Crypto

Netflix has released a trailer for its new crypto documentary, Bitconned, about the rise and fall of Centra Tech, a scam that was part of the wave of initial coin offerings in 2017. The blowback from the scheme caught DJ Khaled and Floyd Mayweather, who had promoted it — they were fined by the SEC. Ray Trapani, one of the co-founders, appears to be a key narrator of the Netflix documentary.

Here’s a fun profile of Gary Gensler, the head of the Securities and Exchange Commission, with a lot of details on his approach to enforcement (“Though you might think otherwise, I don’t spend the majority of my time on crypto,” he says). Don’t worry, there’s even an explanation of his genuinely weird social media antics.

CoinDesk and TechCrunch report U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) action against Sinbad.io, calling it a money laundering tool used by the “Lazarus” state-sponsored hackers used to move a “significant” portion of the $620 million in crypto stolen from Axie Infinity last year.

This follows sanctions against other mixing services like Blender.io and Tornado Cash.

OFAC:

Lazarus Group has operated for more than ten years and is believed to have stolen over $2 billion worth of digital assets... the DPRK has resorted to using illicit tactics, such as heists perpetrated by the Lazarus Group, to generate revenue for its unlawful weapons of mass destruction and ballistic missile programs. 

Last week, Changpeng Zhao agreed to step down as CEO of the massive cryptocurrency exchange Binance — part of a plea deal with the DOJ for breaking anti-money-laundering laws.

However, one remaining disagreement has been where he will spend his time while awaiting sentencing for the felony charges. Despite agreeing to a $175 million bond, prosecutors consider him a flight risk and wanted to keep him in the US. That question isn’t fully answered, but Reuters reports a judge ruled CZ is staying the US for now while the court considers it, instead of being allowed to return to the UAE.

What if we really have already found every criminal who runs a cryptocurrency exchange?

Now that Binance reached a $4 billion settlement with the DOJ and ditched its CEO Changpeng Zhao, Coinbase head Brian Armstrong said to CNBC in an interview, “The enforcement action against Binance, that’s allowing us to kind of turn the page on that and hopefully close that chapter of history.”

Coinbase is also being sued by the SEC for allegedly selling unregistered securities, by the way.

But now the question is: to where? Kwon faces charges in both the US and South Korea in connection with the collapse of the Terra stablecoin and its sister token Luna.

Kwon was arrested in Montenegro in June and spent four months in prison for attempting to use a fake passport. Federal prosecutors in the US filed additional charges against Kwon following his arrest, accusing him of wire fraud, commodities fraud, securities fraud, and more.

A Montenegrin Justice Minister must now decide whether to extradite Kwon to the US or South Korea.

In a lawsuit filed on Tuesday, Genesis alleges Gemini, a crypto exchange owned by the Winklevoss twins, made “significant withdrawals” before Genesis filed for bankruptcy, contributing to a “run on the bank.”

This comes after Gemini sued Genesis owner Digital Currency Group (DCG) in July, claiming it engaged in fraud through the high-yield Earn program they partnered on. When not waging legal battles against each other, Gemini, Genesis, and DCG must deal with the lawsuit New York’s Attorney General filed against all three of them.

Another one of the world’s largest cryptocurrency exchanges joins Coinbase and Binance in facing charges of operating as an unregistered securities exchange, as well as accusations (PDF) of commingling customers' crypto assets and cash with its own and even allegedly paying expenses directly from bank accounts that held customer cash.

Kraken agreed to pay a $30 million fine in a settlement when it ended its crypto staking program in the US earlier this year; we’ll see if this case ends up costing it more.

Following a jury's conviction of former FTX boss Sam Bankman-Fried on fraud charges, the Wall Street Journal reports that several former FTX employees, including former general counsel Can Sun, are involved in launching a new cryptocurrency exchange based on Dubai.

Sun and Ferrante said they wanted to use the lessons they learned from FTX’s failure to protect user funds. Backpack Exchange, the name under which Trek Labs will do business, will use Backpack’s technology to allow users to hold funds in their own “self-custody” crypto wallets that the exchange itself wouldn’t be able to unilaterally access, they said.

With this stage of Sam Bankman-Fried’s big crypto fraud trial over after the jury found the former FTX boss guilty, The Verge reporter Elizabeth Lopatto joined the Crypto Critics’ Corner podcast to discuss everything that went on in the courtroom.

Along with hosts Bennett Tomlin and Cas Piancey, they discuss not only the trial’s final moments but also what’s next for SBF.

“We are currently investigating the Poloniex hack incident,” confirmed infamous hype man Justin Sun in a tweet. As we reported last year, Sun purchased “Polo” because of its gray-area approach to know-your-customer rules. Somewhat ironically, he is now offering a “white hat bounty” to the hacker.

Seriously, you’ll have to guess; this press release is completely inscrutable.

Its previous NFT work didn’t go so well.

The Bored Ape Yacht Club has concluded its investigation into what caused at least 15 convention attendees to suffer eye pain, vision problems, and sunburnt skin during ApeFest 2023, determining that UV-A emitting lights were likely behind the injuries.

