SEC - Page 61

US regulators have slapped eIght celebrities with charges for operating an illegal cryptocurrency trading scheme.

In a Securities and Exchange Commission (SEC) press release, stars such as rapper Soulja Boy, actress Lindsay Lohan, and others face charges. According to the statement, they allegedly failed to disclose to social media followers they had been paid to promote TRX and BTT cryptocurrencies.

According to reports, Lohan and boxing superstar Jake Paul have agreed on a settlement.

Additional celebrities involved in the scandal include singer Austin Mahone, rapper Lil’ Yachty, singer Akon, porn actress Kendra Lust, and hip-hop artist Ne-Yo.

JUST IN:

The SEC has charged eight celebrities regarding "illegally touting" $TRX and $BTT without disclosing that they were being paid.

The celebrities are:
– Lindsay Lohan
– Jake Paul
– Soulja Boy
– Austin Mahone
– Kendra Lust
– Lil Yachty
– Akon
– Ne-Yo

— unusual_whales (@unusual_whales) March 22, 2023

The SEC stated: “[It] charged the following eight celebrities for illegally touting TRX and/or BTT without disclosing that they were compensated for doing so and the amount of their compensation.”

SEC authorities also charged cryptocurrency investor Justin Sun with fraud for allegedly manipulating trading for two tokens.

The statement continued: [Sun is accused of] “orchestrating a promotional campaign in which he and his celebrity promoters hid the fact that the celebrities were paid for their tweet.”

It also charges Sun’s companies Tron Foundation Ltd, BitTorrent Foundation Ltd, and Rainberry Inc.

Regulators Crack Down on Superstar Crypto Scheme

SEC chair Gary Gensler said the case demonstrated the “high risk investors face when crypto asset securities are offered and sold without proper disclosure.”

He added: “As alleged, Sun and his companies not only targeted U.S. investors in their unregistered offers and sales, generating millions in illegal proceeds at the expense of investors, but they also coordinated wash trading on an unregistered trading platform to create the misleading appearance of active trading in TRX.

It also accused Sun of convincing investors to buy TRX and BTT with the promotional campaign, according to Gurbir S Grewal, SEC Director of Division of Enforcement.

He concluded: “As alleged in the complaint, Sun and others used an age-old playbook to mislead and harm investors by first offering securities without complying with registration and disclosure requirements and then manipulating the market for those very securities.”

Lohan has paid the SEC $10,000, with an additional $30,000 in fines. Paul has paid over $100,000. The eight people, excluding Soulja Boy and Mahone, have paid a total of over $400,000 in settlements.

Signum Digital announced on Thursday it had teamed up with the Hong Kong Securities and Futures Commission (SFC) after the latter granted it an approval-in-principle to launch its security token offering (STO).

The tokens will offer digital assets via blockchain technologies based on tangible assets. These can include artworks, real estate, private equities, and commodities.

The company, who partnered with Coinstreet and Somerley, said that doing so could also lower risks for cryptocurrencies, namely amid major market volatility.

Samsun Lee, Chief Executive of Signum Digital, said in a statement: “In today’s financial market, SMEs face many challenges in traditional fundraising channels, and professional investors also have limited options for high quality alternative investment opportunities.”

He added that Signum Digital hoped to “fill such a gap” with its CS-Pro security token offering and subscription platform.

Somerley chairman Martin Sabine added that his company believed there was “considerable pent-up demand” for professional investors to “deploy a proportion of their portfolio into digital assets.”

He continued: “The events of 2022 may have shaken their confidence in parts of the crypto world but not their belief that digital assets will play a pivotal role in the future of finance.”

His company’s new offering with Signum Digital would become a “medium risk way of participating in these future opportunities.”

Hong Kong Opens Doors to Crypto

The news comes as Hong Kong explores regulations for cryptocurrency and other digital assets, namely after the SFC published its virtual asset trading rules in February.

The Government agency is seeking expert advice on the subject to outline its cryptocurrency regulatory framework. This has attracted numerous firms to invest in Hong Kong’s growing cryptocurrency hub.

