SEC Files Charges in $11 Million Crypto Scam Shilled by Steven Seagal

In brief

  • The SEC filed charges against three individuals involved with defunct crypto projects Start Options and Bitcoiin2Gen.
  • According to the SEC, the three fraudulently lured $11 million out of investors in an ICO.
  • Actor Steven Seagal was previously fined for marketing one of the projects without disclosing his earnings.

2017 and 2018 were wild days for initial coin offerings, when an assortment of B-list actors, athletes, and music artists would tie their name to a project.

Today, the US Securities and Exchange Commission (SEC) continued to press its case against the participants in a crypto project linked to actor and martial arts aficionado Steven Seagal.

According to an SEC complaint filed in US District Court for the Eastern District of New York, three individuals behind Start Options and Bitcoiin2Gen fraudulently convinced small investors to part ways with more than $11 million in cash for tokens and products that did far less than they claimed.

Kristijan Krstic and John DeMarr were the founder and chief marketer, respectively of Start Options, which purported to be a platform for trading and mining cryptocurrencies, as well as Bitcoiin2Gen, a token the SEC says is a “sham.”

“DeMarr fraudulently misappropriated at least $1.8 million—nearly half of the fiat currency he raised from investors—for his own personal benefit, including car payments and personal credit card debts,” reads the SEC complaint. “Krstic, meanwhile, received more than $9 million of investor funds in fiat currency and digital assets.” Krstic allegedly pulled out of the scheme in 2018 without refunding investors.

This despite DeMarr calling Start Options “the largest Bitcoin exchange in euro volume and liquidity.”

The third person named in the complaint is Robin Enos, who the SEC says received about $12,000 from DeMarr for assisting in the marketing effort. The two allegedly erroneously claimed B2G tokens would be mineable and tradable by April 2018—the same month Krstic abandoned the project. 

Seagal was previously fined by the SEC last February for marketing Bitcoiin2Gen without revealing he had been paid $157,000 in B2G token to do so. 

Seagal promoted Bitcoiin2Gen in February 2018 as a way “to empower the community by providing a decentralized P2P payment system with its own wallet, mining ecosystem and robust blockchain platform without the need of any third party.”

Of course, that was before the token became worthless.

Today’s complaint seeks financial penalties, disgorgement plus interest for aggrieved investors, and injunctive relief against the parties. DeMarr also faces criminal charges filed by the Department of Justice and the US Attorney’s Office for the Eastern District of New York.


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Swiss Crypto Brokerage Firm Obtains License from FINMA

Crypto Broker AG, the brokerage subsidiary of Swiss digital assets startup Crypto Finance Group, received a securities license from Switzerland’s financial watchdog.

Crypto Broker AG Scores FINMA Securities License

According to a press release on PRNewswire on Monday (Feb. 1, 2021), Crypto Broker AG, has secured the securities house license from the Swiss Financial Market Supervisory Authority (FINMA). The new FINMA license marked an important milestone for the firm following a successful 2020, which saw Crypto Broker AG trade more than $1 billion worth of assets.

The securities housing license would enable the crypto brokerage startup to offer new products and services including the option to trade security tokens, to banks and other financial service providers.

Commenting on the new license, the CEO and founder of Crypto Finance Group, Jan Brzezek, said that having a licensed broker enables the company to expose its clients to a new digital asset class, while offering regulated and professional services. Also speaking on the FINMA license was Rupertus Rothenhaeuser, Crypto Broker AG’s CEO, who said:

“Today’s announcement marks a milestone in achieving the Crypto Finance Group vision: providing professional products and services for the evolving digital asset universe. Given last year’s exponential growth in digital asset operations with our clients, we expect continued business expansion in 2021.”

Crypto Broker AG’s license marks the latest regulatory approval for the Swiss financial market regulatory watchdog. Back in June 2018, Crypto Fund, another subsidiary of Crypto Finance, became the first crypto firm to receive the FINMA operating license. Later that year, Crypto Fund also obtained that asset manager license from the Swiss regulatory watchdog.

FINMA has further issued different licenses to banks to engage in crypto services. As reported by BTCManager back in October 2020, the Swiss arm of major Russian bank Gazprombank got approval from FINMA to offer crypto custodial services. Earlier in the same year, FINMA gave the greenlight to InCore bank to conduct crypto-related transactions.

