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Binance Bitcoin balance drops by 3.4K BTC within 24 hours of CFTC lawsuit

Binance’s Bitcoin balance was reduced by over 3,900 BTC in the past week, of which 3,400 BTC were pulled out in the last 24 hours alone.

Soon after the United States Commodity Futures Trading Commission (CFTC) sued crypto exchange Binance and its CEO Changpeng “CZ” Zhao for regulatory violations, the entrepreneur sought damage control measures while rejecting allegations of market manipulation. However, investors responded by pulling over 3,400 Bitcoin (BTC) from Binance within 24 hours of the announcement, anticipating market fluctuations.

“Binance.com does not trade for profit or “manipulate” the market under any circumstances,” stated CZ, responding to the CFTC’s allegations. However, episodes involving crypto entrepreneurs such as FTX’s Sam Bankman-Fried and Terraform Labs’ Do Kwon have shaken investor confidence in the crypto ecosystem.

Investors have started moving assets away from Binance to lessen the impact of a shutdown if it were to happen. As a result, Binance saw a reduction in its total Bitcoin balance while other exchanges registered an increase, as shown below.

Bitcoin balances on exchanges overview. Source: coinglass.com

Binance’s Bitcoin balance was reduced by over 3,900 BTC in the past week, of which 3,400 BTC were pulled out in the last 24 hours alone.

Bitcoin balance on Binance. Source: coinglass.com

Competing exchanges, including Coinbase, Bitfinex and Gemini, recorded an increase in BTC reserves during the 24-hour timeframe.

Bitcoin balance on crypto exchanges. Source: coinglass.com

It is important to note that Bitcoin balances on crypto exchanges have declined since March 20. Over the last seven days, nearly 27,000 BTC left major exchanges.

Related: 7 details in the CFTC lawsuit against Binance you may have missed

Alongside the CFTC’s lawsuit against Binance and CZ, a federal judge temporarily halted a proposed deal between Voyager and Binance.US.

Judge Jennifer Rearden approved the United States Department of Justice’s emergency motion. Source: Court Listener

As Cointelegraph reported, Judge Jennifer Rearden of the U.S. District Court for the Southern District of New York granted the emergency stay on March 27, halting the potential deal between Voyager and Binance.US until a decision is made on the Department of Justice’s appeal against the bankruptcy plan.

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A friend in need: How the crypto industry reacts to recent bank bailouts

With a focus on sovereignty and creating an alternative to traditional financial systems, how is the crypto community reacting to government intervention in the recent bank crisis?

In its early days, crypto enthusiasm was fuelled by the promise to cut the rigged banking system out of the people’s basic need to exchange goods and funds. To some degree, it still is. But as digital assets become more and more intertwined with a larger financial market, this tension gradually fades away. 

The recent wave of partial bailouts of failed institutions such as Silvergate Bank, Signature Bank and Silicon Valley Bank (SVB) has not raised any concerns among the crypto community. Moreover, the United States Federal Reserve System came as a savior, at least in regard to USD Coin (USDC) issuer Circle, which kept a significant portion of its reserves in Signature Bank and SVB.

If the Fed decided to let the banks fail, we would probably have witnessed another sharp dip in the crypto market and not the optimistic resurgence of the last two weeks.

Does this mean that the crypto industry has come to a point where it is highly dependent on traditional banking and cannot contrapose itself as an alternative anymore? Is that kind of interconnectedness desirable for digital assets or should the industry create some distance from traditional finance (TradFi)?

Was it a bailout?

Technically, both SVB and Signature were bailed out, but economists are highlighting the major difference between the current solution and the U.S. government’s actions during the economic crisis in 2008.

“During the [2008] financial crisis, there were investors and owners of systemic large banks that were bailed out,” as Treasury Secretary Janet Yellen explained, but this time, it was depositors who got their back covered by the Deposit Insurance Fund, supplied by the banks, not taxpayers.

