{"id":25996,"date":"2023-09-18T23:34:58","date_gmt":"2023-09-18T23:34:58","guid":{"rendered":"https:\/\/davidgerard.co.uk\/blockchain\/?p=25996"},"modified":"2023-09-19T12:12:25","modified_gmt":"2023-09-19T12:12:25","slug":"crypto-collapse-fortress-custody-hack-binance-stonewalls-sec-ftx-to-dump-its-crypto-genesis-sues-dcg-new-york-restricts-crypto-listings","status":"publish","type":"post","link":"https:\/\/davidgerard.co.uk\/blockchain\/2023\/09\/18\/crypto-collapse-fortress-custody-hack-binance-stonewalls-sec-ftx-to-dump-its-crypto-genesis-sues-dcg-new-york-restricts-crypto-listings\/","title":{"rendered":"Crypto collapse: Fortress custody hack, Binance stonewalls SEC, FTX to dump its crypto, Genesis sues DCG, New York restricts crypto listings"},"content":{"rendered":"<p><i>By <\/i><b><i>Amy Castor<\/i><\/b><i> and <\/i><b><i>David Gerard<\/i><\/b><\/p>\n<ul>\n<li aria-level=\"1\">Help our work: <b><i>tell just one other person<\/i><\/b>. Word of mouth is the best way to get information out about any creative work. If you like this, tell someone. Thank you.<\/li>\n<li aria-level=\"1\">You can also send us money! Here\u2019s<a href=\"https:\/\/www.patreon.com\/amycastor\"> Amy\u2019s<\/a> Patreon and here\u2019s <a href=\"https:\/\/www.patreon.com\/davidgerard\/\">David\u2019s<\/a>.<\/li>\n<li aria-level=\"1\">We still have <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/05\/bitcoin-it-cant-be-that-stupid.png\">\u201cBitcoin: It Can\u2019t Be That Stupid<\/a>\u201d stickers for patrons. Message one of us and ask!<\/li>\n<\/ul>\n<blockquote><p>\u201cThe bad actors in the crypto space are really giving the credulous simpletons a bad name.\u201d<\/p><\/blockquote>\n<p style=\"text-align: right;\">\u2014 <a href=\"https:\/\/twitter.com\/bgreysk\/status\/1695853426150625574\">bgreysk<\/a><\/p>\n<p>David Golumbia, noted bitcoin critic and author of <i>The Politics of Bitcoin,<\/i> <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2023\/09\/15\/david-golumbia-1963-2023\/\">passed away on Thursday<\/a>. He will be deeply missed. His last book, <i>Cyberlibertarianism<\/i>, is going through its final edit and is set for a 2024 release. He also put a free copy of <i>The Politics of Bitcoin<\/i> up on Academia.edu for all to read. [<a href=\"https:\/\/www.upress.umn.edu\/book-division\/books\/the-politics-of-bitcoin\"><i>University of Minnesota Press<\/i><\/a>; <a href=\"https:\/\/www.academia.edu\/29162085\/The_Politics_of_Bitcoin_Software_as_Right_Wing_Extremism\"><i>Academia.edu<\/i><\/a><i>, PDF<\/i>]<\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2023\/09\/18\/crypto-collapse-fortress-custody-hack-binance-stonewalls-sec-ftx-to-dump-its-crypto-genesis-sues-dcg-new-york-restricts-crypto-listings\/purcell\/\" rel=\"attachment wp-att-25997\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-25997\" src=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2023\/09\/purcell.jpg\" alt=\"\" width=\"510\" height=\"315\" srcset=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2023\/09\/purcell.jpg 680w, https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2023\/09\/purcell-300x185.jpg 300w, https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2023\/09\/purcell-348x215.jpg 348w\" sizes=\"auto, (max-width: 510px) 100vw, 510px\" \/><\/a><\/p>\n<p>&nbsp;<\/p>\n<h3>You had <i>one job<\/i><\/h3>\n<p>Probably the hardest part of crypto custody is that every crypto company appears to be run by Bozo the Clown.<\/p>\n<p>Fortress is the latest crypto trust to put on the red nose and floppy shoes. It was hacked in early September via a \u201cthird-party vendor\u201d by some unspecified means. Then it didn\u2019t tell anyone. Then it was bought and bailed out by Ripple Labs. <i>Then<\/i> the hack was revealed. [<a href=\"https:\/\/twitter.com\/Fortress_io\/status\/1699793873395191813\"><i>Twitter<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.ph\/KKhSS\"><i>archive<\/i><\/a>]<\/p>\n<p>Fortress claimed that no customer funds were lost. This turns out not to be true \u2014 instead, Ripple bailed Fortress out a day after the announcement. [<a href=\"https:\/\/www.theblock.co\/post\/250082\/ripple-made-fortress-customers-hit-by-security-incident-whole-as-part-of-acquisition\"><i>The Block<\/i><\/a><i>; <\/i><a href=\"https:\/\/fortune.com\/crypto\/2023\/09\/12\/ripple-fortress-acquisition-customers-hack-bailout\/\"><i>Fortune<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.ph\/wywHq\"><i>archive<\/i><\/a><i>; <\/i><a href=\"https:\/\/twitter.com\/mikebelshe\/status\/1701322135778820181\"><i>Twitter<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.ph\/uV8jb\"><i>archive<\/i><\/a>]<\/p>\n<p>The Ripple deal had apparently been in the works for some time but was accelerated by the hack. It\u2019s not clear why Ripple wanted Fortress quite so badly.