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Crypto Lender Genesis Agrees to $21 Million SEC Fine, Funds to Await Bankruptcy Claim Settlements

Crypto Lender Genesis Agrees to  Million SEC Fine, Funds to Await Bankruptcy Claim SettlementsGenesis Global Capital has settled with the U.S. Securities and Exchange Commission (SEC) and agreed to pay a $21 million civil penalty. The SEC further disclosed that the regulator will “not receive any portion of the penalty until after payment of all other allowed claims by the bankruptcy court, including claims by retail investors in […]

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Cristiano Ronaldo sued for promoting Binance, unregistered securities

The soccer star’s Binance-tied NFTs allegedly promoted investments in unregistered securities on the crypto exchange.

Pro-soccer star Cristiano Ronaldo has been hit with a proposed class-action lawsuit from plaintiffs claiming they suffered losses from his promotion of the now-legally embroiled crypto exchange Binance.

A Nov. 27 filing to a Florida District Court claimed Ronaldo “promoted, assisted in, and/or actively participated in the offer and sale of unregistered securities in coordination with Binance.”

Binance entered a multi-year partnership with Ronaldo in mid-2022 to promote a series of his own nonfungible tokens (NFT), of which he has at least three collections tied to Binance.

The complaint claims users who signed up for Ronaldo’s NFTs were more likely to use Binance for other purposes — including investing in what they claimed were unregistered securities, including Binance’s BNB (BNB) and its crypto yield programs.

“Ronaldo’s promotions solicited or assisted Binance in soliciting investments in unregistered securities by encouraging his millions of followers, fans, and supporters to invest with the Binance platform.”

Ronaldo was a key part of Binance’s growing popularity due to his influence and reach, with 850 million followers across social media, says the complaint. They allege his NFT sales were “incredibly successful” at promoting the exchange, with a 500% increase in searches for “Binance” the week following the initial sale.

The suit alleges Ronaldo knew or should have known “about Binance selling unregistered crypto securities” as he has “investment experience and vast resources to obtain outside advisers.”

Related: Why Binance’s US plea deal could be positive for crypto adoption

The suit cited Securities and Exchange Commission guidance, which warned celebrities of the need to disclose payments received for promoting cryptocurrencies — which the complaint claims Ronaldo didn’t do.

The class action plaintiffs are Michael Sizemore, Mikey Vongdara and Gordon Lewis, who seek damages and funds to cover legal fees.

Meanwhile, Binance and founder Changpeng “CZ” Zhao is facing their own legal woes, pleading guilty and paying a $4.3 billion settlement to the United States on money laundering charges and running an unregistered money-transmitting business.

Zhao stepped down as CEO and faces up to 18 months in prison. Binance agreed to up to five years of Justice Department and Treasury compliance monitoring.

The SEC has sued Binance claiming — among other charges — that it sold unregistered securities and is reportedly investigating if Binance misappropriated customer funds.

Magazine: NFT Creator: DMT and a Hellboy outfit — How diewiththemostlikes got on SuperRare

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Coinbase disputes SEC’s crypto authority in final bid to toss regulator’s suit

Coinbase says the SEC’s definition of an investment contract isn’t in line with U.S. securities laws.

The United States Securities and Exchange Commission overstepped its authority when it classified Coinbase-listed cryptocurrencies as securities, the exchange has argued in its final bid to dismiss a lawsuit by the securities regulator.

In an Oct. 24 filing in a New York District Court, Coinbase chastised the SEC, claiming its definition for what qualifies as a security was too wide and contested that the cryptocurrencies the exchange lists are not under the regulator’s purview.

“The SEC’s authority is limited to securities transactions. Not every parting of capital with a hope of gain qualifies, and trades over Coinbase are only securities transactions if they involve ‘investment contracts.’ The transactions at issue here do not.”