The Federal Deposit Insurance Corporation (FDIC) has effectively guaranteed all deposits at both banks beyond its normal limit of $250,000 per account. Still, it was only due to the FDIC’s support that Circle was able to withdraw the whole $3.3 billion deposit from the SVB and save USDC from further depegging.

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Still, isn’t there something odd about an industry with a strong anti-establishment and even anti-Fed background taking federal backing for granted, if not outright advocating for it?

Maybe not, as no speaker Cointelegraph has reached out to sees any ethical contradictions here. There’s an overlap between the crypto community and the startup community, so there’s naturally been a lot of support for the bank bailouts, Daniel Chong, CEO and co-founder at Harpie, explained:

“I personally don’t see a dissonance here: You can be a TradFi skeptic and still be in favor of startups having a way to continue operations and make payroll. We don’t need thousands of employees missing paychecks to prove that DeFi is a viable financial system.”

Although the DNA of the crypto community would oppose a bailout, Tony Petrov, chief legal officer at risk management platform Sumsub, told Cointelegraph that, sometimes, it is very important to at least attempt to save valuable institutions on the border of crypto and fiat — especially given the obvious scarcity of such institutions.

Then-Senator Barack Obama argues in favor of the Emergency Economic Stabilization Act of 2008 before the Senate in December of that year.

Of course, bailouts have gained a negative connotation not only within the crypto community. In some cases, a bailout looks like billionaire executives getting taxpayer-funded handouts in exchange for their own poor decisions. The philosophy of “too big to fail” is helping utterly ineffective and ill-governed banks to stay where they are, even if they don’t provide real value to the society where they exist. But, Petrov continued, it’s hard to deny that what happened to SVB, Silvergate and Signature was not a clear example of mismanagement solely on the side of the banks’ executives:

“After all, they invested in governmental notes, not in some shady digital coins, the value of which can hardly be predictable even within one day. Taking this topic very softly, it can be claimed that a part of the blame for the consequences should be borne by the U.S. government.”

Is crypto really to blame?

Although the panic among crypto investors following the FTX debacle played a role in depleting the bank’s crypto deposits, Signature’s problems were much more deep-rooted, Ahmed Ismail, CEO of liquidity aggregator Fluid, told Cointelegraph.

The bank served a tightly knit set of customers, including a group of startups and their investors. Ismail said that it aimed for rapid growth without adequately diversifying its business or clientele:

“Truth be told, businesses dealing with such tightly knit customer circles always face the risk of experiencing a domino effect.”

Petrov also doesn’t buy into the hypothesis that crypto is to blame for the banks’ collapse. Speaking to Cointelegraph, he highlighted the common problem of Silvergate and SVB, which was, ironically, their faith in U.S. Treasurys. By raising interest rates, the Federal Reserve naturally dropped their value, and the simultaneous turmoil at SVB provoked a bank run.

Some posit that it is the crypto industry itself whose financial stability is being undermined by interconnectedness with the banking system: more specifically, by the extreme limitations of that connection. The crypto market has been backed into a corner of the traditional banking system, Chong claimed.

Even before the collapse of Signature, SVB and Silvergate, there were only a handful of entities willing to bank crypto companies. It’s impossible for a crypto company to diversify its assets across many different institutions since there aren’t 20 banks that will have it:

“The idea that ‘crypto is too risky to bank’ has become a self-fulfilling prophecy. The few institutions willing to bank with crypto companies face very high demand from a market that has nowhere else to go. They become ‘crypto banks’ by default, and all the risks inherent in these fast-moving markets end up concentrated in a few institutions.”

What is to be done?

What can the crypto industry do to escape the sudden dangers of relying upon banks? Not much. The paradox is obvious: Cryptocurrencies won’t need banks if they somehow become the major means of exchange and accumulation, but the only way for them to get to this utopian point lies through their interchangeability with fiat money. To Petrov, because of that exchangeability demand, building a fence against TradFi looks like a counterintuitive idea.

An independent world of crypto remains a great libertarian promise, but nothing more, he explained, “In the background of the meltdown of three huge crypto-friendly banks, we saw the surge of BTC for more than $8,000 in 10 days. This is evidence that there is no distance between fiat and crypto: They communicate as the venous circuit and the arterial circuit in a human organism.”

