The top Democrat on the U.S. Senate Committee on Finance reportedly sent a letter informing Pantera Capital founder Dan Morehead that the crypto investor is facing a tax probe. The New York Times reports that in a letter, Senator Ron Wyden (D-OR) asks Morehad to give detailed information about a large investment profit that he […]
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Two U.S. senators have criticized the Department of Justice (DOJ)’s new interpretation of “money transmission,” which extends requirements to non-custodial software, citing concerns over its impact on crypto networks and financial innovation. “I’m concerned the DOJ’s interpretation would treat software developers as criminals for merely writing and publishing code used by others,” one of the […]
If the Justice Dept. prevails in the case against the cryptocurrency mixer, internet service providers and the post office may also be liable to transmitter requirements, they said.
United States Senators Cynthia Lummis and Ron Wyden have sent a letter to Attorney General Merrick Garland voicing their concern over the Justice Department’s (DOJ’) interpretation of money transmission licensing.
As the bipartisan authors indicate in a footnote, this interpretation is being applied in the case against Roman Storm, co-founder of crypto mixer Tornado Cash, who has been charged with operating an unlicensed money transmission operation and other serious crimes.
The Bank Secrecy Act and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) clearly define money transmission as the acceptance and transmission of currency and other forms of value. Non-custodial crypto service providers do not meet the established definition of money transmitters, and the DOJ is thus acting contrary to the Treasury, muddying policy enforcement, the senators said. In their words:
The SEC alleges that Prager Metis, an accounting firm engaged by bankrupt crypto exchange FTX in 2021, committed hundreds of violations related to auditor independence.
The United States Securities and Exchange Commission (SEC) has commenced legal proceedings against an accounting firm that had provided services to cryptocurrency exchange FTX prior to its bankruptcy declaration.
According to a September 29 statement, the SEC alleged that Prager Metis provided auditing services to its clients without maintaining the necessary independence, as it allegedly continued to offer accounting services. This practice is prohibited under the auditor independence framework.
To prevent conflicts of interest, accounting and audit tasks must be kept clearly separate. However, the SEC claims that these activities spanned over a period of approximately three years:
“As alleged in our complaint, over a period of nearly three years, Prager’s audits, reviews, and exams fell short of these fundamental principles. Our complaint is an important reminder that auditor independence is crucial to investor protection.”
While the statement doesn't explicitly mention FTX or any other clients, it does emphasize that there were allegedly "hundreds" of auditor independence violations throughout the three-year period.
Furthermore, a previous court filing pointed out that the FTX Group engaged Metis to audit FTX US and FTX at some point in 2021. Subsequently, FTX declared bankruptcy in November 2022.
The filing alleged that since former FTX CEO Sam Bankman-Fried publicly announced previous FTX audit results, Metis should have recognized that its work would be used by FTX to bolster public trust.
Related: FTX founder’s plea for temporary release should be denied, prosecution says
Concerns were previously reported about the material presented in FTX audit reports.
On Jan. 25, current FTX CEO John Ray told a bankruptcy court that he had “substantial concerns as to the information presented in these audited financial statements.”
Furthermore, Senators Elizabeth Warren and Ron Wyden raised concerns about Prager Metis' impartiality. They argued that it functioned as an advocate for the crypto industry.
Meanwhile, a law firm that provided services to FTX has come under scrutiny in recent times.
In a Sept. 21 court filing, plaintiffs allege that Fenwick & West should be held partially liable for FTX's collapse because it reportedly exceeded the norm when it came to its service offerings to the exchange.
However, Fenwick & West asserts that it cannot be held accountable for a client's misconduct as long as its actions remain within the bounds of the client's representation.
Magazine: Blockchain detectives: Mt. Gox collapse saw birth of Chainalysis
A new push for clarity on compliance from Senator Wyden aims to ensure economically distressed communities receive promised benefits from crypto mining companies.
Democratic Senator Ron Wyden is digging into the activities of crypto companies that take advantage of tax breaks provided by the Opportunity Zone program.
Senator Wyden’s main concern stems from the perception that some crypto companies may be taking advantage of what he called “a lack of safeguards and transparency measures” in the Opportunity Zone program.
The concerns were raised in letters he sent to two companies and one individual. He wants to understand how they are providing the required reciprocal support for low-income communities as stipulated by the rules of the program.
The Oregon Senator wrote letters to crypto miners Argo Blockchain and Redivider Blockchain and to Opportunity Zone specialist accountant from accounting firm HCVT Blake Christian.
The Opportunity Zone program was implemented in 2017 and designed to offer tax incentives to companies that create jobs and drive private investment into economically distressed communities.
In his letters to Argo and Redivider, Wyden requested information about the extent to which each company is engaged in the Opportunity Zone program and when they began their involvement with it. He also asks them to provide information about how many jobs their operations have created, which is one of the core Common Good contributions the program was made for.
Democratic Senator Ron Wyden is digging into the activities of crypto companies that take advantage of tax breaks provided by the Opportunity Zone program.
Last July, Argo Blockchain CEO Peter Wall specifically stated that the location of his company’s Dickens County, Texas, mining facility was chosen specifically because of its inclusion in the Opportunity Zone and abundance of renewable energy. At the time, he told Cointelegraph that he believed the facility could “reinvigorate the community through the creation of jobs,” which is one of the main concerns of Senator Wyden.
Wyden pulled into question Redivider’s true reason for operating within the Opportunity Zone based on a February 2022 interview with Huffpost in which CEO Tom Frazier said his company “100%” would have opened a mining facility with or without the tax break. Currently, only accredited investors can invest in Redivider’s $250 million Opportunity Zone fund.
To Christian, Senator Wyden requested information about what crypto mining projects in the Opportunity Zone his clients are currently invested in and how many jobs those companies are creating. In this letter, Wyden brought up the same Huffpost interview in which Christian said that his client investors were just “looking for a way to save some money because they’re about to get drilled on short term capital gains taxes.”
This insinuates that his clients may simply be looking for a way to offset short-term capital gains taxes by investing in mining operations that receive a tax break.
There has not yet been a response from Argo, Redivider, or Blake Christian.
Related: Crypto tax rules will reduce US budget deficit by $11B over ten years — White House
Wyden’s new push for clarity in the crypto industry could be signs of what Blockchain Association Executive Director Kristen Smith called a “bipartisan vibe shift on crypto” in the Senate in a March 26 tweet. Based on her analysis, there is now “progressive, libertarian, moderate, conservative, and liberal” support in both houses to take crypto seriously.
1/ If you’ve been paying attention the past few weeks, there’s a lot of evidence of a bipartisan vibe shift on crypto. Contrary to the media narrative that pushes a polarized split on the issues, here’s what I’ve seen…
— Kristin Smith (@KMSmithDC) March 25, 2022
Several U.S. lawmakers have spoken up against the cryptocurrency tax provision in the $1 trillion infrastructure bill. While the bill has been revised from last week’s version, the text is still “unworkable,” according to Senator Pat Toomey. “I plan to offer an amendment to fix it.” Other lawmakers, including Sen. Ron Wyden, Rep. Warren Davidson, […]
While Americans are still getting their third stimulus payments, discussions of tacking on a fourth round of direct payments to Joe Biden’s trillion-dollar infrastructure proposal have started trending. Just recently, a coalition led by Senate Finance Chair Ron Wyden and over a dozen Democratic leaders wrote a letter to President Biden asking to get “much-needed […]