Tag: Cryptocurrencies

SPAC CFO Sentenced to Prison for Embezzling $5M

by Blockchain News

Cooper Morgenthau, the former CFO of African Gold Acquisition Corporation (AGAC), has been sentenced to three years in prison for embezzling $5 million from three different Special Purpose Acquisition Companies (SPACs). The sentencing comes as a result of Morgenthau’s use of the embezzled funds to trade cryptocurrencies and meme stocks, leading to significant losses. In addition to his prison sentence, Morgenthau has been ordered to forfeit $5.1 million and pay restitution of the same amount.

The embezzlement scheme began in June 2021 and continued until August 2022, during which time Morgenthau wired approximately $1.2 million from African Gold to his personal accounts for trading purposes. He traded equities and options of cryptocurrencies and meme stocks, leading to almost all of the funds being lost. Following the losses, he then provided falsified documents to accountants and an auditor at African Gold ahead of its public filing with the U.S. Securities and Exchange Commission (SEC). This led to “material misstatements” in the company’s public financial records.

Moreover, Morgenthau raised an additional $4.7 million from private investors in a separate SPAC, based on the fraudulent claim that the money would be used to launch yet another SPAC. Unfortunately for the investors, Morgenthau used the freshly-raised capital to cover his losses at African Gold and continue further trading of cryptocurrencies and meme stocks.

The malpractice was discovered by African Gold in August 2022, resulting in Morgenthau being fired, and the SEC being informed. Subsequently, Morgenthau pled guilty to one count of wire fraud on January 3.

The case sends a clear message to the SPAC community that fraud in the markets will not be tolerated. U.S. Attorney Damian Williams said in a statement, “With today’s sentencing of Cooper Morgenthau, SPAC promoters have been sent a message that fraud in the SPAC markets will be punished, and greed on Wall Street will be met with serious consequences.”

SPACs have become increasingly popular over recent years, and this case highlights the importance of proper oversight and compliance in the sector. While SPACs offer companies a faster and less complicated path to going public, they also come with risks. Embezzlement and fraud can damage the reputation of the entire industry, leading to regulatory scrutiny and increased oversight. As such, it is essential for SPACs and their investors to take proper precautions and perform proper due diligence when selecting management teams and making investment decisions.

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Nearly Half of Millennials Own Cryptocurrencies

by Blockchain News

A recent survey conducted by Bitget, a leading cryptocurrency exchange, has revealed that nearly half of millennials across major population countries own cryptocurrencies. The study, which was conducted between July 2022 and January 2023 and published on April 28, featured approximately 255,000 adult respondents from 26 countries, with around 10,000 respondents per country.

The survey found that 46% of millennial respondents owned cryptocurrencies, compared with 25% of Gen X, 21% of Gen Z and 8% of baby boomers. This trend is in line with previous studies that have suggested that Gen Z and millennials tend to have the highest adoption rates for cryptocurrencies out of all population groups.

In addition to ownership, the survey also revealed that 27% of millennials and 36% of Gen Z consider cryptocurrency regulation an important factor when voting for political candidates. This finding suggests that politicians who are pro-cryptocurrency regulation may have an advantage in attracting younger voters.

Furthermore, the study suggested that by the beginning of the next decade, demographic processes may lead to a dramatic shift towards increased acceptance of cryptocurrencies as a higher proportion of younger generations continue to exhibit strong demand for crypto, despite the slowdown in population growth.

The Bitget survey is not the first to suggest that younger generations are more receptive to cryptocurrencies. In October 2022, a Charles Schwab survey revealed that almost 50% of Gen Z and millennials want crypto in their retirement funds. The survey also found that 43% of Gen Z and 47% of millennials already invest in cryptocurrencies outside their 401(k) retirement accounts.

The rise in cryptocurrency ownership among younger generations is likely due to several factors, including increased access to technology and a lack of faith in traditional financial institutions. Cryptocurrencies offer a decentralized and more secure alternative to traditional banking systems, which may be more appealing to younger generations who are skeptical of established financial institutions.

In conclusion, the Bitget survey provides further evidence of the growing acceptance of cryptocurrencies among younger generations. As more millennials and Gen Zers enter the workforce and gain greater financial independence, it is likely that we will see a continued shift towards increased adoption of cryptocurrencies as a legitimate form of investment and payment. This trend may have significant implications for the future of the global economy and financial system, as cryptocurrencies continue to gain mainstream acceptance and challenge traditional financial institutions.

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CFTC Commissioner Calls for Reduced Cryptocurrency Anonymity

by Blockchain News

Christy Goldsmith Romero, a commissioner of the US Commodity Futures Trading Commission (CFTC), has called for reduced anonymity for cryptocurrencies. Speaking at the City Week 2023 conference in London on April 25, Romero emphasized the need to manage the risks associated with digital assets. She believes that anonymity is the primary feature that makes cryptocurrencies appealing to illicit finance and that this issue must be addressed by both governments and the industry.