Switzerland Implements Blockchain Act

Switzerland has continued to maintain its reputation as a crypto-friendly region, which has seen cryptocurrency and blockchain startups move and thrive in the country. In September 2020, the “Blockchain Act”, which seeks to regulate the emerging industry, passed through Switzerland’s House of Representatives unopposed.

Meanwhile, the first part of the Blockchain Act covering company law reforms came into effect on February 1, 2021. The second part of the legislation involving financial market infrastructure upgrades would be implemented in August 2021.

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Hot to Get Your Crypto Out of Robinhood Without Paying Taxes

In brief

  • Robinhood trading app allows investors to buy crypto, but they can’t transfer it out.
  • Cashing out can trigger capital gains taxes.
  • Users looking to switch to another service should time their moves, says CPA Shehan Chandrasekera of CoinTracker.

Robinhood caused quite a kerfuffle last week after it temporarily suspended trading of several popular stocks, including GameStop and AMC, and then limited cryptocurrency purchases as well.

While the moves can plausibly be explained by cash constraints and/or technical issues from the popular trading app, they highlighted the limits of using centrally controlled applications to purchase decentralized digital assets.

But US residents looking to transfer their crypto out of Robinhood into something a little less centralized face two challenges. The first is that Robinhood doesn’t support withdrawals; you have to cash out. The second is that, when you cash out, you’re on the hook for capital gains tax, even if you intend to just put that cash into another exchange.

According to Shehan Chandrasekera, head of tax strategy for crypto tax software firm CoinTracker, there are five ways of reducing, or even eliminating, your cryptocurrency taxes.

The first option is perhaps the least attractive: Sell the dip. Essentially, in this scenario, said Chandrasekera, when you’ve spent more on crypto than the current market value of the coins, you don’t have to pay capital gains because you haven’t made anything. “By cashing out at this moment, you also get to tax loss harvest,” he tweeted. “You can then invest the cash in another crypto exchange.”

Second, you can wait. If the coins have been there longer than one year, they’ll qualify for long-term capital gains, which lowers the maximum tax rate from 37% to 20%.

“The US tax code rewards patient hodlers with long-term time horizons,” Chandrasekera told Decrypt. He pointed out, “Long-term capital gains can even be subject to a 0% rate if you meet certain income criteria.” In other words, those maximum rates are for big earners, not smaller traders.

Can’t wait for a bear market and/or 12 months? The third route is to just start trading elsewhere and leave your holdings in Robinhood. “If you incur any crypto losses outside of [Robinhood] anytime in 2021, exit [Robinhood] at a profit,” Chandrasekera wrote. “You can use those outside losses to offset [the Robinhood] exit tax bill (vice versa).”

As a fourth option, wrote Chandrasekera, you can also wait until after you file taxes to determine if you have any capital losses to carry forward into 2021. “If yes, you can use these losses to offset your gains when exiting.”

Last, you can hold off and just keep an eye on crypto and stock losses. Both count for capital losses and gains. “Exit when the timing is right so you can minimize your exit taxes by using losses coming from stocks,” wrote Chandrasekera.

Chandrasekera told Decrypt, “Option 1 and 2 are the most user friendly, especially if you do your own taxes.”


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SEC Charges Three of Stealing $11.4M Through Token Backed by Actor Steven Seagal

The U.S. Securities and Exchange Commission (SEC) on Monday charged three associates of defunct crypto firm Bitcoiin2Gen with defrauding investors of $11.4 million through the 2018 B2G token offering infamously peddled by actor Steven Seagal.

Bitcoiin2Gen and Start Options founder Kristijan Krstic and company promoter John DeMarr allegedly violated federal securities laws during the 2018 raise with DeMarr associate Robin Enos “aiding and abetting,” according to the SEC. DeMarr also faces criminal fraud charges in a parallel suit filed Monday.

The trio allegedly promised to deliver Bitcoiin2Gen’s investors an Ethereum-based token the SEC claims never existed. They allegedly disseminated misleading brochures among 460 investors to whom they’d promised a “mineable” and “tradeable” digital token – B2G – selling the sham for funds they never returned.