The SFC announced at the time: “Operators of virtual asset trading platforms which plan to apply for a licence, including pre-existing platforms […], should begin to review and revise their systems and controls to prepare for the new regime.

It also warned that companies failing to apply for licences “should start preparing for an orderly closure” of their operations in the finance region.

Gary Gensler, chairman of the US Securities and Exchange Commission (SEC), has restated his claim that his organisation could regulate proof-of-stake tokens under the Howey Test.

Gensler told reporters on Wednesday that such tokens could spark securities regulations as investors expected returns after purchasing tokens backed by proof-of-stake mechanisms.

He said as quoted by The Block: “Whatever they’re promoting and putting into a protocol, and locking up their tokens in a protocol, a protocol that’s often a small group of entrepreneurs and developers are developing, I would just suggest that each of these token operators … seek to come into compliance, and the same with the intermediaries”

The comments contradict statements from Rostin Behnam, Commodity Futures Trading Commission (CFTC) chairman, who revealed last week that his agency should regulate Ether (ETH) as a commodity rather than a security.

Gensler, the SEC, and other US regulators have launched an industry-wide crackdown on cryptocurrencies in recent months, including Paxos, Ripple, CoinEx, and Kraken.

The news comes after New York Attorney General Leticia James sued crypto exchange platform KuCoin, where she alleged the latter had sold unregistered US securities in New York.

A key executive for venture capital firm Andreessen Horowitz has slammed the United States Securities and Exchange Commission (SEC) for poorly-defined regulatory frameworks, reports show.

The comments come at Tuesday’s Futures Industry Association event, where numerous cryptocurrency executives and thought leaders gathered to discuss the crypto industry.

Andreessen Horowitz (a16z) chief, Brian Quintenz, said: “The SEC is completely out of control. They’re going rogue.”

He said in a panel talk: “The United States has to make a decision about whether or not it will embrace and support innovators in this country. There are jurisdictions that are mindful about this. That is not what we are seeing in the United States, and the clock is ticking.”

CoinFund President Chris Perkins added that locations such as the United Kingdom, Singapore, and Hong Kong surpassed the US in regulatory frameworks.

He added: “We try to advise our founders about regulatory risk, but it’s hard without regulatory clarity. Other countries are not waiting for us.”

Perkins added that industry experts have aimed to build future laws backed with bipartisan support. Julia Hueckel, Coinbase associate general counsel, added: “I see bipartisan interest, and that gives me hope.”

The news comes after New York Attorney General (NYAG) Leticia James sued cryptocurrency trading platform KuCoin, designating its sale of Ether (ETH) as an unregistered security.

US regulators have also targeted cryptocurrency firms such as Binance.us, Binance, Paxos, Ripple, Gemini, CoinEx, and many others. Gemini co-founder Tyler Winklevoss slammed the SEC in January after the latter sued the exchange for selling unregistered securities with its Earn programme.

KuCoin faces a lawsuit after New York State Attorney General, Letitia James, filed the measure on Thursday.

In a press release, she accused the cryptocurrency firm of violating securities laws, citing unregistered tokens as securities.

The regulator is the first to accuse Ether of becoming a security, despite the Commodity Futures Trading Commission (CFTC) consistently designating Bitcoin and Ether as commodities.

The regulator claims that the Martin Act allows regulators to designate Ether tokens as securities, allowing them to file criminal charges against violators.

The NYAG said in a statement, “KuCoin claimed to be an exchange, but is not registered with the Securities and Exchange Commission as a national securities exchange or appropriately designated by the [CFTC] as is required under New York Law.

“KuCoin also failed to comply with a subpoena issued by OAG to provide more information about its digital asset trading activities in the state. KuCoin has already been found to be operating without proper licensure in multiple jurisdictions including the Seychelles, Canada, and the Netherlands.”

Shortly after the NYAG publicised the lawsuit, ETH dropped 8 percent, with other cryptocurrencies following suit.

If you’re keeping score:

White House announces plan to add a 30% tax to energy used to mine $BTC or any other digital asset.

NYAG sues KuCoin and dubs $ETH a security.