<\/p>\n<p>Prime Trust similarly failed to do its one and only job \u2014 safeguarding other people&#8217;s money \u2014 and <a href=\"https:\/\/amycastor.com\/2023\/08\/15\/crypto-collapse-sam-bankman-fried-goes-to-jail-sec-appeals-ripple-ruling-prime-trust-bankrupt-the-tangled-tale-of-trueusd-and-tron\/\">went bankrupt<\/a>. Coincidentally, Scott Purcell, the CEO of Fortress, was previously the <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2023\/07\/02\/crypto-collapse-trueusd-in-trouble-prime-trust-and-banq-go-down-europe-hates-binance-blockfi-terra-luna-twitter-is-just-resting\/\">CEO of Prime<\/a>. This is called \u201cexperience.\u201d<\/p>\n<p>When Prime went belly up, Purcell stressed on Linkedin that Prime had no connection with Fortress. \u201cThis is a heck of a team running Fortress Trust,\u201d he said. It sure was. Fortress has now scrubbed its team page. [<a href=\"https:\/\/www.linkedin.com\/posts\/scpurcell_lots-of-noise-about-prime-trust-and-people-activity-7072603363242086400-lwUw\/\"><i>LinkedIn<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.ph\/wip\/MCuaQ\"><i>archive<\/i><\/a><i>; <\/i><a href=\"https:\/\/twitter.com\/Pledditor\/status\/1702098851836858774\"><i>Twitter<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.ph\/wip\/8R2vP\"><i>archive<\/i><\/a>]<\/p>\n<h3>Everybody still hates Binance<\/h3>\n<p>Binance is not cooperating with the SEC. In June, BAM (the corporate entity of Binance.US) agreed to keep all Binance.US money inside the US and away from the sticky fingers of Binance International. You\u2019ll be shocked to hear that this hasn\u2019t been happening.<\/p>\n<p>Binance.US is using custody provider Ceffu \u2014 formerly Binance Custody, which launched in December 2021 and became Ceffu in February 2023. [<a href=\"https:\/\/www.binance.com\/en\/feed\/post\/207990\"><i>Binance<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.ph\/YS3J4\"><i>archive<\/i><\/a>]<\/p>\n<p>BAM is claiming that this completely Binance entity somehow isn\u2019t a Binance entity and is refusing to provide the SEC with information on Ceffu: [<a href=\"https:\/\/storage.courtlistener.com\/recap\/gov.uscourts.dcd.256060\/gov.uscourts.dcd.256060.114.0.pdf\"><i>Motion to Compel<\/i><\/a><i>, PDF; <\/i><a href=\"https:\/\/storage.courtlistener.com\/recap\/gov.uscourts.dcd.256060\/gov.uscourts.dcd.256060.110.9.pdf\"><i>Memorandum in support<\/i><\/a><i>, PDF<\/i>]<\/p>\n<blockquote><p>BAM has been unable to credibly explain its own relationship with Ceffu, including the extent to which it is owned and controlled by Binance or Zhao. And whether the entity involved is Binance, Ceffu, or another Binance Entity,<\/p><\/blockquote>\n<p>Ceffu is owned by Binance subsidiary Bifinity UAB in Lithuania, the only country left in the EU that welcomes Binance. It\u2019s also the country where Binance parks billions of dollars. Bifinity was previously named Binance Connect, run by Helen Hai, Binance&#8217;s head of global fiat. [<a href=\"https:\/\/www.forbes.com\/sites\/davidjeans\/2023\/07\/21\/binance-europe-bifinity-helen-hai\/\"><i>Forbes<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.ph\/2DByv\"><i>archive<\/i><\/a>]<\/p>\n<p>The SEC also says Binance is barely coughing up discovery documents, thus the motion to compel:<\/p>\n<blockquote><p>As of the date of this filing, BAM has only produced a little over 220 documents. Many are unintelligible screenshots of bank account information, documents without dates or signatures, and letters from counsel and tables that appear to be prepared for purposes of this litigation, without any supporting evidence or verification by an individual with knowledge confirming the accuracy of the information.<\/p><\/blockquote>\n<p>Binance has no excuse, so it\u2019s been pounding the table and complaining that the SEC\u2019s requests are overly broad.