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SEC Enforcement Director Defends Crypto Regulation Approach Amid Industry Criticism

Gurbir Grewal, the SEC’s Enforcement Division Director, recently defended the agency’s approach to cryptocurrency regulation, emphasizing consistency in their enforcement actions.

During an SEC Speaks event on April 3, Grewal responded to critiques that the SEC is formulating crypto rules on the fly.

He highlighted the “creative attempts” by crypto companies to evade SEC oversight in the U.S., countering claims that the SEC is overstepping its authority or engaging in arbitrary enforcement.

Using the sentencing of Sam Bankman-Fried, the ex-CEO of FTX, as a cautionary tale, Grewal underscored the consequences of lax regulatory enforcement.

Bankman-Fried was sentenced to 25 years for defrauding investors, a situation that led some to financial despair.

Grewal expressed his desire for the industry to move beyond debates over the SEC’s jurisdiction to tackle critical issues like fraud, opacity, asset commingling, conflicts of interest, and regulatory oversight that heighten investor risks.

Grewal also defended the clarity and consistency of the SEC’s application of the Howey test, a standard for determining what constitutes a security.

This comes amid discussions about classifying Ether as a security, a topic Grewal didn’t directly address.

He stressed the public availability of these analyses, noting that even those challenging the SEC in court have relied on the Howey framework to evaluate their crypto offerings.

His remarks follow a Utah court’s decision to sanction the SEC for “bad faith” in a case against Debt Box, highlighting criticisms of the SEC’s perceived erratic enforcement practices.

This has fueled concerns about a potential industry exodus from the U.S. Additionally, Grewal’s comments were preceded by criticism from SEC Commissioner Hester Peirce regarding the regulator’s guidelines for crypto asset custody.

Peirce, alongside other SEC staff and commissioners, participated in the event, which concluded on April 3, aiming to address these regulatory challenges and criticisms head-on.

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Surge in Sophistication: Blockchain Security Threats Intensify with $239M Lost to Attacks in Early 2024

Blockchain News/Crypto News Today/DeFi

In the first three months of 2024, the blockchain security sphere faced challenges that, while seemingly typical, underscored a growing concern over the sophistication of cyber-attacks, particularly those involving private key compromises and phishing.

Ronghui Gu, a co-founder of CertiK, a blockchain security company, shared insights with Cointelegraph about these challenges.

He noted a significant uptick in losses due to private key compromises, marking a stark increase to $239 million from just $18.8 million in the same period last year, an alarming rise of 1,171%.

CertiK’s “Hack3d” quarterly security report shed light on these figures, revealing that despite only 26 incidents of private key compromises, the financial impact was profound.

Additionally, phishing attacks have not only become more frequent, with 83 incidents reported, but also more devastating, cumulatively costing victims $64 million.

Gu highlighted the severity of the situation by pointing out that “The sophistication and success of phishing attacks have also reached alarming levels, with 18 phishing incidents, each causing over $1 million in losses.”

Despite these daunting challenges, Gu remains optimistic about the crypto community’s ability to bolster its defenses.

He advocates for the use of multisig wallets and multiparty computation as effective measures to enhance security.

These methods distribute the authorization power, thereby reducing the risk of single-point failures and unauthorized access, ensuring that no single entity has complete control over assets and complicating efforts by attackers to compromise private keys.

Gu stresses the importance of integrating both Web2 and Web3 security practices to combat these advanced threats.

This includes encrypting internal systems, implementing multifactor authentication, conducting regular security audits, and educating employees on the latest phishing and social engineering tactics to minimize the risk of security breaches.

Looking ahead, Gu anticipates that the current trends in cyber threats will persist throughout the year, fueled by the recent uptick in market activity.

He warns that the increasing sophistication of cyber-attacks, coupled with the lucrative opportunities presented by a growing market, necessitates not only vigilance but also proactive measures to anticipate and thwart emerging threats.

“This, combined with the escalating sophistication of attacks, suggests that we should not only expect the continuation of serious security incidents but also proactively prepare for the emergence of new, innovative attack vectors,” Gu concluded.

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Terraform Labs Faces Allegations of False Claims as SEC Trial Nears Conclusion

Blockchain News/Crypto News Today/DeFi

As the Terraform Labs versus United States Securities and Exchange Commission (SEC) trial nears its conclusion, attorneys have alleged that the crypto firm disseminated numerous false claims about its platform to investors.

