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Opyn DeFi protocol founders are leaving crypto after CFTC crackdown

November 14, 2023 Coin Telegraph

CFTC

Two of the founders of crypto options platform Opyn are stepping down from leadership roles to pursue other aims, but Opyn will continue under new leadership.

Zubin Koticha and Alexis Gauba, two founders of the Opyn decentralized finance (DeFi) protocol, are stepping down from the project and “leaving crypto,” according to a statement from Koticha posted to social media on Nov. 14. The statement comes approximately two months after Opyn settled an enforcement action against it from the United States Commodity and Futures Trading Commission (CFTC).

Hey Crypto Twitter,

It's been a while

This one's a tough one...

After the regulatory action against Opyn, @alexisgauba and I have made the decision that we are leaving crypto.

This is honestly really emotional for me and Alexis.
— zubin koticha (@snarkyzk) November 14, 2023

In his statement, Koticha claimed that the decision was “really emotional” for them. “We thought we were going to be in crypto for the rest of our lives,” Koticha explained. “But unfortunately and unexpectedly, this is the end of the road.” According to him, Opyn will continue under the leadership of its head of research, Andrew Leone, who is being promoted to CEO.

Koticha hinted that the two executives will be working on a new project, stating, “As for me and Alexis - we got something new for y’all very soon.” However, this new project will not be crypto-related, as the two “have made the decision that we are leaving crypto.”

Gauba shared Koticha’s post from her own account, commenting, “Always thought I’d be building in crypto for the rest of my life, so it’s really sad to be leaving.”

Opyn is an options trading platform that runs on the Ethereum network. Its development team is headquartered in San Francisco, California. On Sept. 7, the CFTC announced that it was simultaneously issuing and settling an enforcement action against Opyn and two other DeFi teams for allegedly operating an unregistered derivatives exchange. Opyn was ordered to pay a civil monetary penalty of $250,000 and “cease and desist” from violating U.S. commodities trading laws. Attempting to open the Opyn interface from a U.S. IP address now produces a “blocked” error page, and this redirection persists even when using many offshore VPN addresses.

The CFTC action against Opyn was controversial even within the commission itself, as Commissioner Summer Mersinger wrote a dissenting opinion claiming that the enforcement action should not have been taken.

FBI searched Kraken co-founder’s home in March: Report

July 7, 2023 Coin Telegraph

Coin Telegraph

Electronic devices were seized from former Kraken CEO Jesse Powell’s Los Angeles home in connection to a non-crypto-related investigation into alleged hacking and cyberstalking.

The United States Federal Bureau of Investigations (FBI) reportedly searched the home of Kraken co-founder Jesse Powell in March as part of an investigation into claims he hacked and cyber-stalked a nonprofit arts group.

It is claimed that Powell interfered with computer accounts by blocking access to emails and other messages from contributors of Verge Center for the Arts — the non-profit Powell founded, according to a July 6 report from The New York Times, citing three people with knowledge on that matter.

The F.B.I. searched the home of the cryptocurrency executive Jesse Powell in March. https://t.co/NRnK99cts7
— NYT Business (@nytimesbusiness) July 6, 2023

The trio informed The NYT that the FBI and the U.S. Attorney’s Office for the Northern District of California has been investigating Powell since “at least” September.

Electronic devices were reportedly seized from Powell’s home in Brentwood, Los Angeles as part of the search. However, it is understood that prosecutors have not accused Powell of any crimes.

Powell’s lawyer, Brandon Fox said the investigation mostly focused on allegations made by Verge Center for the Arts — the nonprofit Powell founded, and not anything to do with Powell’s involvement in the “cryptocurrency arena.” This was reportedly also confirmed by a Kraken spokesperson.

Fox also said that Powell “did nothing wrong.”

*An inside view of Verge Center for the Arts, which was founded by Powell. Source: Verge Center for the Arts*

Cointelegraph reached out to Jesse Powell for comment but did not receive an immediate response.

Powell reportedly founded the Sacramento-based arts group in 2007. However, his LinkedIn states that he’s worked as the founder and board member since April 2010.

Kraken remains the second largest United States-based cryptocurrency exchange behind Coinbase, according to CoinMarketCap.

Kraken was hit with enforcement action by the U.S. Securities Exchange Commission in February for failing to register the offer and sale of their staking service program.

The firm reached a settlement with the securities regulator, paying a lofty $30 million fine.

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Multiple US state regulators allege AI trading DApp is a Ponzi scheme

April 5, 2023 Coin Telegraph

Alabama

The scheme allegedly claimed it could generate returns of up to 2.2% a day by leveraging AI to trade more often and with higher profits than a person could.

Securities regulators from Montana, Texas, and Alabama have jointly filed enforcement actions against cryptocurrency trading platform YieldTrust.ai, alleging it is “perpetrating a Ponzi scheme.”

According to April 4 statements from the Montanan, Texan and Alabamian regulators, YieldTrust.ai and its Romanian owner, Stefan Ciopraga, claimed the decentralized application (DApp) called “YieldBot” is “powered by cutting-edge artificial intelligence” and is “capable of executing 70 times more trades with 25 times higher profits than any human trader could.”

The regulators alleged YieldTrust didn’t provide “any proof” to investors that the artificial intelligence (AI)-powered bot exists, “let alone that it is performing at the level YieldTrust.ai claims.”

Montana’s regulator stated in its cease and desist order that YieldBot was developed for Binance’s BNB Smart Chain and could interface with staking programs to generate returns for new investors of up to 2.2% per day through:

“[Analyzing] the crypto markets and – in milliseconds – make its own trading decisions, autonomously choosing from hundreds of trading methods and chaining them together to create unique strategies – achieving an exhilarating performance.”

However, the state regulators claimed an independent firm that conducted an audit of YieldBot’s smart contract found it was “dangerous,” as “the deploying team retained sufficient control to block users from withdrawing their assets.”

As noted by the regulator's statements and highlighted in an April 4 tweet from Montana’s securities commissioner, Troy Downing, scammers are apparently capitalizing on the hype surrounding AI “by developing high-tech ploys to deceive investors.”

Artificial intelligence may be an exciting concept, but scammers are attempting to capitalize on the excitement by developing high-tech ploys to deceive investors.#AI #SecuritiesFraud #InvestmentScam #MTNews https://t.co/FMSqLJW40E
— Commissioner Troy Downing (@DowningCSIMT) April 4, 2023

An order from Montana’s regulator demands YieldTrust.ai cease and desist all activity in the state and seeks a total of $100,000 in fines while the Texas State Securities Board issued multiple cease and desist orders.

After the audit of its smart contract was published, YieldTrust.ai allegedly announced it would cease operations, which appears to be verified by the lack of trading activity according to DappRadar data.

*Activity on YieldTrust.ai’s dApp from Feb. 1 to April 5. Source:* *DappRadar*

However, the regulator’s orders accuse YieldTrust.ai of “raising capital from the public to cover withdrawals from prior investors,” which, alongside the promise of high returns, are the characteristics of a Ponzi scheme.

YieldTrust.ai’s website has been taken offline and its Twitter account deleted. Cointelegraph was unable to contact YieldTrust.ai or Ciopraga for comment.

AI has become far more prominent, accessible and surrounded by hype since the release of the ChatGPT AI chatbot on Nov. 30 by AI research company OpenAI.

Despite its inaccuracy at times, ChatGPT has proved to be a powerful tool, with the latest version capable of passing the bar, acing SATs and even identifying exploits in smart contracts.

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enforcement action

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