<\/p>\n<p>These are the stonewalling and delay tactics we predicted previously. Binance knows this case is life or death. Their expensive lawyers \u2014 estimated to cost <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2023\/06\/23\/sec-sues-binance-part-3-vips-on-vpns-wash-trading-the-binance-us-equity-sale-who-is-guangying-chen\/\">over $1 million a day<\/a> \u2014 have nothing to do here except pound the table, argue it\u2019s the wrong table, and cast doubt on the existence of tables.<\/p>\n<p>Meanwhile, Binance.US is bleeding staff. It\u2019s fired another 100 people \u2014 a third of its workforce. CEO Brian Shroder has quit and Chief Legal Officer Norman Reed has stepped in as interim CEO. Krishna Juvvadi, head of legal, and Sidney Majalya, chief risk officer, are also jumping ship. [<a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2023-09-12\/binance-us-cuts-100-positions-as-crackdown-erodes-crypto-business\"><i>Bloomberg<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.ph\/668up\"><i>archive<\/i><\/a><i>; <\/i><a href=\"https:\/\/www.wsj.com\/livecoverage\/stock-market-today-dow-jones-09-14-2023\/card\/binance-us-legal-risk-executives-leave-the-crypto-exchange-vQ1nP5C32KBv3O7neuyN\"><i>WSJ<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.ph\/k15Vh\"><i>archive<\/i><\/a>]<\/p>\n<p>Binance.US\u2019s only purpose was access to US business and US banking \u2014 and it doesn\u2019t have those any more. We expect Binance to shut down its US affiliate as soon as it thinks it can get away with it.<\/p>\n<p>ChainArgos points out that many ERC20 tokens have flowed out of Binance.US \u2014 even after the CFTC suit. A large part of the funds are flowing to CZ\u2019s market maker Sigma Chain \u2014 which is the precise thing the regulators wanted to prevent. [<a href=\"https:\/\/twitter.com\/ChainArgos\/status\/1703373400515756519\"><i>Twitter<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.ph\/wip\/AGJC5\"><i>archive<\/i><\/a>]<\/p>\n<h3>FTX: Salame slicing<\/h3>\n<p>FTX in bankruptcy has court approval to start dumping its crypto \u2014 selling up to <i>one hundred million dollars\u2019 worth<\/i> of crypto (of its $3.4 billion total) per <i>week<\/i>. It will also do hedging and staking on its bitcoin and ether. FTX is hiring Mike Novogratz of Galaxy Digital as an advisor to manage risk \u2014 in the hope that removing $100 million a week in precious actual money US dollars from the crypto trading market doesn\u2019t tank said market. Coinbase wants to reassure us that everything will be <i>fine<\/i>. [<a href=\"https:\/\/restructuring.ra.kroll.com\/FTX\/Home-DownloadPDF?id1=MjUyMDY1MQ==&amp;id2=-1\"><i>Doc 2505<\/i><\/a><i>, PDF;<\/i> <a href=\"https:\/\/www.coinbase.com\/institutional\/research-insights\/research\/weekly-market-commentary\/disassociation-sept-15-2023\"><i>Coinbase<\/i><\/a>]<\/p>\n<p>Ryan Salame, the former co-CEO of FTX Digital Markets \u2014 <i>a.k.a.<\/i> <a href=\"https:\/\/amycastor.com\/2023\/01\/04\/ftx-bahamas-vs-john-jay-ray-bankman-fried-pleads-not-guilty-doj-seizes-ftx-assets\/\">Sam\u2019s Bahamas party fund<\/a> \u2014 is copping a plea. Salame donated millions to crypto-sympathetic politicians with <a href=\"https:\/\/amycastor.com\/2022\/12\/18\/crypto-collapse-binance-is-not-so-fine-ftx-delaware-vs-ftx-bahamas-celsius-voyager-gemini-tether\/\">\u201cloans\u201d from FTX<\/a>. He pleaded guilty to campaign finance law violation and operating an unlicensed money-transmission business. He\u2019ll forfeit $1.5 billion in assets \u2014 including two properties in Lenox, Mass., and a 2021 Porsche 911 Turbo S \u2014 and pay $6 million in restitution before his sentencing in March. Salame was released on a $1 million bond, which may or may not have been linked to him showing up in court wearing bitcoin socks. The New York Times says that Salame is <i>not<\/i> cooperating with the Sam Bankman-Fried investigation. [<a href=\"https:\/\/www.nytimes.com\/2023\/09\/07\/technology\/ftx-guilty-plea.html\"><i>NYT<\/i><\/a><i>; <\/i><a href=\"https:\/\/twitter.com\/innercitypress\/status\/1699858463839391817\"><i>Twitter<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.ph\/wip\/rmzZP\"><i>archive<\/i><\/a><i>, <\/i><a href=\"https:\/\/amyhcastor.files.wordpress.com\/2023\/09\/2023.09.07-signed-marked-court-exhibit.pdf\"><i>Plea