Binance Expects to Settle Multiple Investigations: "Likely a Fine, Could be More"

Crypto Giant Binance Expects to Pay Penalties to Resolve U.S. Investigations

Binance, the world’s largest cryptocurrency exchange, expects to pay monetary penalties to settle existing U.S. regulatory and law-enforcement investigations of its business, the firm’s chief strategy officer said in an interview.

Binance grew quickly and began as a business powered by software engineers unfamiliar with laws and rules written to address the risk of bribery and corruption, money laundering, and economic sanctions, Patrick Hillmann said.

The company has been working to fill gaps in its early compliance efforts, he said, but still expects regulators will impose fines for past conduct.The company is “working with regulators to figure out what are the remediations we have to go through now to make amends for that,” Mr. Hillmann said Wednesday. The outcome will be “likely a fine, could be more.…We just don’t know. That is for regulators to decide.”

SEC Charges Roadrunner Transportation Systems, Inc. with Accounting Fraud

The Securities and Exchange Commission today announced settled charges against Roadrunner Transportation Systems, Inc. for engaging in a multi-year accounting fraud scheme from at least July 2013 through January 2017. Roadrunner is a shipping and logistics company based in Downers Grove, Illinois.

According to the SEC’s order, Roadrunner manipulated its financial reports to hit prior earnings guidance and analyst projections. The order finds that, among other things, Roadrunner hid incurred expenses by improperly deferring them and spreading them over multiple quarters to minimize their impact on Roadrunner’s net earnings and avoided writing down assets that were worthless and receivables that were uncollectable. The SEC’s order also finds that Roadrunner manipulated earnout liabilities related to the company’s acquisitions which created an income “cushion” that could be used in future quarters to offset expenses. According to the order, Roadrunner concealed its fraud from Roadrunner’s independent auditor. The order finds that, as a result of this conduct, Roadrunner materially misstated its financial results in its earnings releases, earnings calls, and quarterly and annual reports from at least the second quarter of 2013 through the third quarter of 2016.

Crypto CEOs Like Coinbase’s Brian Armstrong Need to Accept That Existing Regulations Also Apply to Them

The problem is the pernicious concept in crypto that goes under the name “regulation by enforcement.” We need to excise this phrase from crypto, not just because it is imprecise but because it simply is not a thing. Regulators in the U.S. are not creating new rules; they are enforcing existing rules. Perhaps crypto executives need a quick refresher on the law and rule-making process….

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If regulators have thus far been successful in obtaining enforcements then this should be a huge wake-up call to the crypto industry that financial transactions in crypto conform to regulated financial transactions and, as such, the existing rules apply. If their legal counsel is telling them otherwise, then it is time to get new legal counsel because this is a multi-million dollar lesson that the industry keeps learning and will keep learning until they make a change in strategy. A new lawyer won’t cost as much.

We’re starting to get a growing list of crypto services where one might ask: Is it regulated? And based on the enforcement actions we can say: Yes, unequivocally….

Banks Are Breaking Up With Crypto During Regulatory CrackdownNew York’s Metropolitan Commercial Bank recently announced that it was closing its crypto business, citing material changes in the regulatory environment. Signature Bank cut ties with the international business of Binance, the biggest crypto exchange. The lender, one of crypto’s leading banks, started paring back its relationships with crypto depositors late last year.

The crackdown is squeezing crypto businesses. While the industry often pitched itself as an alternative to banks, these firms still rely heavily on banks to link up with a financial system that runs on hard currencies such as dollars and euros. Without banks, crypto companies struggle to pay their employees and enable customers to move money in and out of digital currencies.

“If you don’t have a bank account, it’s very hard to do business,” said Scott Shay, Signature’s chairman.

Ex-Coinbase Manager Tests If SEC Crypto Reach Is ‘Major’ Question

The Securities and Exchange Commission will wrangle with the question of whether regulating a crypto token is a “major” issue, seeking an answer that could help define how the controversial products are policed.

The agency has sued Ishan Wahi, an ex-Coinbase manager, and his brother for alleged insider trading involving tokens listed on Coinbase’s platform.

The SEC says it has jurisdiction because several tokens are securities. But the defendants argue regulating digital tokens is a major issue. The SEC’s power grab violates the “major questions doctrine” that says an agency can’t bring about a major policy without clear statutory authorization, they say.

Stanford Research Director, Former Dean Revealed to Be Sam Bankman-Fried’s Bond Signers

A federal judge ruled the names of Sam Bankman-Fried’s bond co-signers should be revealed after Bankman-Fried did not apply to the appeals court.

District Judge Lewis Kaplan, of the Southern District of New York, originally ruled in favor of news organizations, including CoinDesk, which argued the names of Bankman-Fried’s signers were in the public interest, but did not rule pending an appeal. While Bankman-Fried’s attorneys filed a notice that they would appeal, they did not file the actual appeal, the judge said in a new ruling Wednesday.

The signers were revealed to be Stanford University’s Andreas Paepcke and Larry Kramer, who put up $200,000 and $500,000, respectively. Bankman-Fried’s parents are both Stanford instructors. Paepcke is a senior research scientist while Kramer is a former dean of Stanford Law School.

SEC Chair Gensler’s new proposal tightens crypto custody restrictions

Securities and Exchange Commission chairman Gary Gensler on Wednesday proposed sweeping changes to federal regulations that would expand custody rules to include assets like crypto and require companies to gain or maintain registration in order to hold those customer assets.

The proposed amendments to federal custody rules would “expand the scope” to include any client assets under the custody of an investment advisor. Current federal regulations only include assets like funds or securities, and require investment advisors, like Fidelity or Merrill Lynch , to hold those assets with a federal- or state-chartered bank, with a few highly specific exceptions.

It would be the SEC’s most overt effort to rein in even regulated crypto exchanges that have substantial institutional custody programs serving high-net-worth individuals and entities which custody investor assets, like hedge funds or retirement investment managers.

Quebec securities regulator executive says watchdog has ‘completely reformed’ its conduct

The head of Quebec’s securities regulator says the watchdog has overhauled the way it handles investigations in the wake of its last major insider-trading case, vowing his teams won’t repeat the same mistakes as it tries to bolster its credibility in fighting white-collar crime.

Louis Morisset, chief executive of the Autorité des Marchés Financiers, said in an interview Tuesday that the watchdog has “completely reformed” the way it conducts search and seizures, and processes the material obtained, since a judge lambasted the AMF for its shortcomings five years ago in what was known as the Amaya affair.