Report: Federal Prosecutors in New York Probe Digital Currency Group and Subsidiary Genesis

January 7, 2023 Bitcoin.com

SEC Enforcement Remains Focused on Crypto — Chair Gensler Says He’s ‘Impressed’ With Enforcement Results

November 16, 2022 Bitcoin.com

US regulator touts to ‘aggressively police’ crypto in new report

October 21, 2022 Coin Telegraph

bitfinex

The Commodity Futures Trading Commission (CFTC) says 20% of its enforcement actions were aimed at the digital assets market in the 2022 fiscal year.

The U.S. commodities regulator certainly doesn’t want to look like it's going easy on crypto, revealing it was behind 18 separate enforcement actions targeting digital assets in the 2022 fiscal year.

In an Oct. 20 report from the Commodity Futures Trading Commission (CFTC), a total of 82 enforcement actions were filed in 2022’s fiscal year, imposing $2.5 billion in “restitution, disgorgement and civil monetary penalties either through settlement or litigation.”

The CFTC said that 20% of the enforcements were aimed at digital asset businesses, with chairman Rostin Behnam stating:

“This FY 2022 enforcement report shows the CFTC continues to aggressively police new digital commodity asset markets with all of its available tools.”

One of the more recent CFTC enforcement actions that gained notoriety in the crypto world was a $250,000 penalty against bZeroX, its successor Ooki DAO, and its founders in September.

The action sparked fierce criticism from the community for going after the members of a decentralized autonomous organization (DAO), with CFTC commissioner Summer Mersinger labeling the move a "blatant ‘regulation by enforcement.’"

The CFTC also highlighted actions taken during the year against the operators of the Digitex Futures exchange for illegal futures offerings, manipulation of its native token DGTX, and failure to provide a customer identification and anti-money laundering program.

It also took action against Bitfinex for engaging in “illegal, off-exchange retail commodity transactions in digital assets with U.S. persons,” and operating without registering as a futures commission merchant (FCM).

Meanwhile, the report pointed to action against Tether Holdings for making “untrue or misleading statements” and “omissions of material” in connection with its USDT stablecoin Tether was ordered to pay a civil monetary penalty of $41 million.

It also targeted South African Pool Operator and CEO Cornelius Johannes Steynberg with fraud charges for accepting around 29,400 BTC worth over $1.7 billion from approximately 23,000 non-eligible contract participants from the United States in late June.

The crypto industry had previously favored the CFTC for being easier on digital asset regulation, however, chairman Rostin Behnam has vowed to come down hard on the asset class saying: “‘Don’t expect a free pass,” earlier this month.

Both the CFTC and Securities and Exchange Commission (SEC) are currently wrangling for control of crypto asset regulation.

A bill submitted by senators Cynthia Lummis and Kirsten Gillibrand in June propose that the CFTC oversees crypto regulation which would be much better for the industry as the assets would be considered commodities rather than securities which have much more stringent rules.

However, Congress is unlikely to turn its attention to digital asset regulation until sometime next year as confirmed by Congressman Jim Himes this week.

Regulatory uncertainty creates rash of ‘novel’ lawsuits: Legal experts

June 29, 2022 Coin Telegraph

Choate Hall & Stewart LLP

“Litigation and enforcement activity is likely to accelerate in the current regulatory climate, perhaps in unpredictable ways,” says lawyers from Choate Hall & Stewart LLP.

Regulatory uncertainty surrounding crypto has created a “fertile environment” for crypto-related litigation and enforcement to grow, according to lawyers from Choate Hall & Stewart LLP.

In an analysis piece published on Law360 on June 28, lawyers from Choate Hall & Stewart LLP, including Mike Gass, Diana Lloyd and Alex Bevans, noted increasing evidence that “novel applications of existing laws” are being used to litigate against users and investors of cryptocurrency, predicting this trend to only accelerate over time:

“High market capitalization, alongside widely discussed regulatory uncertainty, has created fertile ground for litigation and enforcement to grow.”