document<\/i><\/a><i>, PDF<\/i>; <a href=\"https:\/\/amyhcastor.files.wordpress.com\/2023\/09\/2023.09.07-cpof.pdf\"><i>Order of forfeiture<\/i><\/a><i>, PDF<\/i>]<\/p>\n<p>In the Sam Bankman-Fried criminal case, Judge Lewis Kaplan rejected Sam\u2019s request for a pre-trial release. Sam\u2019s claims that he does not have unimpeded access to discovery material are \u201cunsupported,\u201d the judge said. He noted that Sam had failed to request more time, and doesn\u2019t personally need to inspect every piece of discovery because he has an entire legal team at his disposal. Sam\u2019s appeal is set to go before a panel of three judges on September 19. [<a href=\"https:\/\/storage.courtlistener.com\/recap\/gov.uscourts.nysd.590940\/gov.uscourts.nysd.590940.278.0.pdf\"><i>Order<\/i><\/a><i>, PDF<\/i>; <a href=\"https:\/\/storage.courtlistener.com\/recap\/gov.uscourts.nysd.590940\/gov.uscourts.nysd.590940.256.0.pdf\"><i>Order<\/i><\/a><i>, PDF<\/i>]<\/p>\n<p>More of Sam\u2019s <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2023\/07\/30\/john-jay-ray-sues-ftx-inner-circle-for-1-billion-prosecutors-want-sam-bankman-frieds-bail-revoked\/\">tawdry ramblings<\/a> have found their way to the New York Times. He once again blames it all on his ex-girlfriend, Caroline Ellison. Should you care? No. Will it help his appeal for pre-trial release? Definitely not. But at least we didn\u2019t suffer his planned 15,000-word Twitter thread. [<a href=\"https:\/\/www.nytimes.com\/2023\/09\/14\/technology\/sam-bankman-fried-ftx-twitter-thread.html\"><i>NYT<\/i><\/a>]<\/p>\n<h3>A hundred and four degrees with a head full of steam<\/h3>\n<p>Celsius Network founder and former CEO Alex Mashinsky\u2019s bank accounts and a property in Texas have been frozen by federal prosecutors, according to an August 31 filing that was unsealed on September 5. Mashinsky put his Austin house up for sale for $2.4 million in August 2022, just a year after he bought it. The house is now off the market. [<a href=\"https:\/\/storage.courtlistener.com\/recap\/gov.uscourts.nysd.601957\/gov.uscourts.nysd.601957.28.0.pdf\"><i>Doc 28<\/i><\/a><i>, PDF; <\/i><a href=\"https:\/\/twitter.com\/atxideas\/status\/1556008323203403777\"><i>Twitter<\/i><\/a><i>, 2022, <\/i><a href=\"https:\/\/web.archive.org\/web\/20220806200623\/https:\/\/twitter.com\/atxideas\/status\/1556008323203403777\"><i>archive<\/i><\/a>]<\/p>\n<p><a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2023\/07\/15\/crypto-collapse-alex-mashinsky-of-celsius-arrested-ripples-bizarre-xrp-win-gemini-sues-genesis-gisele-bundchen-knew-nothing\/\">Since his arrest in July<\/a>, Mashinsky has been out of jail on a $40 million bond.<\/p>\n<p>Mashinsky has asked the court to dismiss <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2023\/07\/15\/crypto-collapse-alex-mashinsky-of-celsius-arrested-ripples-bizarre-xrp-win-gemini-sues-genesis-gisele-bundchen-knew-nothing\/\">the FTC\u2019s complaint against him<\/a> for lying and lying and lying to customers. He says the FTC complaint \u201ccannot substantiate a claim that Mashinsky \u2018is violating\u2019 or is \u2018about to violate\u2019 the law because Mashinsky resigned from his position as CEO of Celsius\u201d in September of last year. (The filing says 2023, but it was 2022.) Yeah, that\u2019s great, thanks. [<a href=\"https:\/\/storage.courtlistener.com\/recap\/gov.uscourts.nysd.602050\/gov.uscourts.nysd.602050.44.0.pdf\"><i>Doc 44<\/i><\/a><i>, PDF; <\/i><a href=\"https:\/\/storage.courtlistener.com\/recap\/gov.uscourts.nysd.602050\/gov.uscourts.nysd.602050.45.0.pdf\"><i>Doc 45<\/i><\/a><i>, PDF<\/i>]<\/p>\n<p>Former Celsius CTO Nuke Goldstein, who was also sued by the FTC, has filed a similar motion to dismiss. In his supporting memorandum, Nuke explains he did nothing wrong. It was all Mashinsky who \u201cwas responsible for leading almost all of the acts of misconduct alleged in the Complaint.