SEC - Page 43

A US lawmaker, Representative Tim Burchett, has put forth a bold proposal to slash Securities and Exchange Commission (SEC) Chair Gary Gensler’s salary to a mere $1 per year as part of a broader plan to defund the regulatory agency.

This proposition is contained in an amendment to the Financial Services and General Government (FSGG) bill, a comprehensive piece of legislation introduced on July 13, with the aim of substantially reducing government expenditures across various sectors.

Currently, Gary Gensler receives an annual salary estimated to exceed $300,000 for his role as SEC Chair. Burchett’s move is not isolated, as the FSGG bill seeks to curtail funding for multiple government agencies.

Representative Steve Womack, while presenting the bill to the House Rules Committee on November 6, argued that the SEC and other agencies had become victims of regulatory overreach, placing an excessive financial burden on the government.

Womack’s perspective is that defunding the SEC would serve as a means to curtail its regulatory “intrusiveness” and refocus the agency on its primary mission.

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He stressed, “Specifically, we turn off rulemakings at the Securities and Exchange Commission that lack proper cost-benefit analysis and aggregate impact analysis.”

He also acknowledged the importance of the agencies under their jurisdiction but criticized their deviation from their intended mandates, asserting that such deviations have been detrimental to the American public.

It’s worth noting that this isn’t the first instance of Gary Gensler and the SEC facing criticism from US politicians.

Back on June 12, US Representatives Warren Davidson and Tom Emmer introduced the SEC Stabilization Act to the House of Representatives.

One of the key provisions of this bill aimed to oust Gensler from his position as SEC Chair, redistributing the agency’s power between the chair and commissioners.

Additionally, it proposed the creation of an executive director role and the addition of a sixth commissioner to prevent any single political party from holding a majority influence.

Davidson and Emmer have been vocal critics of Gensler’s leadership at the SEC, with Emmer characterizing him as a “bad faith regulator” and accusing him of disproportionately targeting the crypto community with enforcement actions while neglecting more significant wrongdoers.

These ongoing debates and legislative efforts reflect the contentious atmosphere surrounding the SEC’s role and leadership within the US government.

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Bitfinex, a cryptocurrency exchange, disclosed a “minor” security breach stemming from the hacking of one of its customer support agents that occurred between October 30 and November 5.

While this incident resulted in a series of phishing attacks targeting Bitfinex users, the company asserted that minimal harm was inflicted, as outlined in a statement issued on November 4.

The breach involved the unauthorized access to a portion of Bitfinex’s customer support boards containing partial, outdated, and incomplete information.

This breach was facilitated through phishing tactics employed against a customer support agent.

Fortunately, the compromised support agent did not possess “senior permissions,” limiting their access to support tools and help desk tickets, according to Bitfinex.

It is noteworthy that Bitfinex emphasized the integrity of its core systems remained intact, and no customer funds were compromised.

The company asserted that no servers, wallets, or databases were accessed, ensuring the safety of customer assets on the platform, and no password information was exposed.

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In fact, most of the affected customer accounts were either empty or inactive.

While Bitfinex indicated that the issue has been “resolved,” they continue to scrutinize the incident and the compromised data, actively reaching out to affected customers.

Additionally, Bitfinex promptly reported the incident to law enforcement authorities and is collaborating with investigative agencies to identify the perpetrators behind the phishing attack.

The company underlined its history of successfully securing convictions against individuals who have targeted their operations in the past.

Despite the breach, Bitfinex highlighted its commitment to maintaining robust security procedures, which includes mandatory cybersecurity training for all employees.

Founded in Hong Kong in 2012, Bitfinex has been under the leadership of CEO Jean-Louis van der Velde since 2013.

In terms of its reputation within the cryptocurrency community, Bitfinex ranks 17th in CoinGecko’s “Trust Score” index for cryptocurrency exchanges.

Over the last month, the platform received more than 800,000 visits, underscoring its popularity among cryptocurrency traders.

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Renowned cryptocurrency lawyer John Deaton has shared his perspective on the ongoing lawsuit between the United States Securities and Exchange Commission (SEC) and Ripple, suggesting that a settlement amount of $20 million or less would represent a significant legal victory for Ripple.