Oliver Chapman, CEO of supply chain specialists OCI, also doesn’t see how crypto can escape TradFi. All in all, it is TradFi that has stepped in to support a bank that was crucial for the crypto industry, he told Cointelegraph. 

The crypto industry may or may not distance itself from TradFi, but if it does, it will either be tiny and unimportant or pose a systemic risk, Chapman said, stating, “Finance is either important or we return to the caves. And whether that finance is traditional, crypto or a combination, when things go wrong, a systematic crisis that could precipitate a disastrous global recession remains a danger.”

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The crypto economy can continue improving its performance without directly conflicting with banks and similar traditional finance institutions, Ismail stated. It has already made finance more accessible and cost-optimized by cutting out cost-bearing intermediaries. Moreover, using cryptography and smart contracts in decentralized finance has enhanced the system’s security without compromising efficiency. But there’s nothing inevitable about the conflict between the two systems, Ismail said:

“I don’t see why traditional finance and the crypto economy should be pitted against each other. Both can coexist without the cost of the other.”

Chong doesn’t take this conviction for granted. In his opinion, we’re going to see a lot of value moving on-chain exactly as a result of such collapses within the traditional finance system. The question is whether the crypto market, with its own wave of devastating collapses in 2022, is ready to serve as a safe alternative to banks. In order to be the alternative to TradFi, the crypto community needs to come up with some standards for how to manage corporate assets. 

Chong added, “In the current environment, you need to be a crypto-native engineer to have any chance of keeping your blockchain assets secure. That’s not scalable.”

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Crypto reform coming to US in 2023, says former White House chief of staff

SVB’s epic failure occurred “at a bank that happened to deal with crypto customers” but “was not a crypto-induced problem,” said Mick Mulvaney.

In the United States, crypto reform legislation isn’t the province of a single political party, and that’s why a former U.S. Congressman, who also played a prominent role in the Trump administration, believes that passage of a federal “digital assets” law this year is a real possibility.

“Democrats aren’t all on one side; Republicans aren’t all on the other side,” said Mick Mulvaney — budget director and later acting White House chief of staff from January 2019 to March 2020 — further explaining:

“I do think in this Congress, which has got functionally about 14–16 months left before it sort of shuts down before the next election cycle, you will get a meaningful piece of legislation on blockchain/crypto — what we’re referring to collectively as digital assets.”

Mulvaney’s government resume is long and varied. In addition to six years in the U.S. House of Representatives, he was also director of the Office of Management and Budget from February 2017 until March 2020, as well as special U.S. envoy to Northern Ireland — a post from which he resigned on Jan. 7, 2021 — the day after protesters inspired by President Donald Trump attacked the U.S. Capitol Building. Mulvaney is now a strategic adviser to Astra Protocol, a Switzerland-based Web3 Know Your Customer (KYC) platform.

Centralized versus decentralized finance

Mulvaney has an interest in Bitcoin (BTC) and blockchain technology going back nearly 10 years. In 2016, he co-founded the Congressional Blockchain Caucus. Today, he says decentralized finance (DeFi) protocols have some key advantages over their centralized counterparts. Moreover, it’s now possible to integrate key compliance processes like KYC and Anti-Money Laundering into DeFi platforms — something that would reassure regulators.

“There’s a weakness in the system when it comes to the centralized and a strength that comes from decentralized finance,” he said. Much of the fraud commonly associated with the crypto space can be attributed to centralized entities, from Mt. Gox to FTX. DeFi, in his view, brings additional layers of transparency that make engaging in fraudulent activities more difficult, “and over the past decade has proved that it is the better system [...] Even regulators are beginning to understand this,” he told Cointelegraph.