Coinbase claimed the SEC has undertaken a “radical expansion of its own authority” and claimed jurisdiction “over essentially all investment activity,” which only Congress is entitled to do under the major questions doctrine.

In an Oct. 24 X post, Coinbase chief legal officer Paul Grewal echoed the claims, saying the SEC’s definitions have “no limiting function at all.”

Coinbase’s recent filing comes in response to the SEC’s Oct. 3 rebuttal where it asked the court to reject Coinbase’s dismissal motion, iterating its belief that various cryptocurrencies Coinbase listed were investment contracts under the Howey test.

Related: Securities regulators oppose special treatment of crypto in Coinbase case

The SEC sued Coinbase on June 6, claiming the exchange violated U.S. securities laws by listing several tokens it considers securities and not registering with the regulator.

Coinbase filed the motion for judgment on June 29 arguing the SEC was abusing its power and violating Coinbase’s due process rights.

Judge Katherine Polk Failla, who oversees the case, may ask Coinbase and the SEC to appear in court for oral arguments and then issue judgment on the case, dismiss it, or move for it to be heard in front of a jury.

Magazine: Hall of Flame: Crypto lawyer Irina Heaver on death threats, lawsuit predictions

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SEC lawsuits squeeze net worths of Coinbase and Binance CEOs

Brian Armstrong and CZ have seen respective net worth losses of 11.8% and 5.1% since the SEC sued Coinbase and Binance.

The net worths of Coinbase CEO Brian Armstrong and Binance CEO Changpeng Zhao (CZ) have suffered heavy blows due to recent lawsuits by the United States securities regulator.

Armstrong’s net worth was slashed by $289 million and Zhao’s by $1.33 billion within a span of 30 hours after the Securities Exchange Commission (SEC) sued Binance on June 5 and then Coinbase on June 6, according to data from the Bloomberg Billionaires Index and Forbes.

Zhao — the richest man in the crypto industry and the 54th richest person overall — had his net worth fall 5.1% to $26 billion this week.

The SEC’s lawsuit against Binance has contributed to Zhao falling two spots in Bloomberg's Billionaire Index. Source: Bloomberg

While the Binance CEO’s net worth has rebounded by over 106% this year, he is still down over 73% from his highest net worth of $96.9 billion in January 2022.

Zhao’s net worth has fallen from nearly $100 billion to $26 billion since January 2022. Source: Bloomberg

Armstrong is ranked as the 1,409th richest person by Forbes and took the bigger hit from the SEC’s latest action with his net worth falling 11.8% to $2.2 billion.

Change in net worth of Brian Armstrong since 2019. Source: Forbes

The Coinbase CEO has managed to reap the rewards of a market rebound this year, with a 61% increase in net worth over that time.

Despite the recent fall, Zhao and Armstrong have seen net worth increases well above the 9% year-to-date returns for others on Bloomberg's rich list.

Related: SEC files motion for restraining order against Binance

The SEC sued both Binance and Coinbase alleging the exchanges broke various securities rules, most notably for purportedly offering cryptocurrencies that the regulator considers to be unregistered securities.

Following the suites, a total of 67 cryptocurrencies have now been classed as securities by the SEC.

Binance and Coinbase have both confirmed they will “vigorously” defend the lawsuits laid against them.

Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?

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Crypto Exchange Bittrex Enters Chapter 11 Bankruptcy Protection Following SEC Lawsuit

Crypto Exchange Bittrex Enters Chapter 11 Bankruptcy Protection Following SEC LawsuitBittrex Inc., the U.S.-based cryptocurrency exchange, has filed for Chapter 11 bankruptcy protection in Delaware after being sued by the U.S. Securities and Exchange Commission for failing to register with the regulator. The exchange reportedly has over 100,000 creditors and liabilities ranging from $500 million to $1 billion. Bittrex Bankruptcy Filing Reveals Over 100,000 Creditors […]

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SEC Deems DASH, ALGO, and OMG ‘Unregistered Securities’ in Bittrex Lawsuit