The lawyers cited several cases as examples, including the prosecution of a U.S. citizen for violating sanctions using crypto, several lawsuits brought on by the SEC in recent years, as well a rising number of class action lawsuits and private litigation.

“Cryptocurrency trading platforms and those trading in and using cryptocurrency must recognize that litigation and enforcement activity is likely to accelerate in the current regulatory climate, perhaps in unpredictable ways,” the authors said.

In May, the United States Department of Justice (DOJ) issued its first criminal complaint against an unnamed U.S. citizen through the U.S. District Court for the District of Columbia for using crypto to violate sanctions under the International Emergency Economic Powers Act (IEEPA).

Lawyers from the firm, including Mike Gass, co-chair of the complex trial and appellate practice at the firm, said that this illustrates an “increased willingness of government agencies to pursue criminal charges against those violating old laws with new forms of currency.”

“If this case is any indication, this trend is likely to accelerate.”

Other litigation efforts noted by the lawyers include the Securities and Exchange Commission (SEC) lawsuits against XRP creator Ripple Labs Inc in 2020 and decentralized content sharing platform LBRY in 2021, both for allegedly offering unregistered securities in the form of digital tokens.

More recently, crypto lending platform BlockFi was issued a $100 million fine in February for failing to register its retail crypto lending product, they noted.

The lawyers said the LBRY case in particular “demonstrates the SEC's willingness to target smaller projects like LBRY as much as large projects like Ripple."

The lawyers also noted research that found that the number of crypto enforcement actions between 2019-2021 was greater than every year to that point combined.

Looking ahead, the lawyers believe that the SEC and DOJ are poised to increase their enforcement efforts, and will “likely be willing to pursue novel theories.”

“Crypto-related private litigation also shows no sign of letting up. Increased regulatory certainty may help stem the litigation tide, but it is unclear whether this will happen anytime soon.”

Ontario Securities Commission Snuffs out Crypto Exchanges, Poloniex Targeted for Flouting Compliance

May 26, 2021 Bitcoin.com

Iran seems to be attempting to ban foreign-mined cryptocurrencies for payments

May 7, 2021 Coin Telegraph

Coin Telegraph

A difficult-to-enforce ban may actually be part of a larger sanctions-avoidance strategy.

In a broader effort to circumvent the effects of sanctions, Iran may be attempting one of the first instances of digital currency protectionism.

According to a Tweet from news outlet Iran International, The Central Bank of Iran announced a decision from the Cabinet on Wednesday decreeing that digital currencies traded in the country must have been mined, or “extracted” there as well, barring the exchange of digital assets mined abroad.

While many observers have pointed out that enforcement would be nearly impossible, blockchain lawyer and advisor Fatemeh Fannizadeh noted that the ban may be aimed primarily at banks and forex entities using crypto to pay for imports:

I don't think it will be enforced on an individual level. Exchange platforms can basically not operate. But instead of a blanket ban, it allows banks! and forex offices to use Iranian crypto for international transfers. Iran is not connected to the SWIFT network...
— Meh (@Fatalmeh) May 6, 2021

In late April, the Central Bank of Iran ratified regulations that will allow banks and other financial institutions use crypto to pay for imports. Under that framework, institutions can use crypto from state-licensed mining operations for purchases. This new regulation appears aimed at ensuring that only crypto mined from approved farms will be used for imports.

Since 2019, regulators have issued over a thousand licenses for crypto mining facilities, including a Turkish-run 6,000-rig farm.

The new laws may be part of a larger sanctions strategy years in the making. Iranian research institute Majlis Research Center has been calling on the country to use cryptocurrency to circumvent crippling economic sanctions as far back as 2018, where they wrote in one report that digital assets could be leveraged for international trade:

“According to experts, one way to avoid the adverse effects of the unjust sanctions is to use cryptocurrencies for foreign trade.”

Despite these new efforts at creating a state-sanction crypto import payments pipeline, Iran’s relationship with digital assets has been at times rocky over the last few months. In January, officials blamed widespread power outages on illegal crypto mining facilities, though experts said that decaying and long-ignored infrastructure was more likely to blame.

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