‘Regulators dropped the ball’

When speaking with one of the Trump administration’s leading financial managers, it would be hard not to ask about the current banking crisis. Silicon Valley Bank (SVB) was arguably ground zero in this upheaval, with some critics — most notably Senator Elizabeth Warren — criticizing the Trump administration for loosening banking regulations that might have averted SVB’s bankruptcy.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, enacted in response to the financial crisis of 2007–2008, introduced the idea of “stress testing” large U.S. banks deemed too big to fail. However, the testing threshold was revised in 2018, which meant SVB and Signature Bank (also troubled) were no longer considered “systemically important financial institutions” subject to stress testing. As Warren wrote in The New York Times:

“Had Congress and the Federal Reserve not rolled back the stricter oversight, S.V.B. and Signature would have been subject to stronger liquidity and capital requirements to withstand financial shocks.”

Is Warren correct that the previous presidential administration was at least partly to blame? “It would have happened anyway,” answered Mulvaney. “The changes in 2018 were relatively narrow in scope. Essentially, it took banks under $250 billion [in balance sheet assets] out from the very highest level of regulation.”

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Silicon Valley Bank was still subject to bank regulation, just not the very highest. Meanwhile, duration risk, marked by taking short-term deposits and investing them in long-term assets — arguably the key factor in SVB’s downfall — “is one of the simplest, most basic things that the SEC [Securities and Exchange Commission], the FDIC [Federal Deposit Insurance Corporation] and the Fed are supposed to look at,” said Mulvaney. “The very lowest levels of regulation should have caught this.”

“The regulators dropped the ball,” he stated, emphasizing that this was a management failure “at a bank that happened to deal with crypto customers. This was not a crypto-induced problem, and I think that’s important to note.”

Crypto has bipartisan support

Why is Mulvaney so optimistic about the prospects of federal crypto or blockchain legislation this year? Despite everything one hears about political polarization in Washington DC, especially in Congress, some issues remain “fairly bipartisan,” he explained. One is antipathy to China. Another is suspicion of Big Tech. But a third is “an interest in crypto and blockchain.”

Take the House Financial Services Committee, on which Mulvaney once served. Its Digital Assets Subcommittee is chaired by Republican French Hill, a crypto and blockchain supporter, but the subcommittee also includes crypto supporters on the minority (Democrat) side, including Ritchie Torres, who spoke with Cointelegraph earlier this year about the prospects for digital assets reform legislation.

Mulvaney’s official portrait. 

Bipartisanship extends to the U.S. Senate, too, where Republican Cynthia Lummis and Democrat Kirsten Gillibrand jointly introduced the Responsible Financial Innovation Act in 2022, which aims to create a regulatory framework for digital assets. Mulvaney explained:

“You have a group of people in both parties who just want to know more; they’re interested in the topic, they want to educate themselves.[...] That’s where we are right now with crypto and blockchain.”

Next generation of compliance

Astra Protocol, where Mulvaney now serves as a strategic adviser, bills itself as the next generation of compliance — a decentralized KYC Platform for Web3 that “brings the financial regulatory standards for 155+ countries and over 300 sanctions and watchlists to the crypto industry without sacrificing anonymization.” KYC is a process that many banks and businesses use to verify the identity, suitability and risks of potential customers.

But how can one ensure anonymity when trying to verify identities and conduct background checks?

“I think everyone has come to realize that there are different levels of it [anonymity],” said Mulvaney. “For example, I can tell you who I am. And once you know who I am, you can prove to me who you are so that we can deal with each other with a certain level of trust without telling the whole rest of the world who we are.”

Astra Protocol states that its “patented technology” calls upon experts from major global firms to verify a user’s credentials and perform KYC checks of prospective DeFi users. This enables DeFi protocols to adhere to data privacy regulations without accessing investors’ personally identifiable information. The idea is something like zero-knowledge proofs.

“Astra Protocol has no idea what transpired between a DeFi protocol and a regulatory delegate,” the project states. A DeFi project or exchange will be able to know that you are who you say you are and, importantly, that “you’re not on a sanctions list. You’re not a drug dealer. You’re not a child pornographer, you’re not a bot,” added Mulvaney.

Coming to grips with new technology

So far, the Biden administration hasn’t identified itself as a great friend of cryptocurrencies and blockchain technology. Were things different in the previous administration? What, if anything, was being said about crypto inside the White House?

