SEC Sues, Shuts Down Beaxy and Execs for Operating Unregistered Crypto Exchange

SEC Charges Crypto Trading Platform Beaxy and its Executives for Operating an Unregistered Exchange, Broker, and Clearing Agency

The Securities and Exchange Commission today charged the crypto asset trading platform beaxy.com (the Beaxy Platform) and its executives for failing to register as a national securities exchange, broker, and clearing agency. The SEC also charged the founder of the platform, Artak Hamazaspyan, and a company he controlled, Beaxy Digital, Ltd., with raising $8 million in an unregistered offering of the Beaxy token (BXY) and alleged that Hamazaspyan misappropriated at least $900,000 for personal use, including gambling. Finally, the SEC charged market makers operating on the Beaxy Platform as unregistered dealers.

According to the SEC’s complaint, since October 2019, Nicholas Murphy and Randolph Bay Abbott, through the company they managed, Windy Inc., maintained and provided the Beaxy Platform as a web-based trading platform that facilitated buying and selling of crypto assets that were offered and sold as securities….

SEC Charges Private Fund Auditor and Audit Engagement Partner with Improper Professional Conduct

The Securities and Exchange Commission today announced settled charges against Spicer Jeffries LLP, an audit firm based in Denver, and audit engagement partner Sean P. Tafaro, for their improper professional conduct in connection with audits of two private funds.

According to the SEC’s order, during the audit planning stages, Spicer Jeffries and Tafaro assessed that valuation of investments was a significant fraud risk but did not implement the planned audit approach to respond to the risk. The order further finds that Spicer Jeffries and Tafaro failed to obtain sufficient audit evidence about the method of measuring fair value, the valuation models, and whether alternative valuation assumptions were considered. According to the order, due to these failures and others, Spicer Jeffries and Tafaro did not exercise due care, including professional skepticism. The order also finds that Spicer Jeffries’ deficient system of quality control led to failures to adhere to professional auditing standards.

CFTC Charges Against Binance Highlight Role of Former Compliance Chief

The suit by U.S. regulators against Binance Holdings Ltd. focuses in large part on the work of the cryptocurrency exchange’s former chief compliance officer, alleging he willfully aided and abetted the firm in evading U.S. laws.

Samuel Lim, Binance’s compliance chief between 2018 and 2022, faces civil charges of undermining Binance’s compliance program and conducting activities to evade rules designed to prevent illicit financial activity, the Commodity Futures Trading Commission said Monday.

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The CFTC, the derivatives market regulator, alleged that Mr. Lim and other officers promoted the use of creative means to help the exchange’s customers circumvent Binance’s compliance controls. He allegedly implemented a corporate policy that advised Binance’s U.S. customers to use virtual private networks, or VPNs, to avoid Binance’s internet protocol address-based controls or to create new offshore shell companies to avoid the exchange’s anti-money-laundering controls, according to a complaint filed by the CFTC Monday in Chicago federal court.

Ex-CEO of Binance’s US firm has enlisted lawyer for US investigationsA former chief executive of Binance’s de-facto U.S. subsidiary has enlisted a former federal prosecutor and top cop at the Commodity Futures Trading Commission to represent her in the U.S. government’s investigations into the giant cryptocurrency exchange, a person with direct knowledge told Reuters.

Catherine Coley, who launched Binance.US in 2019 and left suddenly two years later, is being advised by James McDonald, now a partner at New York law firm Sullivan & Cromwell, the person said. It’s unclear when McDonald began representing Coley in the U.S. investigations, though he appeared as her attorney of record in separate civil litigation against Binance.US in January 2022, court records show. His representation of Coley has not been previously reported.

Crypto Fugitive Do Kwon Faces US and South Korean Charges. Who Gets Him First?

Terraform Labs Pte co-founder Do Kwon is in a jail in Montenegro, but his ultimate destination will likely be the US or South Korea. Both countries have charged him in connection with an alleged cryptocurrency fraud that wiped out $40 billion in market value.

But which country will get first crack at the TerraUSD creator? US and South Korean prosecutors have both said they will request Kwon’s extradition. Montenegro’s justice minister, Marko Kovac, said Wednesday a judge would decide how to proceed.

US lawmakers press Wall St regulator over coming climate rule

In an appearance before a House of Representatives panel overseeing federal spending, SEC Chair Gary Gensler defended the agency’s request for a 12% budget increase to respond to burgeoning growth in financial markets and the mounting risk of misconduct.

Gensler said that, with the frequency of stock trades and volume of privately managed assets soaring, “we must be able to meet the match of bad actors.” He also described cryptocurrency markets as a “wild West” that was “rife with non-compliance.”

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Lawmakers questioned him about conclusions of a recent internal watchdog report that staff attrition and a heavy workload were endangering the quality of rulemaking.

Gensler said turnover was in part driven by the desirability of SEC employees on a competitive labor market.

“We run about 6% attrition right now, which is consistent with other agencies,” he said.

Stock Market Crash, Crypto Collapse Hurts Miami, Florida Hotspots

“There were a lot of true believers in the Miami crypto scene. They wanted to drink the Kool-Aid,” the fundraiser said. “The big boys like Peter Thiel all got out on top. The paupers just crumbled to nothing.”

In January, I sat with a former crypto executive at the bar in South Beach’s Eden Roc hotel. Miami was experiencing its normal winter rush of Wall Street conferences, and we were reading faces. The crypto exec wanted to see whether Wall Street’s rank and file had figured out what they had figured out months before — that the beach party was over. “It’s smoke and mirrors. There’s no real money here anymore,” the former crypto exec, a third-generation Wall Streeter, said. “It’s all gone to Dubai and Singapore.” There was fear on people’s faces where two years ago there had been greed.

“You know who’s rich in Miami?” the former crypto exec — now a naturalized Miami citizen — asked me. “The people who make windows for yachts.”

Why are Securities Class Action Mediations Different from Other Mediations?One reason for this difference is that securities cases often have very large amounts of money at stake (hundreds of millions or even billions of dollars are commonly claimed).  Furthermore, securities actions are governed by a highly complex body of case law from state and federal courts at all levels, including the Supreme Court, as well as pleading requirements, discovery stays, defenses and other special provisions and procedures that are unique to the Securities and Exchange Act of 1934, the Securities Act of 1933 and the Private Securities Litigation Reform Act.  Because of the complexity of the analysis of the laws at issue, the parties often find themselves taking quite different views of the strength of the claims made.  This combination of large amounts of money at stake and the complexity of laws at issue frequently results in parties whose settlement positions are far apart.

In addition to the size and complexity of securities cases, securities class actions are often “different” from other cases, because of the sheer number of people, usually with conflicting interests, involved in resolving these cases….

Sam Bankman-Fried’s Legal Defense Is Being Funded With Alameda Money He Gifted His Father

Sam Bankman-Fried, founder of fallen cryptocurrency exchange FTX who claimed to have just $100,000 in his bank account last November, is preparing for trial in October backed by a roster of powerful attorneys. But it has remained unclear, until now, how the former billionaire would afford his pricey defense.

Forbes has learned that Bankman-Fried has been paying legal fees from a multi-million dollar gift he gave his father with money borrowed from FTX’s sister company.

In 2021, while CEO of FTX, Bankman-Fried made a large monetary gift to his father, Stanford Law professor Joseph Bankman, two sources with operational knowledge of both companies told Forbes. It was funded by a loan from the exchange’s trading firm, Alameda Research, they said.