SEC Deems DASH, ALGO, and OMG ‘Unregistered Securities’ in Bittrex LawsuitAccording to the recent complaint by the U.S. Securities and Exchange Commission (SEC) against Bittrex, the securities regulator insists that a few crypto asset tokens were offered and sold as investment contracts and are securities. The news follows the SEC’s designation of several crypto assets as securities, including the case against Terraform Labs, which insists […]

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Chia Network Files for IPO With the SEC, Eyes Public Listing

Chia Network Files for IPO With the SEC, Eyes Public ListingOn Friday, Chia Network Inc. announced that it had submitted a draft registration statement on Form S-1 to the U.S. Securities and Exchange Commission (SEC), requesting an initial public offering (IPO). The blockchain network company, founded by Bittorrent creator Bram Cohen, will initiate the IPO after the U.S. securities regulator approves the filing. Bittorrent Creator’s […]

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US officials appeal protections for Voyager execs in Binance.US sale

The DOJ disagrees with the legal protections given to those involved in the Voyager-Binance.US sale saying the court “improperly” exceeded its authority.

United States officials want to remove a provision included in bankrupt lender Voyager Digital’s plan to sell its digital assets to crypto exchange Binance.US that would prevent them from legally pursuing anyone involved with the sale. 

In a motion filed on March 14 in a New York Bankruptcy Court, U.S. Trustee William Harrington and other government attorneys argued: “the court improperly exceeded its statutory authority" in approving a the pardoning.

They requested the court's approval of the sale be delayed for two weeks to allow them to file an appeal.

The provision protects those involved in carrying out the sale from being held personally liable for its implementation, which the court approved on March 7 after it was found that 97% of Voyager customers favored the plan, according to a Feb. 28 filing.

While U.S. officials are not objecting to other parts of the proposed sale, they argue the provision would impede the government's “ability to enforce its police and regulatory powers.”

On March 6 the Securities and Exchange Commission (SEC) also objected to the plan, particularly the “extraordinary” and “highly improper” exculpation provision, arguing the repayment token would constitute an unregistered security offering and that Binance.US is operating an unregulated securities exchange.

Related: Binance.US, Alameda, Voyager Digital and the SEC — the ongoing court saga

A hearing on the issue is set to occur on March 15 at 2:00 pm local time.

Based on the latest estimates, the plan is expected to result in Voyager creditors recovering approximately 73% of the value of their funds.

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BlockFi execs, Gemini named in proposed lawsuit by a disgruntled investor

Gemini is accused of providing BlockFi with custodial services and misleading information to help BlockFi market its alleged unregistered securities.

An investor with nearly $2 million worth of funds frozen in bankrupt cryptocurrency lender BlockFi has filed a class action complaint against its founders, two directors and crypto exchange Gemini.

In a Feb. 28 complaint filed in the U.S. District Court for the District of New Jersey, investor Trey Greene accused the defendants of numerous wrongdoings, including violating the consumer fraud and exchange acts, breaching its fiduciary duties, as well as offering and selling unregistered securities.

“The unregistered securities sold by the BFI [BlockFi] Defendants on behalf of BlockFi were marketed and sold via a steady stream of misrepresentations and material omissions by Prince and Marquez over several years and through intermittent misrepresentations by Defendant Gemini.”

Greene claims he invested over $1.5 million in interest accounts which are alleged to be unregistered securities, and accrued over $400,000 in capital gains and earned interest which was re-invested.

He is currently unable to withdraw the funds, however, after BlockFi froze all withdrawals on Nov. 10, 2022 — the same day FTX filed for bankruptcy.

Filing of the proposed class action lawsuit. Source: Bloomberg Law

Greene further claims that he was induced into buying the “unregistered securities” by misrepresentations from BlockFi’s founders Zac Prince and Flori Marquez that the offerings were comparable to federally-insured bank products.