&#8221; It\u2019s a hoot. [<a href=\"https:\/\/storage.courtlistener.com\/recap\/gov.uscourts.nysd.602050\/gov.uscourts.nysd.602050.40.0.pdf\"><i>Doc 40<\/i><\/a><i>, PDF; <\/i><a href=\"https:\/\/storage.courtlistener.com\/recap\/gov.uscourts.nysd.602050\/gov.uscourts.nysd.602050.41.0.pdf\"><i>Doc 41<\/i><\/a><i>, PDF; <\/i><a href=\"https:\/\/www.courtlistener.com\/docket\/67604364\/federal-trade-commission-v-celsius-network-inc\/\"><i>Docket<\/i><\/a>]<\/p>\n<h3>Revelations and Apocrypha<\/h3>\n<p>Genesis Global Capital is suing its own parent company Digital Currency Group and DCG International for failure to repay a loan of $620 million in cash and bitcoin. [<a href=\"https:\/\/restructuring.ra.kroll.com\/genesis\/Home-DownloadPDF?id1=MjUxMzc1Mw==&amp;id2=-1\"><i>Doc 681<\/i><\/a><i>, PDF;<\/i> <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2023-09-06\/bankrupt-genesis-sues-dcg-over-620-million-of-unpaid-loans?embedded-checkout=true#xj4y7vzkg\"><i>Bloomberg<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.ph\/IecqO\"><i>archive<\/i><\/a>]<\/p>\n<p>DCGI borrowed 18,697 BTC from Genesis in 2019 and DCG borrowed $500 million in 2022 \u2014 at 10%-12% interest. The loans had an extended maturity date of mid-2023 \u2014 and DCG has not paid Genesis back. (It\u2019s paid some of the BTC back, but it still owes about 4,550.5 BTC.) [<a href=\"https:\/\/blockworks.co\/news\/silbert-dcg-borrowed-millions-from-genesis\"><i>Blockworks<\/i><\/a>]<\/p>\n<p>Genesis is owned by DCG \u2014 but <a href=\"https:\/\/amycastor.com\/2023\/01\/21\/crypto-collapse-genesis-bankrupt-coindesk-for-sale-bankman-fried-attacks-ftx-lawyers\/\">the corporation is in bankruptcy<\/a>, so it has its own obligations to its creditors. So when DCG failed to pay back a loan, Genesis had no choice but to file an adversary complaint.<\/p>\n<p>DCG has proposed a plan that offers unsecured creditors 70%\u201390% baseline recovery with a \u201cmeaningful portion of the recovery in digital currencies.\u201d [<a href=\"https:\/\/storage.courtlistener.com\/recap\/gov.uscourts.nysb.314889\/gov.uscourts.nysb.314889.698.0.pdf\"><i>Doc 698<\/i><\/a><i>, PDF<\/i>]<\/p>\n<p>Genesis is finally closing all trading activity as of September 21, according to an email it sent out to clients. It closed spot trading on September 5. [<a href=\"https:\/\/www.theblock.co\/post\/251107\/genesis-no-longer-offering-trading-services-through-any-business-units-memo\"><i>The Block<\/i><\/a>]<\/p>\n<h3>Making the Turkish Lira look good<\/h3>\n<p>Faruk Fatih \u00d6zer, founder of Turkish crypto exchange Thodex, sought to expand internationally! Specifically, he expanded his personal holding with <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2021\/04\/30\/news-bitcoin-mining-is-not-green-miners-versus-programmers-gold-is-cleaner-than-bitcoin-exchanges-collapse-nft-forgery\/\">$2 billion in crypto from Thodex<\/a> and fled to Albania on 21 April 2021. The exchange shut soon after.<\/p>\n<p>He was finally caught in Albania in August 2022. \u00d6zer, his sister Serap \u00d6zer, and his brother G\u00fcven \u00d6zer have all been sentenced to 11,196 years in jail \u2014 down from the 40,562 years the prosecutor had asked for. Number go up! [<a href=\"https:\/\/www.bbc.co.uk\/news\/world-europe-66752785\"><i>BBC<\/i><\/a>]<\/p>\n<h3>New York takes on the securities fraud gig economy<\/h3>\n<p>The New York Department of Financial Services has put stronger controls on how New York-regulated crypto exchanges \u2014 \u201cvirtual currency entities\u201d \u2014 list and delist coins. Trading entities are now required to have their listing and delisting policy documents approved by the NYDFS. Of particular note: [<a href=\"https:\/\/www.dfs.ny.gov\/reports_and_publications\/press_releases\/pr202309181\"><i>NYDFS<\/i><\/a><i>; <\/i><a href=\"https:\/\/www.dfs.ny.gov\/industry_guidance\/industry_letters\/il20230918_guidance_vc_listing\"><i>NYDFS<\/i><\/a><i>; <\/i><a href=\"https:\/\/www.dfs.ny.gov\/industry_guidance\/industry_letters\/il20230918_gen_framework_greenlisted_coins\"><i>NYDFS<\/i><\/a>]<\/p>\n<blockquote><p>Any actual or potential conflicts of interest in connection with the review and decision-making process have been assessed, effectively addressed, and fully disclosed to the public, whether such actual or potential conflicts of interest are related to the VC Entity, the VC Entity\u2019s affiliates, and the VC Entity\u2019s owners, principals, employees, or their respective families.<\/p><\/blockquote>\n<p>This is aimed squarely at Coinbase. The \u201cconflicts of interest\u201d bit is about Coinbase listing Web3 <i>minor altcoins<\/i> that were invested in by Coinbase Ventures or by Coinbase\u2019s very good friends at a16z.