According to a report from Reuters on April 5, SEC lawyers asserted in the U.S. District Court for the Southern District of New York that Terraform’s narrative was “built on lies.”

These falsehoods purportedly encompassed assurances regarding the stability of the algorithmic stablecoin TerraUSD (UST) and an integration with a South Korean payment application.

Louis Pellegrino, attorney for Terraform, reportedly defended co-founder Do Kwon’s public statements as truthful, suggesting that the SEC’s case relied on selectively presented information.

The civil trial against the SEC emerged over a year subsequent to the commission’s filing of a lawsuit against Terraform in February 2023.

“At that juncture, the regulator alleged that the platform and Kwon had “orchestrated a multi-billion dollar crypto asset securities fraud.”

Throughout the trial, SEC attorneys likened Terra to a “house of cards” that collapsed for investors in 2022.

The fallout from Terra’s demise contributed to a significant downturn in the crypto market, impacting entities such as FTX, BlockFi, Celsius, and others, which were subsequently compelled to declare bankruptcy.

The trial has proceeded in Kwon’s absence, as the Terraform co-founder remains in Montenegro pending a decision on extradition requests from the U.S. and South Korea.

Kwon was apprehended in March 2023 on charges related to the use of falsified travel documents.

In January, Judge Jed Rakoff postponed the start date of the SEC v. Terraform Labs trial to March 25, in a bid to accommodate Kwon.

Other prominent figures in the crypto sphere facing legal proceedings in the U.S. include former Celsius CEO Alex Mashinsky, slated for a criminal trial in January 2025, and former Binance CEO Changpeng Zhao, set for a sentencing hearing on April 30.

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THORChain Hits Record $10 Billion Trading Volume Amid Bitcoin Maximalist Debate on Security and Loan Risks

Blockchain News/Crypto News Today/DeFi

For the first time, THORChain, a decentralized liquidity protocol, has surpassed a significant milestone, recording over $10 billion in total monthly trading volume.

This achievement was highlighted in a post on X, formerly known as Twitter, by THORChain’s official account, with Runscan data confirming a trading volume of $10.26 billion for the month.

Despite this success, Bitcoin maximalists are split on the platform’s security and the attractiveness of its offerings, particularly concerning interest-free loans against Bitcoin (BTC).

The discussion among Bitcoin enthusiasts unfolded on social media, following the announcement.

Fred Krueger, a mathematician and Bitcoin investor, expressed his support for THORChain on March 27, emphasizing his trust in the protocol’s BTC-backed loans as a secure option for Bitcoiners seeking liquidity.

Contrarily, Bitcoin analyst Dylan Le Clair criticized Krueger’s viewpoint, highlighting the inherent risks in taking out a loan that relies on the exchange rate of an altcoin, pointing out the unquantifiable risks involved in such transactions.

THORChain stands out for allowing seamless asset swaps across different blockchains and offering loans without interest or compulsory liquidations.

A notable update on January 30 reduced the collateral necessary for borrowing against Bitcoin and Ether, effectively allowing users to borrow up to half the value of their assets.

Chris Blec, an analyst, acknowledged THORChain’s unique no-liquidation lending model as “interesting” on March 10 but raised concerns about potential pitfalls.

The first risk involves lending Bitcoin to a protocol susceptible to failure or security breaches, an issue THORChain faced in 2021, albeit with a resolution that saw funds returned.

The second risk pertains to the dependency on a centralized provider, which could alter terms, thus endangering loans.

In addition to the platform’s innovative approach to loans, THORChain experienced interruptions to its mainnet service twice in 2023 due to potential security flaws, underscoring the ongoing debates over its safety and reliability for Bitcoiners.

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Tether Completes Elite Security Audit, Sets Sights on Expanding Cryptocurrency Dominance

Blockchain News/Crypto News Today/DeFi

Tether, the company behind the world’s largest stablecoin, has recently achieved a significant milestone by completing a System and Organization Controls 2 (SOC) audit, marking a pinnacle of security compliance as outlined by the American Institute of Certified Accountants (AICPA).

This accomplishment reflects Tether’s dedication to maintaining a secure and reliable platform for its users.

Paolo Ardoino, Tether’s CEO, emphasized the importance of this achievement in a statement released on April 1, saying, “This compliance measure assures our customers that their assets and data are managed in an environment meeting the highest standards for data protection and information security.