In a recent post on a social media platform, Deaton firmly dismissed the notion that the lawsuit’s outcome is evenly balanced, instead asserting that it tilts heavily in favor of Ripple, with an approximate 90/10 advantage.

Deaton’s comments were prompted by a post from Stuart Alderoty, Ripple’s Chief Legal Officer, who highlighted another legal setback for the SEC.

Deaton’s viewpoint aligns with the sentiment prevailing in the cryptocurrency community, where many see the proposed $20 million settlement as a favorable resolution for Ripple.

This assessment takes into account the potential ramifications of the XRP lawsuit and the broader regulatory landscape surrounding digital currencies.

Stuart Alderoty’s post further contributes to this narrative by pointing out yet another setback for the SEC. In the SEC vs.

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Govil case, the U.S. Court of Appeals for the Second Circuit ruled that the SEC cannot demand a substantial disgorgement award without first demonstrating actual financial harm to investors.

Essentially, this implies that in the absence of harm, there should be no penalty imposed.

The SEC initiated legal action against Ripple Labs in December 2020, alleging that the company conducted an unregistered securities offering by selling its native cryptocurrency, XRP.

The case took a significant turn when Judge Analisa Torres ruled that XRP was not a security when traded on the secondary market. Additionally, charges against Ripple executives were reduced during the course of the lawsuit.

Meanwhile, Judge Torres has recently approved an order regarding a joint request from the SEC and Ripple to propose a briefing schedule to address institutional sales of XRP.

This pertains to the portion of the XRP lawsuit where the company was found to have violated securities laws.

Judge Torres has instructed both parties to submit a joint briefing schedule no later than November 9th, indicating ongoing developments in this high-profile legal battle.

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The United States Securities and Exchange Commission (SEC) has rejected the jury’s verdict on Terraform Labs’ alleged violations and is now seeking a summary judgment on all the claims.

The SEC’s stance was made evident in a court filing dated October 27, where they expressed dissatisfaction with the jury’s leniency towards Do Kwon’s alleged involvement in the fraudulent activities that ultimately led to the collapse of the Terra ecosystem.

The court filing, submitted in the U.S. District Court for the Southern District of New York, emphasized the SEC’s belief that Kwon should be held accountable for Terraform’s violations of Exchange Act Section 10(b) and Rule 10b-5 under Exchange Act Section 20(a).

According to the SEC, the evidence they have presented indicates Kwon’s role in misleading cryptocurrency investors by promoting Terra and its in-house Terra LUNA tokens as securities.

On the same day, Do Kwon and Terraform Labs requested that the judge dismiss the SEC’s lawsuit, arguing that Terra Classic (LUNC), TerraClassicUSD (USTC), Mirror Protocol (MIR), and its mirrored assets (mAssets) should not be considered securities as the SEC had alleged.

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Nevertheless, the SEC maintains that Kwon and Terraform Labs not only offered and sold securities but also conducted unregistered transactions involving LUNA and MIR, engaged in transactions with mAssets, and committed fraud.

While Terra’s co-founder, Daniel Shin’s lawyer, attributed the collapse of the Terra ecosystem to the “unreasonable operation of the Anchor Protocol and external attacks carried out by Do-hyung Kwon,” the company recently shifted blame onto market maker Citadel Securities.

Terra accused Citadel Securities of participating in an alleged “concerted, intentional effort” to cause the depeg of its TerraUSD (UST) stablecoin in 2022.

In response, Citadel Securities issued a statement to Cointelegraph, calling Terra’s motion “frivolous” and asserting that it was based on false social media posts.

Citadel Securities also emphasized that they had already provided information confirming their lack of involvement in the matter.

In summary, the SEC has challenged the jury’s decision regarding Terraform Labs’ alleged violations, and both parties continue to engage in legal battles over whether Terra’s assets should be classified as securities, while the blame for the Terra ecosystem’s collapse is shifting between internal and external factors.

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Payment giant PayPal has been served with a subpoena by the United States Securities and Exchange Commission (SEC) concerning its U.S. dollar-pegged stablecoin, according to the firm’s official disclosure in its Q3 financial report filed with the SEC on November 2.