While the Securities and Exchange Commission (SEC) had charged BlockFi with “failing to register the offers and sales of its retail crypto lending product,” on Feb. 14, the filing claims the exchange had “admitted its [interest] accounts were unregistered securities” during the proceedings that resulted in a $50 million settlement on Feb. 15.

Related: FTX ex-director Nishad Singh pleads guilty to fraud charges

Tyler Winkevoss’ Gemini previously held custody over BlockFi’s clients’ crypto holdings through its custodial services, and is alleged to have misrepresented how accessible these funds were to customers.

“Gemini knew of, and acquiesced in, the materially false and misleading statements about the status the safety and accessibility of Plaintiff’s and class members’ assets at Gemini and about the risks of loss. Gemini supplied materially false and misleading information to BlockFi for use in marketing the BIAs [BlockFi interest accounts].”

Gemini is alleged to have breached the exchange act but was not included in the other allegations.

Greene is seeking damages for each of the alleged counts, including "treble damages" for violations of the consumer fraud act, the costs of his lawyers to be covered, a full refund of all funds acquired by the defendants and accrued interest, as well as a judgment preventing similar violations of the consumer fraud act.

Those represented in the class action are any stockholders of BlockFi that purchased their BlockFi unregistered BlockFi Interest Accounts between Mar. 4, 2019 and Nov. 10, 2022

The defendants will be served with a summons, and must respond to the complaint within 21 days of receiving it or be required to pay the full amount demanded by Greene.

Cointelegraph has reached out to Gemini and BlockFi but did not receive a response by the time of publication.

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Forsage founders indicted over $340M DeFi ‘Ponzi scheme’

According to the Department of Justice, Forsage employed smart contracts which were coded in ways consistent with a Ponzi scheme.

The founders behind the alleged $340 million “global Ponzi” scheme Forsage have been indicted by a federal grand jury in the District of Oregon.

The four Russian founders — Vladimir Okhotnikov, Olena Oblamska, Mikhail Sergeev, and Sergey Maslakov — have been formally accused of having key roles in the scheme which raised approximately $340 million from victim-investors, according to a Feb. 22 Department of Justice (DOJ) statement.

“Today’s indictment is the result of a rigorous investigation that spent months piecing together the systematic theft of hundreds of millions of dollars,” said U.S. Attorney Natalie Wight for the District of Oregon, adding:

“Bringing charges against foreign actors who used new technology to commit fraud in an emerging financial market is a complicated endeavor only possible with the full and complete coordination of multiple law enforcement agencies.”

Forsage had touted itself as a low-risk decentralized finance (DeFi) platform built on the Ethereum (ETH) blockchain which purportedly allowed users to generate long-term passive income, Blockchain analytics however reportedly revealed that 80% of Forsage “investors” have received less back than they had put in.

According to the DOJ, analysis of the smart contracts revealed that funds raised as new investors purchased “slots” in Forsage’s smart contracts were diverted to older investors, as is consistent with a "Ponzi scheme."

Forsage still has an active Twitter account, which posted a thread on Feb. 22 claiming that community members who participate in “The Ambassador Program” would be able to earn monthly rewards by completing certain tasks.

On Aug. 1 2022, the Securities and Exchange Commission (SEC) had charged the four founders and seven promoters with fraud and selling unregistered securities, with acting chief of the SEC’s Crypto Assets and Cyber Unit, Carolyn Welshhans, noting at the time:

“Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”

The Philippines Securities and Exchange Commission had also flagged Forsage as a likely Ponzi back in 2020, but a month later the platform was still the second-most popular DApp on the Ethereum blockchain.

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

While a charge refers to the instance when a prosecutor brings criminal charges and accuses an individual or group of an offense, an indictment is filed by a grand jury if prosecutors are able to convince a majority of them that a formal accusation is warranted following an investigation.

Grand juries are common in federal and serious state felony offenses.

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