“This independent validation of security controls is vital for Tether, demonstrating our commitment to being the world’s most trusted and compliant stablecoin.”

In addition to this achievement, Tether has committed to annual SOC 2 audits to continuously verify that its security practices meet rigorous standards.

The company also plans to secure the SOC 2 Type II certification by the end of 2025, a testament to its long-term dedication to internal control efficacy over a 12-month evaluation period.

Tether’s stablecoin, USDT, has witnessed remarkable growth, achieving a $100 billion market cap on March 4 and ranking as the third-largest cryptocurrency, trailing only behind Ether and Bitcoin.

This growth underscores Tether’s significant impact on the crypto market, further highlighted by its plans to expand beyond stablecoins into Bitcoin mining.

The firm has outlined an ambitious $500 million investment strategy to establish Bitcoin mining operations in Uruguay, Paraguay, and El Salvador.

In a Bloomberg interview on Nov. 16, 2023, Ardoino shared Tether’s goal to command 1% of the Bitcoin mining network, alongside detailing plans for expanding its mining capacity to 450 megawatts (MW) by 2025.

This expansion includes considerations for a 300 MW facility and innovative strategies for operational flexibility, such as relocatable containerized facilities to adapt to fluctuating electricity prices.

Ardoino’s cautious yet optimistic approach to mining expansion reflects Tether’s broader strategy of careful growth, stating, “Mining for us is something that we have to learn and grow over time.

“We are not in a rush to become the biggest miner in the world.”

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Bitcoin Cash Surges Ahead of Second Halving Event, Reaches Record Open Interest in Futures

Bitcoin/Blockchain News/Crypto News Today

Bitcoin Cash (BCH) is experiencing a notable surge, trading at $574.84, reflecting a 9.06% increase in the last 24 hours, as the crypto community anticipates the second BCH halving event slated for next week.

This event has sparked significant trading activity, with traders actively adjusting their positions in anticipation.

According to NiceHash, the BCH halving is expected on April 4, leading to substantial movements in the market on March 28, with $190,140 liquidated in short positions and $211,870 in long positions.

Furthermore, Bitcoin Cash futures perpetual contracts reached a historic peak in open interest (OI), hitting $708.75 million, marking an 18.26% rise in a single day and a staggering 165% increase over the week, as reported by CoinGlass.

This surge in interest is a significant jump from May 2021, when OI was at $684.12 million, around the time BCH hit its five-year peak price of $1,399.

Contrastingly, back on the same date in 2020, just before the first BCH halving, futures open interest was significantly lower at $63.29.

During the first halving in April 2020, miner rewards were halved from 12.5 BCH to 6.25 BCH, a change that miners are responding to by ramping up their efforts in anticipation of the upcoming halving.

“DavidShares,” a prominent user on X, highlighted that the Bitcoin Cash hash rate has doubled in the past week. Hash rate, a critical measure of the computational power in a proof-of-work blockchain, reflects the mining and transaction processing capacity.

While Bitcoin is nearing its fourth halving on April 21, amid record highs, Bitcoin Cash’s price remains well below its all-time high of $4,355, achieved in December 2017, as noted by CoinMarketCap.

The earlier scheduling of the BCH halving, relative to Bitcoin’s, stems from a temporary algorithm adjustment made by Bitcoin Cash in 2017.

This adjustment expedited the block creation process, setting the stage for the earlier halving event compared to Bitcoin, scheduled for April 21.

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Tron Foundation Seeks Dismissal of SEC Lawsuit, Argues U.S. Securities Laws Overreach on Global Stage

Blockchain News/Crypto News Today

The Tron Foundation, responsible for the layer-1 blockchain Tron, has filed a motion with a New York federal court to dismiss a lawsuit brought by the United States Securities and Exchange Commission (SEC), contesting the regulator’s attempt to govern activities primarily outside the U.S.

In a statement on March 28, Tron emphasized, “The SEC is not a worldwide regulator,” criticizing the SEC’s endeavors to enforce U.S. securities laws on actions that mainly occur abroad.

In March of the previous year, the SEC launched legal action against Justin Sun, the founder of Tron, alongside the BitTorrent Foundation, and Rainberry Inc., its parent company based in San Francisco, which Tron acquired in 2018.

The SEC’s lawsuit alleges that the sale of Tron and BitTorrent (BTT) tokens constituted unregistered securities offerings.