Elizabeth Warren celebrates the Silvergate $SI bank run and liquidation.

Gensler pens op-ed and tweet… https://t.co/qqrDBBhOvA

— Andrew (@AP_Abacus) March 9, 2023

The statement also argues that KuCoin Earn, the platform’s staking and cryptocurrency lending offering, allowed NYAG to create a KuCoin account with a New York IP address. The exchange allegedly charged a fee for buying and selling tokens, as well as depositing tokens on the KuCoin Earn scheme.

James hopes to receive a court order to block KuCoin from holding exchange status and block the firm from trading in New York. The office also plans to geo-block KuCoin and block access to its apps and services.

The news comes after the NYAG launched further measures against Nexo, Celcius, CoinEx for allegedly offering unregistered securities to customers.

The New York State Attorney General has launched a further lawsuit this month as cryptocurrency exchange CoinEx has come under fire from the regulator.

NYSAG authorities have accused the exchange of operating as an unregistered securities broker as well as commodity broker-dealer.

Attorney General Letitia James said in a statement: “Our laws are designed to protect New Yorkers, and when companies ignore them, they put residents, investors, and businesses at risk. The days of crypto companies like CoinEx acting like the rules do not apply to them are over. My office will continue to protect New York investors and ensure our state’s laws are followed.”

The Office of the Attorney General (OAG) alleges it could buy and sell cryptocurrencies on CoinEx despite the company not being registered in the New York, citing an affidavit.

It adds the availability of unregistered companies violated New York’s Martin Act, allowing the NYAG to enforce actions to block the exchange from operating in New York. The filing continues that stablecoins such as LUNA, LBC, AMP, and RLY were securities and commodities.

The NYAG filing explained further,

“The Tokens each fall within the Martin Act’s definition of commodities, which includes any foreign currency and any other good, article, or material. CoinEx is engaged in the business of selling and offering to sell commodities through accounts, agreements, or contracts to accounts in New York primarily for investment purposes. The Tokens are also securities under the Martin Act because they represent investments of money in common enterprises with profits to be derived primarily from the efforts of others.”

Heavy Measures on CoinEx

It continued, stating CoinEx refused to comply after the NYAG suboenad the firm. The agency will respond by attempting to block the cryptocurrency firm from accessing local IP addresses and providing “full monetary restitution” along with paying fees.

The news comes as New York authorities aim to step up the agency’s efforts to access tools needed to monitor cryptocurrency activities across the US state.

Additional restrictions came after Paxos stablecoin rival Circle blew the whistle on the former’s cryptocurrency offering to the New York Department of Financial Services (NYDFS) last year.

The agency claims that Binance failed to show sufficient reserves for its Binance USD (BUSD) tokens minted and issued from Paxos.

GBBC Digital Finance partnered with the International Organisation of Securities Commissions (IOSCO) on Thursday, becoming an affiliate member of the association.

It joins as the 70th member of the group’s IOSCO Affiliate Members Consultative Committee. The latter offers insights into the IOSCO’s policy and standards

We're very proud to announce that GBBC Digital Finance has joined the International Organization of Securities Commissions (IOSCO) as an Affiliate Member.

Read our full press release here: https://t.co/KxOI1EJW9y pic.twitter.com/G8DrVBMUrj

— GBBC Digital Finance (@GlobalDigitalFi) February 16, 2023

The news comes as the organisation published its Crypto-Assets Roadmap in July last year.

Lawrence Wintermeyer, CBBC Digital Finance chairman, said at the time that the addition was an “important milestone” for his organisation, its members, and the “wider digital finance industry.”

Emma Joyce, CEO of GBBC Digital Finance, added: “We are proud to be an affiliate member of such an esteemed membership organization. Our priority at GDF in 2023 is engagement with regulators and [policymakers] and jointly examining how we might construct a DeFI education and engagement platform.

The news comes after the organisation published a DeFi research paper in March last year. Researchers noted several risks to DeFi systems and later partnered with the Bank for International Settlements to tackle the issues.