<\/p>\n<p>This is big news \u2014 even if it\u2019s <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2022\/04\/11\/web3-a-vc-funded-gig-economy-of-securities-violations\/\">a year and a half late.<\/a><\/p>\n<h3>Regulatory clarity<\/h3>\n<p><a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2023\/09\/04\/crypto-collapse-tethers-new-bank-britannia-binance-woes-nobody-uses-paypals-stablecoin-avi-eisenberg-is-not-getting-his-phones-back\/\">Avi Eisenberg<\/a> was the first DeFi player to get busted hard by the CFTC \u2014 and the Department of Justice \u2014 but he won\u2019t be the last. The CFTC considers DeFi firmly in its ambit, and it\u2019s now gone after three DeFi protocols, with settled charges against Opyn, ZeroEx, and Deridex. All three were charged with illegally offering leveraged and margined retail commodity transactions. Deridex and Opyn were also charged with failing to register and failing to comply with the Bank Secrecy Act. Opyn was fined $250,000, ZeroEx was fined $200,000, and Deridex was fined $100,000. [<a href=\"https:\/\/www.cftc.gov\/PressRoom\/PressReleases\/8774-23\"><i>CFTC press release<\/i><\/a>]<\/p>\n<p>The International Organization of Securities Commissions (IOSCO) recommends that regulators go after DeFi \u201cdevelopers,\u201d in that they&#8217;re usually the protocol operators as well: \u201cIn reality, regardless of the operating model of the DeFi arrangement, \u2018responsible persons\u2019 can be identified,\u201d said Tuang Lee Lim, chair of the IOSCO fintech task force. [<a href=\"https:\/\/www.iosco.org\/library\/pubdocs\/pdf\/IOSCOPD744.pdf\"><i>IOSCO Report<\/i><\/a><i>, PDF; <\/i><a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2023-09-07\/defi-probes-should-focus-on-the-developers-in-charge-iosco-says\"><i>Bloomberg<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.ph\/xmk15\"><i>archive<\/i><\/a>]<\/p>\n<p>David Rosenthal says that the IOSCO report on DeFi seems to have been heavily influenced by his advice. He urged regulators to always look for the man behind the curtain. [<a href=\"https:\/\/blog.dshr.org\/2023\/09\/brief-remarks-to-iosco-defi-wg.html\"><i>DSHR blog<\/i><\/a>]<\/p>\n<p>The SEC has hit another bunch of NFTs. Stoner Cats 2 LLC raised $8.2 million by selling NFTs to finance a web series called Stoner Cats \u2014 a show about cats that become sentient after smoking weed. The NFTs were marketed as investments in the production. The company is paying a $1 million penalty and returning investors\u2019 money. The project was backed by Mila Kunis\u2019 production company. Kunis, her husband Ashton Kutcher, and Chris Rock all appeared in the show, which only holders of the NFT could watch. Kutcher <a href=\"https:\/\/amycastor.com\/2022\/03\/28\/the-gorilla-in-the-room-yuga-labs-investors-pretend-to-care-about-the-planet-they-dont\/\">also backed Bored Apes Yacht Club<\/a>. [<a href=\"https:\/\/www.sec.gov\/news\/press-release\/2023-178\"><i>SEC press release<\/i><\/a><i>; <\/i><a href=\"https:\/\/www.sec.gov\/files\/litigation\/admin\/2023\/33-11233.pdf\"><i>complaint<\/i><\/a><i>, PDF<\/i>; <a href=\"https:\/\/www.coindesk.com\/policy\/2023\/09\/13\/mila-kunis-backed-web-series-faces-sec-enforcement-action-for-unregistered-nft-offerings\/\"><i>CoinDesk<\/i><\/a>]<\/p>\n<p>SEC just busted Linus Financial for offering crypto lending accounts. We were surprised to see there was no financial penalty. It seems that Linus saw <a href=\"https:\/\/amycastor.com\/2022\/02\/12\/news-doj-finds-bitfinexs-stolen-btc-blockfi-fined-100m-forbes-sells-out-to-binance-crypto-super-bowl-nfts\/\">the SEC\u2019s February 2023 settlement with BlockFi<\/a>, realized they were in trouble, called the SEC, closed down their offer, and cooperated fully. If the SEC\u2019s crypto lending enforcement follows the pattern of its ICO actions, we don\u2019t expect the next violators to get such a good deal. [<a href=\"https:\/\/www.sec.gov\/news\/press-release\/2023-171\"><i>SEC press release<\/i><\/a><i>; <\/i><a href=\"https:\/\/www.sec.gov\/files\/litigation\/admin\/2023\/33-11229.pdf\"><i>complaint<\/i><\/a><i>, PDF<\/i>]<\/p>\n<h3>My beautiful launderette<\/h3>\n<p>The bitcoin use case shows up again! It\u2019s money laundering. Caio Marchesani, an Italian fintech owner in the UK, allegedly converted hoards of cash into crypto via Binance for Sergio Roberto de Carvalho \u2014\u00a0 who Interpol called \u201cone of the world\u2019s most wanted kingpins\u201d \u2014 and Flor Bressers, <i>a.k.a.