Tron, headquartered in Singapore, argues in its dismissal motion that the SEC’s lawsuit targets “foreign digital asset offerings to foreign purchasers on global platforms,” over which the SEC lacks jurisdiction.

The foundation asserts that the token sales occurred entirely outside the United States and were specifically designed to exclude the U.S. market, pointing out that the SEC failed to prove any initial sales to U.S. residents.

Furthermore, Tron disputes the SEC’s claim regarding subsequent secondary sales of tokens on U.S.-based platforms, labeling these allegations as “tenuous at best.”

It also challenges the notion that the tokens meet the criteria for investment contracts under the Howey test, a standard for defining securities in the U.S.

In addition, the SEC accuses Justin Sun of engaging in deceptive trade practices, including “manipulative wash trading” and undisclosed payments to celebrities like Soulja Boy and Akon for promotion.

Tron counters these accusations by stating the SEC has not substantiated these claims with specific facts, particularly any that would imply victims in the United States.

Tron further criticizes the SEC for its broad allegations and lack of detailed factual claims, suggesting that the accusations against it rely too heavily on generalizations and fail to outline the precise basis for fraud claims.

The foundation also invokes the major questions doctrine, arguing that the case should be dismissed based on principles that regulatory authority must be explicitly granted by Congress, a stance previously taken by other crypto entities in similar disputes with the SEC.

The SEC is expected to respond to Tron’s dismissal motion within two weeks, though the commission had not commented on the motion at the time of the report.

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Consensys Defends Ethereum’s PoS Against SEC Concerns, Advocates for Approval of Spot Ether ETFs

Blockchain News/Crypto News Today/DeFi

Consensys recently responded to an inquiry by the United States Securities and Exchange Commission (SEC) regarding concerns about the potential for fraud and manipulation within Ethereum’s proof-of-stake (PoS) system, especially in relation to spot Ether exchange-traded funds (ETFs).

In a comment letter to the SEC, Consensys, a leading blockchain and Web3 software development firm known for creating the MetaMask wallet, argued that the worries about fraud and manipulation are unfounded.

The company elaborated on its position in a blog post, asserting, “In fact, Ethereum’s PoS implementation meets and even exceeds the security of Bitcoin’s proof-of-work (PoW), which underlies Bitcoin-based ETFs that have already been approved for trading by the SEC.”

Consensys outlined several features of Ethereum that contribute to its security advantages over Bitcoin, including quicker block finality, a split of duties between proposers and attesters to prevent dominance by any single group, higher costs for potential attackers, strict penalties for validator misconduct, and greater environmental sustainability.

Moreover, Consensys emphasized Ethereum’s extensive developer community and its operation on a fully transparent and public blockchain.

The firm urged the SEC to recognize these superior security attributes, which exceed those of Bitcoin-based ETPs already sanctioned by the SEC.

While spot Bitcoin ETFs have garnered significant interest, the approval of a spot Ether ETF within 2023 remains uncertain.

The SEC has set a deadline of May 23 to decide on the pending spot ETH ETF applications, starting with VanEck’s proposal.

Despite optimism from some experts about an approval in 2023, there’s speculation that the SEC may defer its decision into 2024.

Companies such as Fidelity, Hashdex, and ARK 21Shares are among those with pending spot ETH ETF applications. The SEC began green-lighting Ether futures-linked investment vehicles in October 2023.

The crypto betting markets are closely watching the SEC’s decisions, with over $12 million wagered on the outcome of the spot Ether ETF approvals before the end of May.

Previously, the SEC approved 11 spot Bitcoin ETFs on January 10. Grayscale, an investment management firm, has expressed hope for a positive verdict from the SEC on spot Ether ETFs by May.

Grayscale’s Chief Legal Officer, Craig Salm, noted on March 25 that the SEC’s current lack of direct engagement with ETF applicants does not necessarily indicate the outcome of their decisions.

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Ripple vs. SEC: Settlement Talks Highlight Regulatory Uncertainty Ahead of Key Pre-Trial Conference

Blockchain News/Crypto News Today/DeFi

In a significant development, Ripple Labs and the U.S. Securities and Exchange Commission (SEC) engaged in settlement discussions on March 29, aiming to resolve ongoing disputes before a crucial pre-trial conference scheduled for April.

Ripple’s Chief Legal Officer, Stuart Alderoty, expressed frustration over the SEC’s lack of clear regulatory guidance for the cryptocurrency industry on social media platform X.