As a result, the joint effort outlined potential solutions for safeguarding stablecoin technologies.

The IOSCO creates and backs global securities standards for the finance industry, hosting 35 national securities regulators across 200 partner organisations.

The United States Securities and Exchange Commission (SEC) has launched a lawsuit against Terraform Labs and its co-founder Do Kwon, according to a recent complaint.

Terraform Labs’ created the TerraUSD stablecoin, which collapsed last year due to fraud. Regulators claim that Terraform and Kwon had defrauded investors by misleading them on who used the cryptocurrency for payments and designating LUNA and Anchor Protocol as “crypto asset securities.”

Terraform and Kwon face charges of selling unregistered securities, security-based swaps, and other offences.

The suit alleges: “Terraform and Kwon also misled investors about one of the most important aspects of Terraform’s offering – the stability of UST, the algorithmic ‘stablecoin’ purportedly pegged to the U.S. dollar. UST’s price falling below its $1.00 ‘peg’ and not quickly being restored by the algorithm would spell doom for the entire Terraform ecosystem, given that UST and LUNA had no reserve of assets or any other backing.”

Kwon and Terraform employees worked jointly with an unnamed US trading firm to resolve the digital coin’s peg to USD after dropping nearly 10 cents in May 2021.

The anonymous trading firm later acquired the UST tokens and traded them for LUNA.

SEC Complaint Details, Comments

Explaining further, the complaint continued: “Almost immediately upon UST’s recovery in May 2021, Terraform and Kwon began to make materially misleading statements about how UST’s peg to the dollar was restored.”

The two suspects also mislead invstors on the cause bhind UST’s recoupling with the USD. The digital currency later collapsed last year, triggering bankruptcies across crypto markets.

SEC Director of Enforcement, Gurbir Grewal, said in a press release: “Today’s action not only holds the defendants accountable for their roles in Terra’s collapse, which devastated both retail and institutional investors and sent shock waves through the crypto markets, but once again highlights that we look to the economic realities of an offering, not the labels put on it.”

He concluded: “As alleged in our complaint, the Terraform ecosystem was neither decentralized, nor finance. It was simply a fraud propped up by a so-called algorithmic “stablecoin” – the price of which was controlled by the defendants, not any code.”

Cryptocurrency giant Binance has faced massive headwinds on Monday after reports found net outflows of $831 million in a 24-hour period.

Blockchain research firm Nansen revealed the data, which follows a major regulatory crackdown on Binance USD (BUSD) issued by crypto trading platform Paxos.

Nansen blockchain data showed that users withdrew roughly $2.8 billion of their digital assets, surpassing $2 billion in deposits over the same period.

The withdrawals hit Binance after the New York Department of Financial Services slapped Paxos with an order to stop issuing the stablecoin. The third-largest in the world, BUSD accounts for 35 percent of Binance’s total trading volumes.

Binance CEO Comments on SEC-Paxos Lawsuit

In a series of tweets, Binance chief executive Changpeng Zhao (CZ) commented on the ongoing developments to his followers that “all funds are #SAFU.”

CZ stated that due to the regulatory crackdown, BUSD’s market capitalisation would decrease over time, adding Paxos would “continue to service the product, and manage redemptions.”

He added that he did not have any information on the SEC lawsuit against Paxos and that the latter had “assured us the funds are #SAFU, and fully covered by reserves in their banks.”

#BUSD. A thread. 1/8

In summary, BUSD is issued and redeemed by Paxos. And funds are #SAFU!

— CZ 🔶 Binance (@cz_binance) February 13, 2023

Zhao said: “I am not an expert on US laws. But personally […] ‘IF’ BUSD is ruled as a security by the courts, it will have profound impacts on how the crypto industry will develop [in] the jurisdictions where it is ruled as such. Binance will continue to support BUSD for the foreseeable future.

He stated that Binance did not “foresee users migrating to other stablecoins over time,” adding it would make product adjustments “accordingly.”

CZ concluded: “Given the ongoing regulatory uncertainty in certain markets, we will be reviewing other projects in those jurisdictions to ensure our users are insulated from any undue harm.”