A similar situation was reported in 2017 after specialist lights used for disinfection were incorrectly installed during a Hypebeast event.

Bullish, a crypto exchange led by former New York Stock Exchange president Tom Farley, is just one of the companies that could potentially relaunch the fallen exchange, The WSJ reports.

Fintech startup Figure Technologies is also in the running, as is the crypto venture capital firm Proof Group, which was one of the companies that bought up Celsius’ assets after it went bankrupt. We could find out FTX’s winning bidder as soon as December, according to the WSJ.

We’ve got the goss on early wake-ups, lawyer fashion, courtroom sketches, and other pressing matters. Go ahead and leave a question here if you’ve got one... [Arnold voice] I’ll be back.

Kevin Dugan’s overview really sums it up: stripped of the affectations, we discovered there wasn’t much to Sam Bankman-Fried at all.

CEO Devin Finzer says OpenSea is “shifting to a smaller team with a direct connection to users.” Decrypt reports about 50 percent of employees are impacted. When it laid off 20 percent of its employees last year, around 230 people remained.

This chart shows OpenSea activity peaked with over 50,000 active wallets (around the time it was valued at $13 billion) and $140 million in daily volume, which has dropped to fewer than 8,000 active wallets and $2.3 million in volume.

The jury only started deliberating a few hours ago, but after all of the testimony and evidence, they notified court officials they reached a verdict, as former FTX CEO Sam Bankman-Fried faces seven charges, including wire fraud. We’ll have their decision here as soon as it is available.

According to a report from CNBC, the media will see it in about 10 minutes.

The 12-person jury will decide whether Bankman-Fried is guilty of seven criminal charges, including two counts of wire fraud. If convicted, Bankman-Fried faces over 100 years in prison.

The Verge’s Elizabeth Lopatto has been tracking the case from the courtroom, and from what she’s seen so far, it doesn’t look like Bankman-Fried’s defense has brought too many convincing arguments to the table:

The closing arguments made clear was how lopsided the case was. Bankman-Fried’s defense appears to be that he is a nice boy who would never do anything to hurt anyone on purpose... Bankman-Fried is right to be frightened. He brought excuses. The prosecution brought receipts.

That’s what experienced litigator Mitchell Epner wrote about this incident during the cross-examination of Sam Bankman-Fried. Elizabeth Lopatto’s summary of SBF’s final day of testimony captures it as part of being “vivisected” on the stand.

It was not until Judge Lewis Kaplan intervened to ask if Bankman-Fried had ever been told by Yedidia about that money, in words or in substance, that Bankman-Fried admitted he’d been told.

Trying to worm his way past tough questions by answering a slightly different question doesn’t seem to work as well for SBF in court as it did with investors and interviewers.

Sam Bankman-Fried’s lawyers are done calling witnesses in the big FTX fraud case over the cryptocurrency exchange’s collapse last year. The lawyers are likely preparing to make their closing arguments, and Elizabeth Lopatto will have more reports from the courtroom later today, following last night’s story on all the things SBF conveniently doesn’t remember.

One of the books, Zeke Faux’s Number Go Up, was given to Bankman-Fried on the witness stand yesterday (He did not recall anything he was quoted as saying, naturally). The author of the other, Michael Lewis, was sitting in the gallery.

As an avowed John Lanchester fangirl, you can imagine the delighted, high-pitched noise I made when I saw he’d reviewed both books.

In a document published Monday, the UK government outlines how it intends to regulate the digital asset industry, stating that it wants crypto companies and activities to fall under the same regulations as traditional financial services, like banks.

One of those rules would require disclosures on all crypto assets available in the UK, which could include information about the token’s code, known vulnerabilities, and dependencies. The government plans to introduce the new regulations to the Parliament in 2024.

Said Sam Bankman-Fried, as reported by Inner City Press and the New York Times, on the stand testifying as he faces fraud charges over the collapse of his failed crypto exchange FTX.

He was explaining the advantage of marketing his exchange by buying stadium naming rights instead of Facebook or Google ads, and why he picked the Miami Heat’s arena over several others... and allegedly paid for the deal with FTX customer funds.

However, unlike yesterday’s testimony, the jury members who will rule on the multiple fraud accusations he’s facing are present too. As Elizabeth Lopatto reports, what he’s said so far shows his defense is going to rely on an argument that he was operating on the advice of his lawyers, and we have some guesses about how well that might work out.

Bored Ape Yacht Club creator Yuga Labs has been awarded over $1.5 million in damages, plus lawyer’s fees, for the trademark infringement lawsuit it won in April against Ryder Ripps and Jeremy Cahen, who had launched a copycat version of the NFT collection.

According to the judge:

Defendants intentionally infringed Yuga’s BAYC Marks with a bad faith intent to profit from their use of those Marks. Indeed, even after Yuga filed this action and after the Court issued its April 21, 2023 Order, Defendants continued to market and promote their infringing RR/BAYC NFT collection and their Ape Market.