“It was pretty much what you would see in the general public at the time,” answered Mulvaney: “‘We’re not really sure what it is. It’s a new piece of technology [...] What are the opportunities,’” and so on.

He recalled conversations on the subject with then-Comptroller of the Currency Joseph Otting, “trying to figure it out.” For instance, which agency should take the lead in regulating digital assets: The Commodity Futures Trading Commission (CFTC), the SEC or a banking agency? “It was unsettled,” recalled Mulvaney. “It was unknown because it was so new.” But that was appropriate for the time. “You don’t want ironclad positions,” especially when adjusting to new technology.

Anyone but Gensler

“I hope that’s what the current [Biden] administration is doing,” i.e., engaging in open-minded discussion. “I get the impression that [SEC chairman Gary] Gensler is sort of dominating the debate. He’s clearly a [crypto] skeptic. I don’t think that’s particularly healthy. I don’t want my regulator taking sides.”

Which government department or commission should take point on crypto? Mulvaney leans toward the CFTC, which would regulate crypto more like a commodity, not a security. Many in the crypto community would probably favor CFTC primacy too. He added:

“I just don’t think Gary Gensler has the mindset to do that [act objectively]. So right now, put me down as supporting anybody other than the SEC because Gensler is still there.”

Remaining obstacles

What does the former acting White House chief of staff think about crypto and blockchain’s long-term prospects? Does the technology have an Achilles heel that will hinder global adoption?

It will not fail because it is (allegedly) being misused by criminals and terrorists, he stated. Lawmakers are slowly learning something that law-enforcement agencies have known for a while. “Crypto is actually a lot better for law enforcement than cash — because while it’s anonymous, it’s still traceable,” said Mulvaney.

The biggest resistance will likely be from “countries that are worried about their own currency being replaced.” He doesn’t include the U.S. in this group, but European Union countries might be candidates. “The Europeans may worry that eventually the euro may be replaced by a digital currency because the euro is sort of held together with needle and thread.”

What about the International Monetary Fund (IMF), which has warned its 190 member countries against making Bitcoin and other private money “official currency?” Is that a responsible position for the world’s lender of last resort?

“No, I think they’re way out of their lane,” answered Mulvaney. The IMF was set up to do a certain thing, “which is to lend money to countries to help them to develop.” Whatever a country wants to adopt as its official currency “is really not the IMF’s business.”

He believes in the “competition of ideas” and “if you get a certain country that wants to adopt Bitcoin or any particular cryptocurrency, I think that’s fine. It’s helpful and could spur more innovation.”

Bitcoin and gold

Mulvaney’s interest in Bitcoin goes back almost a decade and came about “by accident.” He was attending a conference on the gold standard, and “there was a young lady there, talking about something I’d never heard about before, which was Bitcoin, and explaining how it was fixed in total number,” and so on.

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“I remember turning to her at the end of the conference and saying, you know, it’s not exactly the same as the gold standard, but it’s got some interesting parallels. I’d like to know more about it.” They spent some time discussing the new technology, its history, how it worked, and where and how it was being adopted. “I was just fascinated.”

What specifically drew him to Bitcoin? “The value is set by technology.” Later on, as head of the Office of Management and Budget, he saw firsthand “what we’ve done to the currency. I’m very much aware of how much of it [U.S. dollars] we’ve printed over the course of the past ten years.”

“That scares me to death. So to have something that the government cannot, at least in theory, change the value of unilaterally by fiat — that appealed to me, and I think it appeals to a lot of people.”

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Coinbase could face SEC enforcement action for ‘potential violations of securities law’

The crypto exchange claimed that none of its listed assets were considered securities, and any potential targeting of its wallet was based on a “misunderstanding" by SEC officials.

Crypto exchange Coinbase said it received a 'Wells Notice' from the United States Securities and Exchange Commission recommending the regulator take enforcement action.