The SEC’s Enforcement division issued the subpoena to PayPal on November 1, requesting specific documents.

PayPal stated that it is fully cooperating with the SEC’s request.

This development comes approximately three months after PayPal introduced its PYUSD stablecoin in early August.

PYUSD is backed by U.S. dollar deposits, short-term Treasurys, and similar cash equivalents, with Paxos Trust acting as its issuer. The stablecoin operates on the Ethereum blockchain and is designed for digital payments and Web3 applications.

Paxos, the issuer, reported that PYUSD has enjoyed a successful launch, achieving a market capitalization of $150 million within two months of its introduction.

As of now, the market capitalization of PYUSD stands at approximately $159 million, with a daily trading volume of nearly $2.7 million, as reported by CoinGecko.

PayPal has not yet responded to requests for comment from Cointelegraph.

The rapid adoption of PayPal USD was driven in part by its listing on major exchanges such as Coinbase, Crypto.com, Bitstamp, and Kraken shortly after its launch.

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In September, PayPal announced plans to integrate PYUSD into its Venmo mobile payment service, allowing users to buy and send PYUSD to friends and family.

PayPal has been actively expanding its crypto-related initiatives not only in the United States but also internationally.

In late October, it received a license from the United Kingdom Financial Conduct Authority, allowing it to offer crypto services in the UK.

This recent action by the SEC against PayPal further highlights the challenging regulatory environment for crypto companies in the United States.

The SEC has initiated lawsuits against several prominent domestic crypto firms, including its ongoing lawsuit against Coinbase.

In a notable development in October 2023, the SEC moved to dismiss its three-year lawsuit against Ripple, the company behind the XRP token, one of the largest cryptocurrencies by market capitalization.

In April 2023, Circle CEO Jeremy Allaire attributed the declining market capitalization of Circle’s USD Coin stablecoin to increased regulatory scrutiny and a crackdown on cryptocurrencies by U.S. regulators.

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Do Kwon, the co-founder of Terraform Labs, has formally requested that a United States district judge dismiss a securities and fraud lawsuit initiated by the United States Securities and Exchange Commission (SEC), arguing that the SEC has failed to provide evidence of wrongdoing by him or his firm.

In a legal filing submitted on October 27th to the U.S. District Court for the Southern District of New York, legal representatives for both Do Kwon and Terraform presented their case, asserting that the cryptocurrencies associated with Terraform, namely Terra Classic (LUNC), TerraClassicUSD (USTC), Mirror Protocol (MIR), and the mirrored assets (mAssets), which replicate traditional stocks on the blockchain, should not be classified as securities as alleged by the SEC.

The lawyers emphasized that, despite an extensive two-year investigation, the completion of a thorough discovery process involving over 20 depositions and the exchange of more than two million documents and data, the SEC has failed to substantiate its claims of wrongdoing.

They contended that there is insufficient evidence to support many of the SEC’s allegations, suggesting that the regulator was aware that some of its claims were unfounded, particularly the allegation that Kwon and Terraform secretly transferred millions of dollars into Swiss bank accounts for personal gain.

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In the lawsuit filed against Kwon and Terraform in February, the SEC accused the duo of sending 10,000 Bitcoins to a Swiss financial institution and withdrawing $100 million, further alleging that they engaged in fraudulent activities by repeatedly making false and misleading statements.

Kwon’s legal team insisted that the SEC knew the falsity of this allegation when initiating the case, emphasizing that Terraform Labs had no customers and therefore, no customer funds.

The Terra ecosystem, valued at $40 billion, experienced a significant collapse in May 2022 due to the devaluation of TerraUSD (UST), its algorithmic stablecoin, which lost its peg to the U.S. dollar.

Additionally, Kwon and Terraform sought to exclude the opinions of SEC experts, including a report by Rutgers University economics professor Bruce Mizrach, which they criticized as “junk science.”

Judge Jed Rakoff, presiding over the case, had previously rejected Terraform’s attempt to have the lawsuit dismissed.

