March 2023 Rollup | Latest Trends & Developments
Stay informed with NOAH's March 2023 Industry Rollup, a comprehensive overview of the most impactful cryptocurrency events and developments. Read now to get up-to-date on the latest trends and happenings in this rapidly evolving landscape.
CFTC Files Lawsuit Against Binance
The U.S. Commodity Futures Trading Commission (CFTC) has filed a lawsuit against Binance, the largest cryptocurrency exchange, and its executives for allegedly attracting American investors without obtaining the necessary permissions to operate in the country. In addition, the CFTC claims that Binance helped US-based crypto traders evade regulations and hide their locations, seeking unspecified fines and a ban on Binance and its executives from participating in commodity trading governed by U.S. exchange laws. Binance founder Changpeng Zhao denies the allegations.
This lawsuit indicates the CFTC's increased focus on regulating the cryptocurrency industry and serves as a warning to other companies to ensure compliance efforts and protect customers. As the crypto industry continues to grow and evolve, regulators closely scrutinize exchanges' operations to ensure compliance with laws and regulations. The lawsuit against Binance highlights the gaps in its "know your customer" protections and its solicitation of U.S. customers without being registered with the CFTC. It serves as a reminder that companies must operate within the bounds of the law.
Sam Bankman-Fried Faces Additional Bribery Charges
Sam Bankman-Fried, the former CEO of FTX and founder of Alameda Research, is facing an additional criminal charge concerning bribery concerning alleged corruption within said cryptocurrency companies. The latest indictment accuses Bankman-Fried of conspiring to violate the Foreign Corrupt Practices Act by allegedly orchestrating a $40 million bribe to unfreeze trading accounts belonging to Alameda. Bankman-Fried has entered a not-guilty plea for eight corruption-related charges, but the bribery charge and four others remain unaddressed.
The bribery allegation is one of his most serious charges yet, as it implicates Bankman-Fried in an illegal attempt to influence foreign officials. With federal prosecutors expressing concerns about his internet activities and contact with current and former FTX employees, Bankman-Fried's legal troubles are mounting. The presiding judge is now considering additional restrictions on his $250 million personal recognizance bond, making it even more challenging for Bankman-Fried to defend himself against the numerous criminal charges he faces.
SEC Charges Eight Celebrities for Illegally Promoting Crypto Assets on Social Media
The Securities and Exchange Commission (SEC) has recently charged eight high-profile celebrities, including Lindsay Lohan, Jake Paul, and Lil Yachty, for illegally promoting crypto assets TRX and BTT on social media without disclosing their financial incentives. In addition, entrepreneur Justin Sun, who issued the cryptocurrencies and compensated the celebrities between $5,000 and $50,000 worth of crypto assets, was also charged with securities law violations related to the management of the projects. Sun and his companies have been ordered to pay a civil penalty of $18.5 million and cease any further violations.
Six celebrities have settled with the SEC, agreeing to pay fines ranging from $10,000 to $75,000 each. However, actor Kevin Hart and influencer Amanda Cerny have not agreed to settle and are now facing litigation. These enforcement actions are part of the SEC's broader efforts to protect investors from fraud and abuse in the cryptocurrency space, previously warning celebrities endorsing initial coin offerings (ICOs) or other crypto-related investments to disclose the nature, source, and amount of their compensation or risk liability.
Terraform Labs Founder Do Kwon Arrested
Do Kwon, Terraform Labs founder and creator of the TerraUSD and Luna cryptocurrencies, has been arrested in Montenegro and charged with eight counts of fraud by U.S. prosecutors. Kwon is accused of orchestrating a $40 billion fraud scheme that led to the collapse of TerraUSD and Luna in May 2022. The Southern District of New York filed an indictment outlining securities fraud, commodities fraud, wire fraud, money laundering, and conspiracy charges. Kwon allegedly deceived investors about his coins' stability and value, manipulated supply and demand using bots and fake transactions, and misappropriated millions of dollars from the platform.
After fleeing Singapore in June 2022, Kwon went into hiding in Serbia, claiming via Twitter that he wasn't "on the run" and that the charges were "politically motivated." He also attributed his project's failure to external factors like market volatility and regulatory uncertainty. Nevertheless, Interpol and Montenegrin authorities tracked Kwon down and arrested him at Podgorica airport with counterfeit documents. Identified by his fingerprints, Kwon was extradited to the U.S., where he could face up to 20 years in prison if convicted.
Kwon's high-profile case underscores the risks and challenges of regulating the emerging and volatile crypto industry, which operates across multiple borders and jurisdictions. It also raises concerns about the viability and trustworthiness of stablecoins, which are meant to offer stability and liquidity to the cryptocurrency market.
Global Banking Crisis Erupts as Silicon Valley Bank Falters
Silicon Valley Bank (SVB), a prominent regional lender serving the technology industry for four decades, experienced a sudden and devastating collapse within two days. This marked the most significant bank failure since the 2008 financial crisis, leaving the financial world reeling.
The catalyst for SVB's downfall can be traced to the dislocations caused by rising interest rates. As a countermeasure against inflation, the Federal Reserve initiated a series of rate hikes approximately a year ago, subsequently impacting the technology stocks upon which SVB heavily relied. Moreover, these higher rates concurrently diminished the value of SVB's bond portfolio, amassed during the preceding low-rate environment.
On March 8th, SVB disclosed a staggering $1.8 billion loss incurred from securities sales and announced the urgent need to raise over $2 billion to fortify its balance sheet. This revelation incited a frenzy among its depositors, primarily venture capital firms and technology startups, who hastily withdrew their funds.
By March 10th, SVB confronted a textbook bank run, as its liquidity reserves proved insufficient to meet the escalating demands of anxious depositors. In a bid to safeguard both depositors and the broader financial system, the Federal Deposit Insurance Corporation (FDIC) assumed control of SVB.
As the FDIC actively seeks a buyer for SVB's assets and liabilities, it strives to reassure the public of the banking system's stability and security. Nevertheless, concerns persist among analysts, who speculate that the ramifications of SVB's collapse may extend to other banks and sectors, particularly those with significant exposure to the technology industry.
The unexpected and dramatic demise of SVB has underscored the inherent risks and vulnerabilities of banking within a volatile and unpredictable landscape. This event has also prompted a critical reevaluation of the adequacy of regulatory oversight and supervision, particularly concerning banks with niche and specialized business models.
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