In a March 22 blog post, Coinbase said the “legal threat” could potentially target the exchange’s staking program Coinbase Earn, listed digital assets, its wallet, or Coinbase Prime services. A Wells Notice letter typically warns a company that the SEC may follow with an enforcement action, but Coinbase provided no details other than “possible violations of securities laws.”

“We asked the SEC specifically to identify which assets on our platforms they believe may be securities, and they declined to do so,” said Coinbase chief legal officer Paul Grewal. “Today’s Wells notice also comes after Coinbase provided multiple proposals to the SEC about registration over the course of months, all of which the SEC ultimately refused to respond to.”

The crypto exchange said its products and services would “continue to operate as usual” amid the investigation. Grewal pushed back against the approach often cited by SEC chair Gary Gensler — i.e. “come in and talk to us” — claiming that Coinbase met with SEC representatives “more than 30 times over nine months,” but largely did not receive feedback on its proposals.

“At no point in this investigation has the SEC told us a single specific concern about a single asset on our platform. To move to a Wells notice now, is unusual to say the least.”

Related: Coinbase staking ‘fundamentally different’ to Kraken’s — chief lawyer

Coinbase submitted a petition to the SEC on March 20 in an effort to explain to the regulator staking might not necessarily be universally considered a security. The exchange claimed that none of its listed assets were considered securities under the regulator’s purview, and any potential targeting of its wallet was based on a “misunderstanding of crypto products, assets and services” by the SEC.

The SEC had previously announced a settlement with Kraken in which the cryptocurrency exchange agreed to stop its staking program for U.S. users. News of the Wells Notice also followed the SEC announcing a lawsuit against Justin Sun and several celebrities over the offering, sale, and touting of Tron (TRX) and BitTorrent (BTT).

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SEC files lawsuit against Tron’s Justin Sun and celebrities over crypto securities offering

Among the celebrities who settled with the SEC for their alleged role in promoting TRX and BTT were actress Lindsay Lohan, YouTuber Jake Paul, and singer Akon.

The United States Securities and Exchange Commission, or SEC, has called for a jury trial against Tron founder Justin Sun for the “orchestration of the unregistered offer and sale, manipulative trading, and unlawful touting of crypto asset securities.”

In a March 22 filing in U.S. District Court for the Southern District of New York, the SEC named Sun, the Tron Foundation, the BitTorrent Foundation, and Rainberry over the offer and sale of Tron (TRX) and BitTorrent (BTT), alleging the tokens were securities. The financial regulator further alleged Sun engaged in “manipulative wash trading,” driving drive public interest in the two tokens by enlisting the help of celebrities.

Among the celebrities promoting TRX and BTT were American rapper DeAndre Cortez Way, also known as Soulja Boy, Austin Mahone, actress Lindsay Lohan, YouTuber Jake Paul, and singer Aliaune Thiam, also known as Akon. Akon was also behind projects to create a ‘crypto city’ in Senegal and Uganda.

“Although the celebrities were paid to promote TRX and BTT, their touts on social media did not disclose that they had been paid or the amounts of their payments,” said the SEC complaint. “Thus, the public was misled into believing that these celebrities had unbiased interest in TRX and BTT, and were not merely paid spokespersons.”

According to the SEC, Sun’s actions in the offer and sale of TRX and BTT violated aspects of the Securities Act. The regulator alleged the Tron founder was responsible for more than 600,000 wash trades of TRX from April 2018 to February 2019, which led to Sun selling more than $31 million worth of the token.

“While we’re neutral about the technologies at issue, we’re anything but neutral when it comes to investor protection,” said SEC enforcement director Gurbir Grewal. “As alleged in the complaint, Sun and others used an age-old playbook to mislead and harm investors by first offering securities without complying with registration and disclosure requirements and then manipulating the market for those very securities.”

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With the exception of Mahone and Soulja Boy, the other celebrities named in the case have settled with the SEC, agreeing to pay more than $400,000 in disgorgement, interest, and penalties. The U.S. regulator said it planned to “permanently prohibit” Sun from acting as an officer or director of any firm offering crypto securities.

