SEC - Page 27

Consensys’ legal battle with the United States Securities and Exchange Commission (SEC) has brought to light significant revelations regarding the SEC’s position on Ether.

According to a report by Fox Business producer Eleanor Terret, the SEC and its chair, Gary Gensler, held the belief that Ether constituted a security, at least for a certain period.

Terret, referencing court documents filed by Consensys on April 29, stated that the SEC and Gensler “appear to have believed for at least a year” that Ether was an “unregistered security trading out of compliance with current federal regulations.”

This disclosure follows Consensys’ submission of an unredacted complaint against the SEC to a Texas federal court on April 25, in response to a Wells notice from the SEC outlining its intent to sue Consensys for alleged violations of federal securities laws.

The newly revealed documents indicate that on March 28, 2023, Gurbir Grewal, the head of the SEC’s Division of Enforcement, sanctioned a formal investigation into Ether’s classification as a security.

Dubbed the “Ethereum 2.0” investigation, this initiative empowered enforcement personnel to scrutinize and subpoena individuals and entities engaged in the trading of the cryptocurrency.

Sources familiar with the matter, speaking on condition of anonymity, disclosed that subpoena recipients were instructed to maintain strict confidentiality regarding the investigation if they sought additional information from the SEC.

The genesis of the “Ethereum 2.0” investigation stemmed from the SEC’s suspicion that potential unregistered offerings and sales of Ether had taken place since at least 2018.

READ MORE: Republic First Bank Closure Sparks Crypto Debate Amidst First U.S. Banking Failure of 2024

Should the SEC under Gensler’s leadership deem Ether a security, it would contradict prior guidance provided by the SEC under former Chair Jay Clayton.

In June 2018, Bill Hinman, then-Director of Corporation Finance, declared in a speech the SEC’s stance that Ether, along with Bitcoin, did not qualify as securities.

Further revelations from the filings indicate that the five-member commission authorized the Division of Enforcement’s “Ethereum 2.0” investigation on April 13, 2023, merely five days before Gensler faced questioning before the House Financial Services Committee, where he declined to clarify the SEC’s stance on Ether’s classification as a security.

This development coincides with recent assertions by applicants and entities involved in a potential Ether exchange-traded fund in the U.S., suggesting an anticipated delay by the SEC in reaching a decision regarding the approval of such a product in May.

ETF analyst Eric Balchunas from Bloomberg believes that Gensler’s ambiguous position on Ether could influence the decision-making process, given his previous reluctance to define Ether as a security.

---

To submit a crypto press release (PR), send an email to sales@cryptointelligence.co.uk.

A security researcher recently received a $250,000 reward for uncovering a critical vulnerability in the Curve Finance decentralized finance (DeFi) protocol.

This flaw had previously enabled cybercriminals to steal millions from various cryptocurrency systems.

The vulnerability, identified by Marco Croc, a cybersecurity expert from Kupia Security, involved a reentrancy issue that could have been exploited to tamper with balances and withdraw unauthorized funds from liquidity pools.

Marco Croc detailed his findings in a series of posts on X, explaining the potential risks and manipulations possible due to the bug.

Curve Finance swiftly responded to the disclosure, conducting a comprehensive investigation into the matter.

They acknowledged the significant threat posed by the vulnerability and consequently awarded Marco Croc the highest possible bounty of $250,000 for his critical input.

“Curve Finance recognized the severity of the vulnerability,” Marco Croc said, highlighting the importance of the protocol’s quick action.

Despite the protocol’s assessment that the vulnerability was “not as dangerous,” with confidence in their ability to recover any potentially stolen funds, Curve Finance admitted that the occurrence of such a security incident could have led to widespread panic within the community.

READ MORE: Top SHIB Holders Revealed: Burn Address Dominates, Whales Shift Billions, and Shibarium Upgrade Looms

This acknowledgment comes in the wake of Curve Finance’s recovery from a massive $62 million hack in July.

In an effort to mitigate the impact on their users, Curve Finance and its community took significant steps towards compensation.

The protocol decided to reimburse $49.2 million worth of assets to affected liquidity providers (LPs).

This decision was backed by an overwhelming majority of tokenholders, with 94% approving the disbursement to cover losses across several pools including Curve, JPEG’d (JPEG), Alchemix (ALCX), and Metronome (MET).

The compensation proposal detailed the amounts to be recovered and redistributed: “The overall ETH to recover was calculated as 5919.2226 ETH, the CRV to recover was calculated as 34,733,171.51 CRV and the total to distribute was calculated as 55’544’782.73 CRV.”

The attacker had exploited a bug in certain versions of the Vyper programming language, which rendered versions 0.2.15, 0.2.16, and 0.3.0 susceptible to reentrancy attacks.

This incident underlines the persistent threats in the DeFi space and the continuous need for rigorous security measures.

---

To submit a crypto press release (PR), send an email to sales@cryptointelligence.co.uk.

In a significant legal development, Ripple Labs has vigorously challenged the U.S. Securities and Exchange Commission’s (SEC) proposal for a nearly $2 billion fine against the blockchain-based payment protocol company.

The legal dispute stems from the SEC’s assertion that Ripple should face a substantial financial penalty, to which Ripple has responded by suggesting a more reasonable figure of no more than $10 million.

This legal contention surfaced in a recent court filing where Ripple Labs firmly opposed the SEC’s plea to a federal judge.

The blockchain giant argued against the imposition of the suggested penalties, which include an injunction, disgorgement of funds, and pre-judgment interest.

The submission emphasized Ripple’s commitment to regulatory compliance and criticized the SEC’s demands as overly severe, lacking both legal and principled foundations.