It’s worth noting that Do Kwon is currently detained in Montenegro and has previously requested that the court reject the SEC’s motion to extradite and interview him in the United States.

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In a recently resurfaced video from 2019, Gary Gensler, now the head of the United States Securities and Exchange Commission (SEC), criticized the SEC’s approach to spot Bitcoin products, calling it “inconsistent.”

The video, which has gained renewed attention on social media, captures a discussion on blockchain regulation between Gensler and SEC Commissioner Hester Peirce during the 2019 MIT Bitcoin Expo.

During the conversation, Gensler expressed his views on the regulatory landscape for Bitcoin and other cryptocurrencies.

He pointed out the perceived inconsistency in the treatment of Bitcoin futures and Bitcoin exchange-traded funds (ETFs). Gensler noted that while Bitcoin futures and possibly Ethereum futures were allowed, Bitcoin ETFs had not received approval.

He highlighted the similarity in the underlying technologies and suggested that this inconsistency was a concern.

In the wake of the video’s resurgence, the cryptocurrency community on social media platforms, including Twitter, couldn’t help but draw attention to the contrast between Gensler’s past and present views on spot Bitcoin ETFs.

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Some users humorously remarked on the change in Gensler’s stance, with one market analyst posting, “Gary Gensler says Gary Gensler is wrong,” and another user commenting on the shift in his approach.

As of now, the SEC has granted approval for Bitcoin and Ether futures ETFs but has consistently rejected spot Bitcoin ETF applications since 2017.

This pattern of rejections continued under Gensler’s leadership at the SEC. Gensler has justified these rejections by citing concerns about the lack of adequate protections against market manipulation in spot Bitcoin ETFs.

Notably, Gensler’s SEC faced a lawsuit from asset manager Grayscale after it rejected the company’s proposal to convert its existing Bitcoin trust into a spot ETF.

A court ultimately ruled that the SEC’s rejection of the application was “arbitrary and capricious,” and the SEC did not pursue an appeal against this decision.

The resurgence of this video has sparked discussions and debates about the evolving regulatory landscape for cryptocurrencies in the United States and the SEC’s role in shaping it.

It remains to be seen how Gensler’s current position as SEC chairman will influence future decisions regarding spot Bitcoin ETFs and other cryptocurrency-related matters.

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Ripple CEO Brad Garlinghouse has voiced strong criticism of former U.S. Securities and Exchange Commission (SEC) Chair Jay Clayton’s recent statements concerning the agency’s regulatory approach.

The SEC has been actively pursuing regulatory actions against crypto exchanges and companies since the beginning of 2023.

In an interview with CNBC on June 29, 2023, Jay Clayton expressed his belief that the SEC should only take legal action against specific companies when there are solid legal grounds to do so.

He emphasized the importance of regulatory agencies introducing regulations and pursuing legal cases that they are confident will successfully withstand judicial scrutiny.

Brad Garlinghouse seized the opportunity to remind everyone that it was Jay Clayton who had initiated a lawsuit against Ripple, himself, and Ripple co-founder Christian Larsen in December 2020.

The SEC’s lawsuit alleged that the company and its two executives had engaged in an “unregistered, ongoing digital asset securities offering,” having raised over $1.3 billion through the sale of XRP tokens.

Garlinghouse pointed out that Clayton had brought the case against them and then abruptly left his position the very next day.

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Clayton’s remarks from June 2023 have drawn significant attention, especially in light of the recent developments in the lawsuit involving Garlinghouse and Larsen.

As previously reported, the SEC made a move to dismiss the charges against the two executives in October.

This decision by the SEC follows a significant ruling by Judge Analisa Torres in July.

The ruling partially favored Ripple, declaring that the retail sales of XRP tokens did not meet the legal definition of a security.

However, the court did find Ripple in violation of securities laws for directly selling XRP tokens to institutional investors.

In essence, Garlinghouse’s criticism underscores the ongoing tension between crypto companies and regulatory bodies like the SEC.

The case against Ripple has been a focal point of this tension, with key figures like Clayton at the center of the controversy.

As the crypto industry continues to evolve, these regulatory challenges will likely remain a subject of intense debate and legal scrutiny.

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