In October 2022, the SEC announced it had reached a $1.2-million settlement with Kim Kardashian for touting EthereumMax (EMAX) tokens on her social media accounts. Following a similar settlement with former NBA player Paul Pierce in February, SEC chair Gary Gensler warned celebrities not to “lie to investors when you tout a security.”

Magazine: SEC sues Do Kwon, Paxos ready to litigate, SBF’s VPN

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Celsius custody account holders can receive 72.5% of their crypto, says bankruptcy judge

Should they opt in to the deal, Celsius customers cannot “pursue any litigation, including seeking relief from the automatic stay, turnover, or other claims or causes of action.”

A bankruptcy judge overseeing the bankruptcy case for crypto lending platform Celsius Network has approved a settlement plan allowing custody account holders to get back 72.5% of their crypto holdings.

In a March 21 hearing, United States Bankruptcy Judge Martin Glenn signed off on an agreement allowing Celsius custody account holders the right to receive 72.5% of their crypto claims provided they approve of the settlement. Under the agreement, the claimants cannot “pursue any litigation, including seeking relief from the automatic stay, turnover, or other claims or causes of action” and digital assets not part of the settlement will be controlled by the Celsius debtors.

The settlement between the committee of unsecured creditors, Celsius debtors, and an ad hoc group of account holders was the latest development in the lending platform’s case in U.S. Bankruptcy Court for the Southern District of New York since filing for Chapter 11 in July 2022. The defunct platform announced in February that NovaWulf Digital Management would act as a sponsor for its restructuring plan, in which it was suggested that more than 85% of Celsius customers would recover roughly 70% of their crypto.

Judge Glenn ruled in January that more than $4 billion in funds from Celsius’ interest-bearing Earn program belonged to the lending platform. However, a December ruling ordered roughly $44 million in crypto to be returned to Celsius customers, and a February decision from the judge authorized Celsius debtors to sell $7.4 million worth of Bitmain coupons if needed.

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Bankruptcy proceedings for major crypto firms amid the 2022 market crash are ongoing across courts in the United States, now the backdrop for bank failures including Signature, Silicon Valley, and Silvergate. On March 17, the debtors in crypto exchange FTX’s bankruptcy case reported a roughly $7-billion shortfall between scheduled assets and claims.

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Texas lawmaker introduces resolution to protect Bitcoin miners and HODLers

The Lone Star State is already home to many crypto and blockchain firms as well as miners taking advantage of the regulatory-friendly environment.

Cody Harris, member of the Texas House of Representatives, has introduced a resolution aiming to have the legislature say the “Bitcoin economy is welcome” in the state.

In a resolution released on March 21, Harris encouraged Texas lawmakers to “express support for protecting individuals who code or develop on the Bitcoin network” as well as miners and Bitcoiners operating in the Lone Star State. The state representative added that Texas’ constitutional rights concerning “all unreasonable seizures or searches” should extend to attempts to go over residents’ digital asset holdings.

“Individuals who mine Bitcoin in Texas will never be inhibited by any law or resolution that restricts the practice of securing the Bitcoin network for the safety of the virtual currency,” said the resolution. “All those in the broader community who choose to own Bitcoin as a manner of storing their wealth and transacting peer-to-peer with other law-abiding Texas citizens shall always feel free and safe in their ownership and use of Bitcoin.”

House Concurrent Resolution 89, if adopted, would largely not apply to Texas’ laws and regulations, but rather express a certain sentiment among lawmakers. The resolution cited the Chinese government’s crackdown on crypto miners, a move which drove many firms to Texas. Riot Platforms, Core Scientific, and White Rock Management are among some of the firms to set up operations in the Lone Star State.

Under the state’s commercial laws, cryptocurrencies are recognized as part of an amendment to Texas’ Uniform Commercial Code. However, some lawmakers at the federal level have criticized Texas’ seemingly loose regulatory regime for the potential environmental impact caused by the energy consumption of mining firms.