Highlighting the ambiguity, Alderoty criticized the SEC, referencing eight major cryptocurrency lawsuits that underscore the regulatory uncertainties plaguing the sector.

These remarks stemmed from court-ordered settlement talks aimed at reconciling differences between Ripple Labs and the SEC.

The settlement conference, observed by Ripple CEO Brad Garlinghouse and Alderoty in Manhattan, sought to address these issues ahead of the final pre-trial conference set by Judge Analisa Torres for April 16.

This meeting underscored the urgency of reaching a potential settlement.

The SEC’s aggressive stance includes seeking a final judgment against Ripple Labs, demanding permanent injunctions, disgorgement with prejudgment interest, and civil penalties nearing $2 billion.

This approach has sparked a strong reaction from Ripple’s leadership, including Garlinghouse and Alderoty, who plan to challenge what they perceive as the SEC’s regulatory overreach in an upcoming filing on April 22.

The cryptocurrency community is closely watching this case, as its outcome could significantly impact the regulation of digital assets in the U.S.

The controversy over the SEC’s transparency and regulatory approach intensified following a court ruling in the Coinbase vs. SEC lawsuit, which conflicted with Judge Torres’s reasoning in the Ripple case, particularly regarding secondary market sales.

This discrepancy has fueled debate among lawyers and cryptocurrency enthusiasts over the interpretation of secondary sales as investment contracts, especially when the buyer’s counterparty is unknown.

Amid these legal battles, pro-XRP attorney Bill Morgan addressed the XRP community’s concerns, particularly regarding the impact of XRP’s secondary sales.

Morgan highlighted Judge Torres’s comments on the insufficient consideration given to the distinction between secondary and program sales by the SEC, a key point in Ripple’s defense and a significant issue for the XRP community.

This ongoing legal saga between Ripple and the SEC continues to captivate the cryptocurrency industry, with potential implications for the regulatory landscape and legal framework for digital assets in the U.S.

As the April 16 pretrial conference approaches, both parties are preparing for a confrontation that could decisively shape the future of cryptocurrency regulation and enforcement in the country.

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Anthropic Shuns Saudi Investments Amid FTX Bankruptcy Sale, Citing National Security Concerns

Blockchain News/Crypto News Today

AI startup Anthropic has decided not to accept investments from Saudi Arabia for the sale of an 8% stake in the company, originally purchased by Sam Bankman-Fried three years ago for $500 million.

This decision is made amidst the bankruptcy proceedings of FTX, and the stake, spurred by the booming interest in AI technologies, is now valued at over $1 billion.

The rejection of Saudi investments is attributed to national security concerns, particularly regarding the potential dual-use of technology for civilian and military applications, which could complicate matters with regulatory bodies like the Committee on Foreign Investment in the United States (CFIUS).

The sale, expected to finalize in the coming weeks, aims to use the proceeds to repay FTX customers.

The shares, classified as class B and lacking voting rights, are valued based on Anthropic’s latest $18.4 billion valuation.

Despite the company’s significant funding rounds totaling about $7 billion from tech behemoths such as Amazon, Alphabet, and Salesforce, the current transaction excludes these entities from the pool of potential buyers.

Instead, the sale is targeted towards a new investor syndicate through special purpose vehicles (SPVs), with venture firms being approached to participate.

Anthropic, known for its advanced language model competing with OpenAI’s ChatGPT, is led by founders Dario and Daniela Amodei.

Although they have the right to vet investors, they are not directly involved in the ongoing sale discussions.

Their acquaintance with Bankman-Fried was facilitated by a mutual interest in “effective altruism,” aimed at leveraging wealth for charitable causes.

While rejecting Saudi Arabian funds, Anthropic is open to investments from other sovereign wealth entities, including the UAE’s Mubadala, which is reportedly considering an investment.

The marketing of FTX’s stake is managed by Perella Weinberg.

Saudi Arabia’s sovereign wealth fund, the PIF, with assets over $900 billion, continues its aggressive technology sector investments, including talks with Andreessen Horowitz for creating a $40 billion AI-focused fund.

These moves align with Crown Prince Mohammed bin Salman’s “Vision 2030 Initiative” to diversify the nation’s economy beyond oil, including investments in global tech companies, sports leagues, and enhancing international financial relationships.

This backdrop adds complexity to Anthropic’s decision, especially as Saudi Arabia seeks to strengthen its tech capabilities amid growing ties with China.

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