SEC - Page 259

Former FTX CEO Sam Bankman-Fried’s bail has been revoked by a federal judge in response to allegations that he attempted to intimidate witnesses by sharing information with New York Times reporters.

The decision was made during an August 11 hearing at the United States District Court for the Southern District of New York. Judge Lewis Kaplan ordered the revocation of Bankman-Fried’s $250 million bail, which had initially kept him out of custody since his arraignment in December 2022.

Bankman-Fried had given interviews to New York Times reporters, with the intention, as suggested by Judge Kaplan, of “hurting and frightening” his former colleague and girlfriend, former Alameda Research CEO Caroline Ellison.

His legal team confirmed his collaboration with the reporters, leading to the imposition of a gag order to prevent any further extrajudicial statements related to the ongoing criminal case.

Assistant U.S. Attorney Danielle Sassoon cited Bankman-Fried’s breach of previous bail conditions, which included sending a message via the Signal app to FTX US general counsel Ryne Miller, using a virtual private network for internet activities, and releasing information to reporters aimed at intimidating Ellison.

The prosecutor also mentioned that the Putnam County Correctional Facility could provide Bankman-Fried with a laptop if he were to be remanded into custody, though home detention with restrictions on Google Drive was also considered.

Judge Kaplan stated that there was probable cause to believe that Bankman-Fried had attempted to tamper with witnesses on at least two occasions, and he listed additional violations as well.

Consequently, he decided to revoke the bail. Sassoon argued that Bankman-Fried had allegedly asked witnesses to delete specific messages and documents.

Bankman-Fried’s attorney, Mark Cohen, pleaded with the judge to maintain his bail conditions, asserting that coordination with the legal team was necessary.

Cohen also contended that allegations of witness intimidation should be addressed during the October trial.

READ MORE: Hong Kong’s HKVAX Granted Preliminary Approval for Virtual Asset Trading Platform by SFC

Despite Bankman-Fried’s legal team’s intention to appeal the decision, Judge Kaplan denied the motion and ordered Bankman-Fried to be remanded into custody, likely at the Putnam County Correctional Facility.

He may be transferred to the Metropolitan Detention Center in Brooklyn once the trial begins in October.

It’s worth noting that Bankman-Fried’s parents may have been present at the hearing.

Bankman-Fried, who has primarily been staying at his California home except for court appearances in New York, is facing 12 criminal charges spanning two trials scheduled for October 2023 and March 2024.

While a campaign finance law violation charge is set to be dropped due to an extradition agreement with the Bahamas, prosecutors intend to include the alleged scheme in a wire fraud charge.

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The Hong Kong Securities and Futures Commission (SFC) has granted preliminary approval to the Hong Kong Virtual Asset Exchange (HKVAX) to operate a virtual asset trading platform within the framework of the region’s securities regulations.

HKVAX recently disclosed that it has secured an “approval-in-principle” from the SFC, authorizing the execution of Type 1 and Type 7 regulated activities.

The Type 1 license empowers the platform to administer a digital asset trading system dealing with securities, while the Type 7 classification formally permits the company to furnish automated trading services to both retail customers and institutional investors.

In pursuit of capitalizing on the investment prospects presented by Web3, HKVAX is striving to introduce a new category of offerings known as security token offerings.

Once the final endorsement is obtained, the platform intends to provide a range of services, including over-the-counter (OTC) brokerage facilities facilitating transactions between fiat and digital assets.

READ MORE: Top VC Firms Face Class-Action Lawsuit for Alleged Role in FTX Crypto Exchange Fraud

Moreover, the platform plans to establish an institutional-grade exchange platform and a secure custody solution, backed by insurance provisions.

Anthony Ng, who serves as the co-founder and CEO of HKVAX, articulated that as the platform’s operations expand, the entity remains committed to broadening its array of products available in the Hong Kong market.

Simultaneously, HKVAX intends to collaborate with strategic investors during its forthcoming funding rounds.

The announcement from HKVAX emerges in the wake of HashKey and OSL, two exchanges, debuting retail cryptocurrency trading activities in Hong Kong.

These exchanges made history on August 3 as the first entities to be granted licenses to facilitate crypto trading services in the jurisdiction.

Hong Kong’s regulatory authorities have intensified their scrutiny of the cryptocurrency sector following the FTX collapse.

The CEO of the SFC, Julia Leung Fung-yee, stressed the importance of crypto trading within the virtual asset ecosystem in light of the FTX exchange’s downfall in 2022.

In a public address, Leung emphasized that the newly implemented licensing structure for virtual asset service providers aims to safeguard investors as they engage in trading activities.

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FTX’s CEO and chief restructuring officer, John J. Ray III, along with other debtors, are expressing dissatisfaction with certain members of the Official Committee of Unsecured Creditors (UCC), who are attempting to gain control over assets.

These debtors are raising concerns about the UCC’s proposal to invest around $2.6 billion from cash reserves into short-term Treasuries.

They believe this move contradicts the FTX 2.0 draft restructuring plan.

In an official response filed on August 9, FTX addressed the UCC’s opinions regarding the reorganization and term sheet proposal. FTX criticized the UCC’s pursuit of asset control, especially their recommendation to allocate the cash reserves to cover professional fees, which could total up to $330 million.

Tensions have arisen between the UCC and debtors due to allegations that creditors were not adequately consulted and that FTX substantially depleted funds during the bankruptcy filing process.

Furthermore, the United States Securities Exchange Commission (SEC) expressed dissatisfaction with what it perceived as limited engagement and unprofessional conduct among several UCC members.