Bitcoiin2Gen also banked on the blessing of actor Steven Seagal, whom Krstic and DeMarr (through a pseudonym) trotted out as a “brand ambassador” instead of a promoter earning $120,000 to pump B2G. Seagal, who was not named in the Monday suit, settled related charges last February.

The charges bring the regulator’s ICO crackdown into its second presidential administration. Regulators first began pursuing allegedly fraudulent ICO projects during then-President Trump’s administration, but appear poised to continue that trend under Biden’s team.



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Mike Novogratz: Five Crypto Assets Could Replace JP Morgan and the New York Stock Exchange

Mike Novogratz, the CEO of crypto investment firm Galaxy Digital, is unveiling a list of crypto assets that he believes could replace JP Morgan and the New York Stock Exchange.

In a live stream interview with Grammy-nominated rapper Lil Yachty, who recently became vocal about his interest in cryptocurrencies, Novogratz names five cryptocurrencies that can potentially cause a massive disruption in the financial industry in half a decade.

“So Bitcoin, it’s probably on a risk-adjusted basis the safer, but it’s moved a lot. Ethereum has moved a lot this year but I think Ether has a long way to go so that’s a good investment.

And then there is this whole group called DeFi, or decentralized finance. So tokens like Aave (AAVE), or Chainlink (LINK), or Compound (COMP), (YFI), Uniswap (UNI) – those five – there’s a chance that those five blow up the world, not in the next week or the next month but in the next five years. Those are the tokens that want to take the banks and tear the banks limb from limb, that want to replace JP Morgan and the New York Stock Exchange and so I put some money into those things. It’s much riskier, but if it works, it’s going to be a much bigger payoff.”

As for Dogecoin (DOGE), the coin that caught the attention of retail traders after pumping 528% in as little as 24 hours on January 28th, Novogratz says it can be a good short-term play but he’s betting that it will be worth nothing in the future.

“It’s kind of a joke, and it was a meme coin. And listen, memes work. You saw the meme about Bernie Sanders going everywhere, and DOGE was a meme coin that took off and people bought it as a joke, and now people trade it. If you’re going to do it, you do it with a small amount of your money and you buy it and you sell it, and you buy it before it goes up and you sell it when it goes up because there’s no long-term value in Dogecoin. In the long run it’s going to be a zero but it can be exciting to play…

Remember how markets work. Markets work when there’s something that people get excited about, so there’s energy around it. Elon Musk made a joke about Dogecoin and the next thing you know it went flying high, and so you got to be real careful about coins like that. For those people who are going to trade in those, they got to be focused on crypto, they’re like crypto junkies.”

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As Robinhood Halts, DEX Trading Soars

In brief

  • Decentralized exchanges are seeing record smashing volume at the same time Robinhood and other brokers are restricting trading for retail investors.
  • January saw DEX volume of $63 billion in January, more than half of all volume seen in 2020.
  • As new investors the market, DeFi offers a ready alternative for those disillusioned with traditional institutions.

The frenzy around GamesStop, AMC, and other “meme stocks” have caused stock brokers like Robinhood to restrict or suspend trading for thousands of users. But decentralized exchanges like Uniswap are seeing a frenzy of their own, with no way for the developers—or anyone else—to interfere.

Decentralized exchanges (DEX) just closed out their biggest month ever, processing more than $63 billion in trading volume over the last 30 days, according to data from Dune Analytics. That’s more than half the total volume from all of 2020 in January alone.

It’s a sign of the continued rapid growth of the cryptocurrency industry, and specifically decentralized finance (DeFi), as cracks begin to show in the structure of traditional stock trading.

Decentralized exchanges are built to run on blockchains like Ethereum, using smart contracts to automatically swap between cryptocurrencies. The decentralized nature of the exchanges means that no centralized authority connects trade orders to one another, instead using pools of liquidity contributed by protocol users to swap directly between digital assets. 

No centralized authority also means DEX trades can never be censored or suspended, unlike brokers such as Robinhood that can change the rules about who can trade, and how much, seemingly at will.