The filing elaborated on the SEC’s breakdown of the proposed fines, totaling nearly $2 billion, comprising $876 million in disgorgement, an additional $876 million in civil penalties, and $198 million in pre-judgment interest.

Ripple decried these figures as excessive and not reflective of their actual business revenues, though specific revenue details were redacted from the document.

The timing of these legal maneuvers was highlighted by Ripple Labs’ Chief Legal Officer, Stuart Alderoty, who, on March 25, disclosed the SEC’s punitive measures against Ripple.

READ MORE: President Biden Signs Bill Expanding Surveillance Powers, Sparking Privacy Concerns

Alderoty criticized the SEC’s persistent efforts to not only penalize Ripple but to cast a shadow over the broader cryptocurrency sector.

He described the SEC’s actions as an ongoing attempt to intimidate the industry throughout the U.S.

Moreover, Ripple’s filing presented a case for a more proportionate financial penalty.

It argued that a $10 million fine would be more aligned with fines levied in similar cases involving digital assets, where there was no evidence of intentional wrongdoing or significant harm or risk to others.

Alderoty also commented on the broader implications of the SEC’s aggressive stance, suggesting it represented a concerted effort to intimidate the entire crypto community in the U.S.

He remained hopeful, however, that the judge would consider the merits of Ripple’s arguments favorably during the final remedies phase of the case, particularly noting Ripple’s victories on several key issues in the proceedings.

---

To submit a crypto press release (PR), send an email to sales@cryptointelligence.co.uk.

Despite the prevalence of hacks within the crypto space, crypto security experts emphasize that newcomers can navigate the risks by taking certain precautions.

According to a market sizing report by Crypto.com on Jan. 22, the crypto space saw a surge to approximately 580 million users by December 2023, marking a 34% increase since January 2023.

With the influx of new users, Cointelegraph consulted security professionals to offer guidance on safeguarding funds in the digital asset realm.

Luciano Ciattaglia, the director of services at cybersecurity firm Hacken, advises novice digital asset users to steer clear of decentralized finance (DeFi) or decentralized exchanges (DEXs) initially.

Ciattaglia suggests, “Don’t rush into DeFi or DEXs straight away.

Most people use centralized exchanges or wallets for all their crypto investments, and that’s fine.”

He further stresses the importance of choosing exchanges with a solid security track record.

READ MORE: $60 Million in Tether Issued on The Open Network (TON) in First Days

Similarly, CertiK co-founder Ronghui Gu recommends that concerned new users opt for reputable exchanges and wallets, and even consider investing in hardware wallets for heightened security.

Gu underscores the significance of educating oneself on crypto security fundamentals, such as securing private key storage and employing strong passwords, along with enabling multifactor authentication.

Gu also warns against sharing personal data online and falling victim to phishing scams, citing CertiK’s report, which documented 83 crypto phishing incidents in Q1 of 2024, noting an alarming increase in sophistication and success rates.

Ciattaglia underscores the necessity for new users to invest in projects that undergo security audits and maintain active bug bounties, as audited projects with such measures are less susceptible to rug pulls.

Hacken’s quarterly report revealed that 56% of hacked projects between January and March 2024 lacked security audits, leaving vulnerabilities unresolved for a significant portion of these companies.

---

To submit a crypto press release (PR), send an email to sales@cryptointelligence.co.uk.

Uniswap Labs, the entity behind the widely utilized decentralized cryptocurrency exchange Uniswap, received a Wells notice on April 10.

This notice, issued by the United States Securities and Exchange Commission (SEC), serves as a precursor to a potential enforcement action against the company.

The SEC’s purported investigation into Uniswap reportedly centers on the platform’s marketing strategies and investor services.

This regulatory scrutiny prompts reflections on the legal implications of open-source development and the classification of code as a form of free speech.

While the SEC targets Uniswap, some argue that the jurisdictional boundaries of the commission do not extend to entities like Uniswap Labs, which disseminate open-source software for decentralized platforms.

This raises pertinent questions: Can Uniswap Labs be held accountable for activities within a decentralized and permissionless market? Moreover, does the act of publishing code enjoy protections under free speech laws?

The issue of developer liability regarding open-source code has already undergone legal scrutiny.

In 2022, Uniswap Labs faced a class-action lawsuit where plaintiffs held the organization responsible for losses incurred due to scam tokens traded on the Uniswap platform.

However, the court ruled in favor of the developers, asserting that creators of computer code cannot be held liable for the misuse of their platform by third parties.

READ MORE: $60 Million in Tether Issued on The Open Network (TON) in First Days

Nevertheless, recent cases, such as the prosecution of developers associated with Tornado Cash, highlight the potential legal risks faced by blockchain developers.

Concerns about regulatory compliance and avoiding prosecution have prompted discussions within the industry regarding the immutability of smart contracts.

Peter Van Valkenburgh, from Coin Center, advocates for the creation of immutable smart contracts to shield developers from legal liabilities.

Conversely, others argue that mutable code may provide developers with better defense mechanisms and facilitate regulatory compliance.

Despite differing opinions on the technical and legal aspects, the intentions of developers play a crucial role in assessing liability.

However, determining intent is subjective and may not offer a foolproof defense against legal persecution.

As uncertainties persist regarding the nature of SEC action against Uniswap Labs, the broader implications on developer activities and regulatory environments remain subjects of intense debate.

While some express concerns about potential chilling effects on innovation, others maintain optimism about the resilience and allure of blockchain technology.

---

To submit a crypto press release (PR), send an email to sales@cryptointelligence.co.uk.