FTX’s restructuring unit has managed to recover around $7 billion in liquid assets from the original $8.7 billion owed to customers at the onset of the exchange’s bankruptcy proceedings.

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However, some creditors and experts believe that the debtors’ actions are hindering the reorganization process and have contested claims made by the UCC.

The debtors have unveiled a strategy for the relaunch of FTX 2.0, with CEO John J. Ray III striving to finalize agreements and outstanding payments to facilitate the launch.

Yet, Jesse Powell, the CEO of Kraken, has expressed doubt about FTX 2.0, stating that the endeavor is more challenging than starting anew.

Powell pointed to factors like the absence of a complete team, technology, necessary licenses, and damage to the brand’s reputation.

In a separate development, FTX has submitted a request for the dismissal of Chapter 11 bankruptcy proceedings involving FTX Exchange FZE (FTX Dubai).

The exchange argues that it never actually provided cryptocurrency-related services to investors, and therefore, the bankruptcy proceedings are not warranted.

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Binance, renowned as the world’s leading cryptocurrency exchange in terms of trading volume, is said to have initiated the process of registering within Taiwan’s regulatory framework, as mandated by the Money Laundering Control Act and the Financial Supervisory Commission (FSC).

As reported by local media, the FSC has reportedly reached out to numerous domestic crypto service providers, informing them of Binance’s pursuit of Anti-Money Laundering (AML) compliance.

The details stem from insights shared by Chen Peiyun, co-founder of BitShine, a cryptocurrency exchange based in Taiwan.

Chen Peiyun disclosed that Binance has been identified by the FSC as a potential participant in the Taiwanese crypto market.

Requests for comments from Binance, regarding these recent developments, have yet to be addressed as of this time.

Taiwan’s cryptocurrency sector has mostly existed without comprehensive regulation.

However, to bolster security and transparency, the FSC introduced AML guidelines in July 2021, mandating all cryptocurrency exchanges operating within or providing services to the nation to adhere to these regulations.

Operating in Taiwan through a local subsidiary known as Binance International Limited Taiwan Branch (Seychelles), the exchange’s registration records indicate the formal establishment of this entity on May 12, 2023.

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In addition to formalizing its presence through registration, Binance has also formed collaborations with local governmental bodies to combat cybercrime, emphasizing their commitment to security.

Notably, the FSC took on the role of being the primary overseer of cryptocurrency-related activities within the country earlier in March.

This transition was accompanied by an announcement from the regulatory body’s leader, affirming their intentions to develop substantial regulations and policies.

These efforts encompass safeguarding customer assets, segregating them from company funds, and bolstering investor protection practices.

It’s pertinent to mention that Taiwan’s cryptocurrency policies will remain separate from those of mainland China, which, since 2021, has imposed a comprehensive ban on all cryptocurrency-related operations.

These reports of Binance’s intent to engage with the Taiwanese cryptocurrency market coincide with the exchange facing heightened regulatory scrutiny within the United States and Europe.

The company is presently confronted with numerous legal actions in the United States, coupled with the withdrawal from various European jurisdictions following regulatory confrontations.

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The rapid advancement of high-level artificial intelligence (AI) technology has ignited a competitive race between the United States and China, each striving to lead in the development of the most formidable AI systems.

This pursuit has sparked escalating tensions between the two global superpowers.

The Biden Administration, in a decisive move, has imposed limitations on Chinese tech investments pertaining to semiconductors, quantum computing, and AI.

This initiative has triggered apprehensions among regulators in various nations.

The European Union and the United Kingdom are deliberating their responses to this U.S. action.

On August 9, The White House issued two executive notices addressing AI advancements.

The first highlighted a novel opportunity for hackers to employ AI in fortifying U.S. infrastructure against cybersecurity threats, with monetary incentives as rewards.

Conversely, the second note designated China, Hong Kong, and Macau as “countries of concern.”

This classification empowers the U.S. to regulate investments within these regions, particularly in sectors pertinent to national security, including semiconductors, microelectronics, and quantum information technologies.

The document underscored the role of these sectors in military, intelligence, surveillance, and cyber-enabled capabilities.

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The scope of the note presently encompasses the mentioned countries; however, a Biden administration official hinted at the possibility of adding other nations in the future.

The U.S. has already undertaken measures to curtail Chinese technological investments and restrict Chinese access to American services and products.

In a significant development, U.S. regulators imposed bans on semiconductor chip exports to China in October 2022, as these chips are integral to the creation of high-performance AI systems.

China responded swiftly to the U.S. pronouncement through an official statement from the Chinese Embassy in the U.S.

The Chinese Ministry of Foreign Affairs denounced the U.S.’s unilateral decisions regarding investments in China, decrying them as economic coercion and tech bullying.

China perceived these actions as an attempt to sideline it from the global arena.

To counter previous U.S. moves, China announced tightened controls on AI chip-making material exports.

Reports indicated that prominent Chinese tech giants, such as Baidu, ByteDance, Tencent, and Alibaba, have placed significant orders for Nvidia A800 processors, anticipating stricter controls from the U.S.

The U.S. stance had immediate repercussions abroad.

The U.K.’s Prime Minister’s office indicated that the U.S. measures would be taken into consideration while assessing potential national security risks linked to specific investments.

The European Commission also pledged to analyze the U.S. decision, given its proactive involvement in monitoring and regulating AI developments.

As the AI race intensifies, the actions of these influential players hold significant implications for the global technological landscape.

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