Legal Tangles in Crypto Industry: FTX CEO's Testimony, California's ATM Cap Proposal, DOJ's Binance Investigation & UK's FCA Claims
Summary:
This article covers multiple aspects of the crypto industry, including the ongoing legal trials involving FTX CEO Sam Bankman-Fried, who claimed ignorance about questionable financial operations involving his company. In California, legislators have proposed a cap on daily crypto ATM withdrawals and a limit on operators' fees to curb scams. U.S. Senator, Cynthia Lummis, urged the Department of Justice to consider charges against Crypto exchange, Binance, for terrorist support. Lastly, UK's Financial Conduct Authority claimed that crypto firms have violated the new promotional rules 221 times since they were enforced.
In the ongoing legal proceedings last week in New York involving FTX CEO Sam “SBF” Bankman-Fried, the executive himself delivered his own testimony as part of his defence strategy. Bankman-Fried asserts that he was unaware of any specifics pertaining to the establishment of North Dimension, a questionable organization allegedly engineered to launder clientele funds from the crypto exchange through Alameda Research. He says it was Dan Friedberg, the previous chief regulatory officer, who handed him the necessary documents for creating the firm and he signed them indiscriminately. Speaking on the matter, Bankman-Fried denied any knowledge of why FTX crypto exchange started moving client funds from an account with Alameda to North Dimension. His guess was that banks were more at ease dealing with North Dimension to steer clear of reputable hedge funds tied to crypto like Alameda.His testimony also hinted at FTX’s ex-chief technology officer, Gary Wang, as having a partial hand in the creation of the “allow negative” button for Alameda Research. This feature made it possible for the crypto hedge fund to trade beyond its assets. In regards to Alameda’s line of credit, Bankman-Fried confessed, “At the time, I wasn’t entirely clear about the situation...” He expected the funds were being held either in a bank account or being directed to FTX in the form of stable coins. If Alameda were to maintain these funds, he presumed this would be represented as a negative figure on FTX.Bankman-Fried’s statements contradict, to some degree, the testimonies of Wang and former Alameda CEO Carline Ellison. Wang presented his statement on Oct. 6, attesting that Bankman-Fried directed him and ex-FTX engineering director Nishad Singh to greenlight the “allow negative” feature in 2019. Ellison alleged during her testimony that she intended to exit her role as Alameda’s CEO, however, SBF requested she remain to mitigate potential gossip about the firm’s fiscal stability.In California, legislators aim to restrict crypto ATM withdrawals to $1,000 daily as a protection from scams. A proposal known as the Digital financial asset transaction kiosks bill also includes a cap on fees charged by operators to $5 or 15% (whichever is higher) starting in 2025. Should lawmakers approve the bill, the new law would be enforced from Jan. 1, 2024. The proposal was brought forth after lawmakers discovered hefty markups of up to 33% on certain crypto assets compared to crypto exchange prices at a local Sacramento crypto ATM.Further news is about U.S. Senator Cynthia Lummis who is urging the U.S. Department of Justice (DOJ) to explore levying charges against crypto exchange Binance in relation to the Hamas group’s assault on Israel. In a letter to U.S. Attorney General Merrick Garland, Lummis and Representative French Hill of Arkansas encouraged DOJ officials to expedite their investigation and consider possible charges against Binance and Tether. The pair called on the DOJ to carefully assess the role of Binance and Tether in potentially supporting terrorism through violations of existing sanctions laws and the Bank Secrecy Act.According to the United Kingdom Financial Conduct Authority (FCA), crypto companies have violated new promotional rules 221 times. Losses have been incurred since the regulations, enforced as of Oct. 8, due to the companies' failure to adequately explain the risks involved and to clearly display risk warnings. The FCA lambasted the firms for overselling the security, efficiency and simplicity of using crypto while overlooking its inherent risks. Whilst several of the FCA’s crypto-related alerts point towards illegitimate schemes promising lucrative returns on crypto investments, the FCA has also penalised seemingly legitimate enterprises.
Published At
10/30/2023 8:00:00 PM
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