Related: Bitcoin mining advocate is going state-to-state to educate US lawmakers

Texas Governor Greg Abbott, reelected to another four-year term in November 2022, has previously referred to himself as “crypto law proposal supporter” in the state. According to Florida Governor Ron DeSantis, Texas was considering a ban on central bank digital currencies both foreign and domestic following a similar initiative announced by his office on March 20.

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FTX debtors file lawsuit against exchange’s Bahamian arm on ownership of property

The lawsuit claimed FTX Digital Markets was an "economic nullity" within the FTX Group "created as a front to facilitate a conspiracy to defraud the Debtors’ customers".

The legal teams representing Alameda Research, FTX US, and FTX Trading have filed a complaint against the Bahamas-based FTX Digital Markets, claiming the company was a “fraudulent enterprise” used as a shell entity to obfuscate the question of the firm's ownership.

In a March 19 filing with the United States Bankruptcy Court for the District of Delaware, FTX debtors said FTX Digital Markets, or FTX DM, as well as the joint provisional liquidators (JPLs) had claimed the Bahamian arm was the “constructive owner” of FTX.com’s fiat and crypto assets as well as other intellectual property. According to the complaint, these “baseless claims” by FTX DM “will harm FTX.com customers and all other creditors of the FTX Debtors” as the company continues with bankruptcy proceedings in the United States.

“The JPLs’ claim to ownership of FTX.com’s property is based largely on constructive, equitable, and other non-documentary arguments that depend upon the false premise that FTX DM was the center of the FTX Group,” said the filing. “Nothing could be further from the truth. FTX DM was no more than a short-lived provider of limited ‘match-making’ services for customer-to-customer transactions, on the cryptocurrency exchange built, owned, and operated by Debtor FTX Trading, its immediate corporate parent.”

The complaint alleged:

“FTX DM was an economic nullity within the FTX Group. FTX DM was a legal nullity as well. The peculiar history of FTX DM is a classic example of abuse of the corporate form. It was created as a front to facilitate a conspiracy to defraud the Debtors’ customers.”

As part of the court filing, the debtors sought a ruling which would assert that FTX DM had “ownership interest” in the property at the center of the bankruptcy case. In addition, the legal team cited former FTX CEO Sam Bankman-Fried’s criminal and civil charges in the U.S., claiming he had connections with Bahamian authorities aimed at minimizing his “criminal and civil exposure should the massive fraud be discovered”.

FTX Group filed for bankruptcy in the U.S. on Nov. 11, one day after the Securities Commission of The Bahamas, froze FTX DM’s assets and suspended the firm’s registration. The country’s supreme court later approved the appointments of PricewaterhouseCoopers’ Kevin Cambridge and Peter Greaves to act as provisional liquidators for the FTX DM case.

Related: FTX liquidators report exchange held $2.4M ‘fleet of vehicles’ in the Bahamas

Bankman-Fried has pled not guilty to criminal charges in the U.S., while civil cases brought by federal financial regulators have been deferred until after SBF’s October trial. The former FTX CEO is currently free following a $250-million bail bond, but has frequently appeared in court to have the issue of bail revisited after it was discovered he used encrypted-messaging apps and a virtual private network.

Circle announces USDC launch for Cosmos via Noble network

Russian Parliament Votes on Bill Opening Door for Digital Ruble

Russian Parliament Votes on Bill Opening Door for Digital RubleRussian lawmakers have approved a draft law facilitating the implementation of the digital version of the national currency, the ruble. The legislation amends various other acts to introduce definitions and establish procedures related to the launch of the central bank digital currency. Russian State Duma Passes Digital Ruble Draft Law on First Reading The lower […]

Circle announces USDC launch for Cosmos via Noble network

Russian Crypto Industry Queries Government About Proposed Criminal Liability for Miners

Russian Crypto Industry Queries Government About Proposed Criminal Liability for MinersThe organization representing Russia’s crypto sector has asked the government in Moscow to clarify a proposal to introduce criminal liability for “gray” miners. The draft legislation seeks to punish those who fail to report their income to the state and share information about their digital assets. Crypto Companies in Russia Want to Take Part in […]

Circle announces USDC launch for Cosmos via Noble network