<\/i> \u201cthe finger cutter.\u201d Nice. De Carvalho and Bressers were both arrested in 2022. [<a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2023-09-07\/shadow-banker-alleged-to-have-laundered-drug-money-through-binance-exchange\"><i>Bloomberg<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.ph\/dctes\"><i>archive<\/i><\/a>]<\/p>\n<p>We didn\u2019t note it at the time, but Venezuela&#8217;s Petro \u2014 the first government cryptocurrency \u2014 is dead. In March, the government suspended crypto mining. In June, Venezuela banned crypto mining altogether and blocked the bank accounts of local crypto exchanges. This came after payments for Venezuelan oil were apparently <i>diverted<\/i> by the office of the crypto regulator, Joselit Ram\u00edrez. In May, Venezuela shut down what little trading there was in Petro. It looks like Venezuela\u2019s crypto enthusiasm hinged substantially on this one guy. [<a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2023-06-21\/venezuela-once-embraced-crypto-now-it-s-banned-crypto-mining-trading-petro\"><i>Bloomberg<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.ph\/Ru8jJ\"><i>archive<\/i><\/a>]<\/p>\n<p>Bittrex US <a href=\"https:\/\/amycastor.com\/2023\/05\/14\/crypto-collapse-bittrex-files-chapter-11-binance-loses-market-makers-ftx-gets-a-tax-bill-bitcoin-gets-apes\/\">declared bankruptcy in May<\/a>. In a bizarre turn of events, so few of their creditors filed to withdraw their funds that the company might come out ahead on the bankruptcy! We wonder what sort of creditors those might have been who just decided to give their crypto away \u2014 surely not the sort who wouldn\u2019t want too much documentation around what they were doing? It\u2019s a mystery. [<a href=\"https:\/\/www.coindesk.com\/policy\/2023\/09\/13\/surprisingly-few-us-customers-want-their-bittrex-money-back\/\"><i>CoinDesk<\/i><\/a>]<\/p>\n<h3>More good news for bitcoin<\/h3>\n<p>The Monetary Authority of Singapore has issued an order prohibiting Three Arrows Capital founders Zhu Su and Kyle Davies from operating regulated financial services in Singapore for nine years. It seems that Zhu and Davies lied to MAS a whole lot. [<a href=\"https:\/\/www.mas.gov.sg\/regulation\/enforcement\/enforcement-actions\/2023\/mas-issues-prohibition-orders-against-three-arrows-capital-zhu-su-and-kyle-livingston-davies\"><i>press release<\/i><\/a>]<\/p>\n<p>The Salesforce Park NFT restaurant Sho \u2014 one of the dumbest ideas in restaurant history \u2014 is now officially dead. Sho Group CEO Joshua Sigel pitched Sho as a fine dining experience for the sort of people who would spend $7,500 to $300,000 on an NFT. The finest gourmet chicken tendies and a can of <i>vintage<\/i> Monster. [<a href=\"https:\/\/www.sfgate.com\/local\/article\/salesforce-park-sho-restaurant-goes-silent-17858831.php\"><i>SFGate<\/i><\/a><i>; <\/i><a href=\"https:\/\/www.sfgate.com\/local\/article\/salesforce-park-sho-restaurant-is-dead-18351479.php\"><i>SFGate<\/i><\/a>]<\/p>\n<p>After launching in India in April 2022, Coinbase never could quite gain traction in the country. It sent an email to all Indian customers on September 25 closing the service. Coinbase later clarified the email was only sent to account holders who breached its \u201cupdated standards.\u201d But they&#8217;ve also banned new Indian users from signing up. [<a href=\"https:\/\/techcrunch.com\/2023\/09\/10\/coinbase-india\/\"><i>TechCrunch<\/i><\/a>]<\/p>\n<p>Remember <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2018\/12\/29\/the-telegram-icos-ton-blockchain-has-questionable-security-and-will-probably-centralise\/\">Telegram\u2019s ICO in 2018<\/a> for a new cryptocurrency called Grams on a new blockchain called TON (Telegram Open Network)? The SEC <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2020\/03\/24\/telegram-ico-sec-prevails-telegram-restrained-from-issuing-grams\/\">beat Telegram into the dirt<\/a> and TON was shut down. So a bunch of Telegram investors in Russia took the open-source code and <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2020\/05\/14\/telegram-gives-up-on-the-telegram-open-network\/\">started