Survey of Crypto Companies Reveals Lack of Boards, Audits, Governance

Some Popular Crypto Companies Lack Boards, Audits Despite FTX’s Fall

Its sister trading house Alameda Research, which allegedly received unfettered access to FTX customer assets to fund its bets, had such poor recordkeeping that Bankman-Fried told staff members its books were “unauditable,” according to communications published by the group’s new management. Occasionally the firm would find $50 million in assets “lying around that we lost track of,” Bankman-Fried said. Now the former CEO stands accused of fraud, money laundering and bribing Chinese officials — among other charges — while investors and customers are left nursing billions of dollars in losses.

The lack of effective corporate governance and due diligence conducted on FTX’s books raised eyebrows around the world. But for crypto industry watchers, it’s not an unfamiliar tale.

US crypto tsar promises crackdown on digital platforms

The top US cryptocurrency enforcement tsar is promising a crackdown on illicit behaviour on digital platforms, saying the scale of crypto crime has grown “significantly” in the past four years.

The Department of Justice is targeting crypto exchanges along with the “mixers and tumblers” that obscure the trail of transactions, said Eun Young Choi, who was appointed director of the agency’s national cryptocurrency enforcement team last year. The DoJ is targeting companies that commit crimes themselves or allow them to happen, such as enabling money laundering, she said.

“But on top of that, they’re allowing for all the other criminal actors to easily profit from their crimes and cash out in ways that are obviously problematic to us,” she added. “And so we hope that by focusing on those types of platforms, we’re going to have a multiplier effect.”

SEC Obtains Final Judgment Against Head Trader Charged in Fake Trading Scheme

The Securities and Exchange Commission has obtained a final judgment against a head trader at “EmpiresX,” which the agency charged with a fake trading scheme.

According to the SEC’s complaint, filed June 30, 2022, Joshua David Nicholas was the head trader of a purported hedge fund known as EmpiresX that was operated by co-defendants Emerson Sousa Pires and Flavio Mendes Goncalves. Since at least late 2020, EmpiresX sold investments touting daily profits of one percent earned by a trading “bot” or Nicholas’ manual trading. The complaint alleges that, in reality, the bot was fake, Nicholas’ trading resulted in significant losses, and the defendants only transferred a small portion of investors’ funds to EmpiresX’s brokerage account. Instead, the defendants allegedly misappropriated large sums of investors’ money to lease a Lamborghini, shop at Tiffany & Co., make a payment on a second home, and more.

Montenegro court releases crypto entrepreneur Do Kwon on bail

A court in Montenegro agreed on Friday to release Do Kwon, a cryptocurrency entrepreneur charged in the U.S. with a multibillion-dollar fraud, on bail of 400,000 euros ($440,320), pending a trial on local charges.

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He was detained with Han Chang-joon, Terraform Labs’ former finance officer, who will also be released on bail of 400,000 euros. The pair were charged with forging official documents and a court in Podgorica ordered them to be placed in a 30-day pre-trial detention.

The two defendants will remain under house arrest and be supervised by police, the Basic court in Montenegro’s capital Podgorica said in a statement.

“The court … found that the possibility of losing the posted bail of 400,000 euros each, works sufficiently to dissuade them from any desire to flee,” the statement said.

SEC Wants to Slash $22M Fine on Crypto Firm LBRY for Violating Securities Law to $111K

The U.S. Securities and Exchange Commission (SEC) wants to revise a $22 million penalty set on crypto startup LBRY to $111,614, according to court documents from Friday.

The regulator cited LBRY’s “lack of funds and near-defunct status,” as reasons for withdrawing its previous request for fine.

In March last year, the SEC sued LBRY on allegations that the sale of its native LBRY credits (LBC) violated federal securities laws. In November, a New Hampshire judge ruled the startup had violated securities laws by failing to register with the SEC.

Crypto Exchange Binance Announces Exit from Canada, Citing Regulatory Tensions

Crypto exchange Binance has announced that it would cease operations in Canada, citing the challenging regulatory environment.

“We had high hopes for the rest of the Canadian blockchain industry,” the company said in a Friday tweet. “Unfortunately, new guidance related to stablecoins and investor limits provided to crypto exchanges makes the Canada market no longer tenable for Binance at this time.”

In February, the Canadian Securities Administrators (CSA) revealed new guidance that prohibited crypto asset trading platforms within the country from allowing customers to buy or deposit stablecoins without the CSA’s prior approval. Obtaining approval would require the crypto trading platform to pass the CSA’s various due diligence checks.

CME CEO Terry Duffy Says Firm Prepared to Leave Chicago If Necessary

CME Group Inc. is prepared to leave Chicago if the city and state take steps that are perceived as “ill-conceived,” Chief Executive Officer Terry Duffy said in an interview.

Duffy’s remarks, made in an episode of the Odd Lots podcast, come as Mayor Brandon Johnson is being sworn into office after proposing additional taxes, including one on financial transactions, to help boost the city’s revenue. That plan was fiercely opposed by Chicago’s exchanges and investment firms. A higher levy would also require state approval to pass.

“Mr. Johnson has no legal authority to impose a transaction tax on my business,” said Duffy, adding that fighting crime should be a bigger focus for the new mayor. He also shouldn’t “get too bogged down on how he’s going to short-term think he’s going to raise taxes on certain people in order to fit his agenda.”

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“We have sold all of our property in the state of Illinois, in the city of Chicago,” Duffy said. “We don’t own anything any longer.”

Crypto companies Coinbase, Ripple are playing poker with the SEC

Cryptocurrency companies are playing a game of poker with the Securities and Exchange Commission, making bold threats to leave the U.S. as the regulator steps up pressure on the industry to toe the line.

Major players are hoping that the SEC and Washington takes, what crypto watchers see as bluffs, seriously and soften the hard line that regulators have taken on the industry.

My Loaded Twitter Debate with Tether. Here We Go Again.

Two weeks ago, I criticized Binance in a long-form tweet and what followed was a bizarre and disturbing exchange with a Binance senior executive.

A few days ago, I similarly criticized Tether in a long-form tweet and yet another albeit much more civilized and far more exhaustive debate ensued, this time with Tether’s Chief Technology Officer (and primary financial spokesperson), the famed Paolo Ardoino, who responded with 18 points and a slew of other tweets. Today I tweeted my fourth and final response. (And yes, you read the right, Tether’s CTO, not their CFO or CEO, is their primary spokesperson when it comes to Tether’s financial condition.)

Unlike my exchange with the Binance executive, overall, the Stark/Tether/Ardoino exchange has been a terrific, dynamic and civil discussion of ideas, triggering millions of views and lots of commentary from the Twitter-sphere (some made excellent points while others offered the usual blather of personal ad hominem attacks — but all very interesting nonetheless).