

“All of the facts at issue in the Civil Cases are also at issue in the Criminal Case,” said the filing. “Indeed, as to the scheme to defraud FTX.com customers, the scheme to defraud FTX.com investors, the conspiracy to commit securities fraud by materially misleading FTX.com investors, and the conspiracy to commit commodities fraud by misappropriating FTX.com customer funds intended to be used for swaps trading, virtually all of the same documents, witnesses, and other evidence that would be used by the SEC and CFTC to prove their claims arising from these schemes would also be used to prove the Government’s criminal case.”

U.S. prosecutors ask to postpone SEC, CFTC cases against Bankman-Fried https://t.co/wxU2nOPxps pic.twitter.com/4RiSODbuZo
— Reuters (@Reuters) February 7, 2023

Regarding staying discovery proceedings, the U.S. Attorney claimed without intervention, Bankman-Fried had the tools to “improperly obtain impeachment material regarding the Government’s witnesses, circumvent the criminal discovery rules, and improperly tailor his defense in the Criminal Case”. The judge overseeing SBF’s criminal case has already banned the former FTX CEO from using encrypted messaging apps as a condition of his bail after allegations of contacting witnesses potentially involved in the case.

Lawyers for Bankman-Fried said he did not object to staying the SEC and CFTC civil cases until the conclusion of the criminal case. The legal teams for former Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang consented to staying the CFTC case — the two have already settled their civil cases with the SEC.

Both the SEC and CFTC filed separate lawsuits against Bankman-Fried in December shortly after his arrest in the Bahamas. The SEC’s complaint sought injunctions which could prevent SBF from participating in the issuance, purchase, offer or sale of any securities except for his personal account, while the CFTC said it was looking for injunctive and other equitable relief as well as civil monetary penalties against the former CEO, FTX, and Alameda.

Action Is Needed To Regulate Crypto Assets That Are Not Securities, Says CTFC’s New Chairman

February 5, 2023 The Daily Hodl

CFTC head looks to new Congress for action on crypto regulation

February 3, 2023 Coin Telegraph

CFTC

"I will continue to engage and provide technical assistance to draft legislation, as requested,” said Rostin Behnam.

Rostin Behnam, chair of the United States Commodity Futures Trading Commission, or CFTC, has said he will be continuing efforts for the agency to regulate non-security tokens.

In remarks released for a Feb. 3 American Bar Association event, Behnam pointed to “bankruptcies, failures, and runs” as part of the justification for Congress to give the CFTC the authority to address regulation for cryptocurrencies. According to the CFTC chair, the commission was "well positioned" to address any regulatory gaps but deferred to U.S. lawmakers to pull the trigger on legislation.

“Regulation is necessary to protect customers and to prevent failures which cannot predictably be contained within any boundaries across the domestic and global financial markets,” said Behnam. “Regardless of whether one or many occur in 2023 or 2033, we must act. There is a new Congress, and I will continue to engage and provide technical assistance to draft legislation, as requested.”

Today @CFTCbehnam will deliver a keynote address at the ABA Business Law Section Derivatives & Futures Law Committee Winter Meeting. Read it as prepared here: https://t.co/PZuT4vzrBr
— CFTC (@CFTC) February 3, 2023

According to the CFTC chair, budget increases for the commission would also help grow its enforcement team, which brought 69 crypto-related actions to date — a list that includes FTX, Ooki DAO, and others. Behnam said the team was “working towards another strong year of precedent-setting cases” against fraudulent or illegal digital asset projects.

Though the political makeup of the 118th Congress differs slightly from that of its predecessor, it’s unclear if the CFTC will be given additional authority under Behnam. One of the pieces of legislation lawmakers may revisit is the Lummis-Gillibrand Responsible Financial Innovation Act — a bill first introduced in June 2022 aimed at addressing the roles of the CFTC and Securities and Exchange Commission on crypto regulation.

Crypto-related enforcement actions by US states rose sharply in 2022: Report

February 2, 2023 Coin Telegraph

CFTC

There were almost twice as many state actions as federal in 2022, although both the feds and the states broke previous record by significant margins.

The number of crypto-related enforcement actions in the United States grew notably in 2022, according to a survey released by blockchain risk monitoring firm Solidus Labs. Both federal and state regulators broke records for enforcement actions.

There were 58 actions carried out by the four main U.S. federal agencies engaged in crypto enforcement in 2022. That number surpassed the previous high of 40 recorded in 2020 and rose 65% over the 38 actions seen in 2021.

The agencies – the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC) – all broke their previous records, with the exception of FinCEN, which had one action in 2022 compared to four in other years since 2013.

The SEC led the regulators in 2022, with 30 actions, nine of which were civil suits filed after arrests were made, and some of which are ongoing. They netted $242 million in penalties. The report noted:

“The SEC announced 30 crypto-related enforcement actions in 2022, more than any other regulator we identified worldwide.”

The CFTC carried our 19 actions, up 73% from 11 in 2021. Those cases represented 21.95% of the agency’s activity, which was also a record and compares to 4.76% of crypto’s share in SEC cases.

OFAC’s eight cases is up from its previous record of five, with its sanctioning of Tornado Cash being its biggest case. The report noted that activity on Tornado Cash has fallen precipitously since OFAC’s action, in spite of industry pushback.

The report also noted that FinCEN activity is likely to pick up this year after the tightening of sanctions on Russia and strengthening of the Treasury Department’s whistleblower program. So far, all crypto-related FinCEN actions have been for violations of the Bank Secrecy Act.

State's are increasing their rule makings, enforcement actions, and overall activity as it relates to #crypto in the absence of federal action.

We are starting to see a patchwork of licensing regimes form (NY, LA) with other states not far behind (NJ, CA). What does this mean?
— Cody Carbone (@CodyCarboneDC) February 2, 2023

“States have been off to the races,” the report said. States had a combines total of 112 actions in 2022, up from 89 in 2021 and 52 in 2020. Sixteen states made their first-ever action and eight broke their records. An additional 11 states tied their previous enforcement records, and in 15 states the record was “not broken.” The report did not say explicitly whether all 50 states took actions.

Texas and Alabama regulators were the most active, with six cases each. The Texas State Securities Board, which produced the first-ever crypto-related state enforcement order in 2017, is the all-time state leader with 59 actions, “quadruple that of the next-most active state regulators, the Colorado Division of Securities and Washington State Department of Financial Institutions.”

CFTC

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