FreeTON<\/a>, which later renamed itself TON (The Open Network). Anyway, Telegram has now endorsed TON as its official Web3 infrastructure. Good thing they aren\u2019t violating their SEC settlement by restarting TON themselves, hey. [<a href=\"https:\/\/www.coindesk.com\/business\/2023\/09\/13\/messaging-app-telegram-gives-endorsement-to-ton-project-token-surges\/\"><i>CoinDesk<\/i><\/a>]<\/p>\n<p>LastPass is a web-based password manager. It suffered a nasty breach in December 2022. Amazingly, it\u2019s taken this long for the hackers to start scouring the breached data for crypto keys and seed phrases. [<a href=\"https:\/\/krebsonsecurity.com\/2023\/09\/experts-fear-crooks-are-cracking-keys-stolen-in-lastpass-breach\/\"><i>Krebs on Security<\/i><\/a>]<\/p>\n<p>The ransomware guys are forming a cartel. The Lockbit ransomware group will be requiring its \u201caffiliates\u201d to charge their victims no less than 1.5% of their annual revenue. Some of them have just been too soft on the suckers, see. Victims with ransomware insurance will be considered particularly juicy targets. [<a href=\"https:\/\/twitter.com\/vxunderground\/status\/1702925435443585286\"><i>Twitter<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.ph\/wip\/poYkk\"><i>archive<\/i><\/a>]<\/p>\n<br><br><div align=\"center\"><p><a href=\"https:\/\/www.patreon.com\/bePatron?u=8420236\"><img src=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/10\/become_a_patron_button.svg\" alt=\"Become a Patron!\" title=\"Become a Patron!\" width=217 height=51><\/a><br><p style=\"align:center;\" class=\"patreon-badge\"><i>Your subscriptions keep this site going. <a href=\"https:\/\/www.patreon.com\/bePatron?u=8420236\">Sign up today!<\/a><\/i><\/p><\/div>","protected":false},"excerpt":{"rendered":"<p>The hardest part of crypto custody is that every crypto company appears to be run by Bozo the Clown.<\/p>\n","protected":false},"author":1,"featured_media":25997,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[3016,2493,612,3633,568,168,1795,3627,3636,3341,3469,916,167,3634,288,14,684,1552,3629,2237,3638,3452,1769,2409,1798,2890,287,1732,1834,3641,3625,3051,3639,3441,3635,3640,948,3632,594,2020,3624,3421,1908,421,985,70,338,3321,2491,3547,33,3637,3642,3626,2745,117,3631,3050,1096,2240,3630,2227,296,3628],"class_list":["post-25996","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorised","tag-3ac","tag-alex-mashinsky","tag-andreessen-horowitz","tag-ashton-kutcher","tag-binance","tag-bittrex","tag-blockfi","tag-brian-shroder","tag-caio-marchesani","tag-caroline-ellison","tag-ceffu","tag-celsius","tag-cftc","tag-chris-rock","tag-coinbase","tag-david-golumbia","tag-david-rosenthal","tag-defi","tag-deridex","tag-faruk-fatih-ozer","tag-flor-bressers","tag-fortress","tag-free-ton","tag-ftc","tag-ftx","tag-genesis","tag-india","tag-iosco","tag-joselit-ramirez","tag-joshua-sigel","tag-krishna-juvvadi","tag-kyle-davies","tag-lastpass","tag-lewis-kaplan","tag-linus-financial","tag-lockbit","tag-michael-novogratz","tag-mila-kunis","tag-new-york","tag-nft","tag-norman-reed","tag-nuke-goldstein","tag-opyn","tag-petro","tag-prime-trust","tag-ransomware","tag-ripple","tag-ryan-salame","tag-sam-bankman-fried","tag-scott-purcell","tag-sec","tag-sergio-roberto-de-carvalho","tag-sho","tag-sidney-majalya","tag-sigma-chain","tag-singapore","tag-stoner-cats","tag-su-zhu","tag-telegram","tag-thodex","tag-tuang-lee-lim","tag-turkey","tag-venezuela","tag-zeroex"],"jetpack_featured_media_url":"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2023\/09\/purcell.jpg","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/25996","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/comments?post=25996"}],"version-history":[{"count":37,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/25996\/revisions"}],"predecessor-version":[{"id":26034,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/25996\/revisions\/26034"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/media\/25997"}],"wp:attachment":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/media?parent=25996"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/categories?post=25996"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/tags?post=25996"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}