Decentralized exchanges are part of a larger industry known as DeFi, or decentralized finance. DeFi aims to replace the products and services provided by the traditional financial industry, such as loans, asset swaps, and interest bearing deposits on decentralized blockchain networks, allowing equal access for anyone with an internet connection.

DeFi has grown rapidly since the summer of 2020, increasing the total value locked in protocols (TVL), similar in some ways to measures of assets under management (AUM) in traditional financial circles, by nearly 1,400% to more than $26 billion.

Uniswap, by far the most popular decentralized exchange, captured more than 40% of all DEX trading volume in January. The UNI token, used for voting on decisions about the future development of the protocol, has also increased in price more than 300% since the start of 2021.

Robinhood has served as an introduction to markets and trading for thousands of Redditors and other newbie investors searching for both profit and excitement, as COVID-related shutdowns drag on. 

But with billionaire hedge funds seemingly leveraging their size and clout to change the rules of the game daily, decentralized exchanges offer a ready alternative that isn’t owned and controlled by those at the top. If January volume is any measure, there’s a vibrant market ready and waiting should those day-trading rebels ever catch on.


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Bitcoin price is sideways, silver hits a 7-year high and XRP’s rally pops

Bitcoin (BTC) price spent the day trading in a tight range between $32,000 and $34,000. At the time of writing, the digital asset is pinned below the descending trendline resistance and each attempt to cross above it is met by selling. 

Data from Cointelegraph Markets and TradingView show a price increase of 4.14% for the top cryptocurrency, which currently trades at $33,840.

Daily cryptocurrency market performance. Source: Coin360

In light of the sideways price action, Ki Young Ju, theCEO of the cryptocurrency analysis firm CryptoQuant, spotted a potential bullish indicator that may indicate a price breakout in the near future for Bitcoin.

According to Ju, more than 15,000 Bitcoin were recently withdrawn from Coinbase Pro with the outflows going “into custody wallets that only have in-going transactions,” indicating the purchases were likely “OTC deals from institutional investors.” Rallies have followed similar outflows in the past, and Ju sees this as a sign BTC will “protect $33,000 in the short-term.”

Financial markets are still dealing with the antics of r/Wallstreetbets, which has expanded into the cryptocurrency sector via r/Satoshistreetbets and helped initiate the recent pumps in the price of Dogecoin (DOGE) and now XRP.

After rallying 147% to trade at $0.76 overnight, XRP price corrected by 47% and currently the altcoin is trying to retake the $0.40 level.

In other news, Kraken cryptocurrency exchange joined Grayscale Investments in its effort to fight back against the proposed FinCEN self-hosted wallet rule and the U.S. government’s STABLE Act.

The exchange pledged $100,000 to Coin Center, a Washington D.C.-based cryptocurrency advocacy group whose focus is to educate regulators about digital assets while also advancing the rights of crypto users.

Silver surges higher after r/Wallstreetbets takes aim at short-sellers

Traditional markets saw increases across most sectors and this helped to recover some of the losses from Jan. 29. The S&P 500, Dow and NASDAQ have all benefited from the positive price action on Feb. 1 and closed the day up 1.61%, 0.76% and 2.5% respectively.

IShares Silver Trust monthly chart. Source: TradingView

As announced over the weekend, members of the r/Wallstreetbets investing group turned their focus to the precious metals market and pushed silver futures above $30, its highest price level since 2013.

The market has since cooled off slightly, and SLV currently trades at $29.07.

Decentralized exchanges take center stage

DeFi related tokens continue to perform well as the battle between Uniswap and Sushiswap heats up and the top two DEXs see increased trading volume, along with sharp appreciation in the pric of their native tokens.

Both tokens rallied to new 2021 highs. The price of UNI is up 17% and trading at $20.44 while SUSHI is up 28% and trading at a price of $12.73

UNI price vs. SUSHI price. Source: TradingView

Binance Coin (BNB) has been the best performing top 10 coin over the past 24-hours, currently up 12.91% and trading at a price of $49.51. Meanwhile, the NEO-based DeFi platform, Flamingo (FLM), is up 38.19% and trading at $0.305, boosted by an ongoing governance vote by token holders.

The overall cryptocurrency market cap now stands around $1 trillion and Bitcoin’s dominance rate is 62.5%.