In her keynote speech on Illicit Finance and Other Key Risks of Digital Finance, Romero stated that the risks associated with digital assets must be managed. She stressed that market integrity, national security, and financial stability are crucial and cannot be compromised. Romero’s proposal for reducing anonymity in cryptocurrencies could help to address these risks.

Cryptocurrencies are often used by criminals to evade detection and launder money. With the anonymous nature of transactions, it is difficult to trace the movement of funds and identify the parties involved. By reducing anonymity, it would become easier for law enforcement agencies to track down criminals who use cryptocurrencies for illegal activities.

Romero’s proposal may also help to address concerns around the regulation of cryptocurrencies. With greater transparency and traceability, governments and regulatory bodies would have greater visibility into cryptocurrency transactions, which could help them to identify potential risks and take appropriate action.

The issue of anonymity in cryptocurrencies has been a topic of debate for several years. Some argue that anonymity is an essential feature of cryptocurrencies and that reducing it would compromise privacy and security. However, others argue that anonymity enables criminal activities and that reducing it would make cryptocurrencies more legitimate in the eyes of the public and regulators.

Despite the debate, there have been several initiatives to reduce anonymity in cryptocurrencies. For example, the Financial Action Task Force (FATF) has introduced guidelines for virtual asset service providers (VASPs) that require them to implement measures to identify and verify their customers. Similarly, several countries have introduced Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations for cryptocurrency exchanges and other service providers.

In conclusion, Romero’s proposal for reduced anonymity in cryptocurrencies could help to address the risks associated with digital assets. However, it remains to be seen whether the industry will adopt such measures and whether they will be effective in managing the risks of cryptocurrencies. The debate around anonymity in cryptocurrencies is likely to continue, as governments and industry stakeholders grapple with the challenges posed by digital assets.

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Cryptocurrencies Act as Safe Haven Amid U.S. Banking Crisis

by Blockchain News

Amid the ongoing banking crisis in the United States, cryptocurrencies have emerged as a safe haven, according to Cathie Wood, CEO of asset management firm ARK Invest. Wood criticized the Federal Reserve’s inability to prevent bank runs and blamed their policy failure for the current crisis, which has led to the downfall of banks such as Silicon Valley Bank (SVB) and Signature.

In a Twitter thread on March 16, Wood pointed towards the asset-to-liability mismatch, which is typical for banks but was untenable in the current scenario. Deposits were leaving the banking system for the first time since the 1930s, and securities earnings for banks were only 1-2% against deposits paying 3-5%, which eventually became untenable as deposits started leaving the system. Some banks were forced to sell held-to-maturity securities, recognizing losses that depleted their equity accounts.

Wood argued that the ongoing crisis wasn’t forced by cryptocurrency, as the ecosystem has been under heavy scrutiny since FTX’s downfall, leading to a severe regulatory crackdown. She said that regulators are using crypto as a scapegoat for their own lapses in oversight of traditional banking.

Wood has long been a known crypto proponent, often reflected in her company’s investment in emerging markets – especially crypto. She projected crypto as a solution to the central points of failure, the opacity, and the regulatory mistakes in the traditional financial system. As the scapegoat for policy mistakes, crypto will move offshore, depriving the U.S. of one of the most important innovations in history.

The current banking crisis would not have been possible in the decentralized, transparent, auditable, and overcollateralized crypto asset ecosystem, according to Wood. Cryptocurrencies have shown themselves to be a safe haven amid the U.S. banking crisis, with Bitcoin and Ether touching new multimonth highs. As traditional banking continues to struggle, it’s clear that cryptocurrencies will play an increasingly important role in the financial landscape of the future.

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South Dakota Governor Vetoes Bill Excluding Cryptocurrencies from State’s Definition of Money

by Blockchain News

South Dakota Governor Kristi Noem has vetoed House Bill 1193, which aimed to amend the state’s Uniform Commercial Code (UCC) to specifically exclude cryptocurrencies and other digital assets from the definition of money. The bill, which had already passed the state legislature, sought to provide greater clarity and legal certainty for businesses operating with digital assets in South Dakota.

In her veto notice to the state’s House Speaker Hugh Bartels on March 9, Governor Noem argued that the bill would put South Dakota at a disadvantage compared to other states that have embraced cryptocurrencies. She said that excluding cryptocurrencies as money would make it more difficult to use them and potentially harm the state’s economy.

Furthermore, Governor Noem expressed concern that the bill could pave the way for future federal government overreach in issuing a digital dollar. She believes that by excluding cryptocurrencies from the definition of money, the bill would create a regulatory gap that could be exploited by the federal government to impose its own digital currency on the states.

Governor Noem also pointed out that the bill’s exception for central bank digital currencies (CBDCs) could undermine the state’s efforts to regulate cryptocurrencies and digital assets. She argued that CBDCs, which are issued and backed by central banks, could potentially crowd out other digital currencies and become the only viable option for businesses and consumers alike.

Governor Noem’s decision to veto the bill has been met with mixed reactions from the cryptocurrency community. Some have praised her for recognizing the potential of digital assets and for standing up against federal government overreach. Others, however, have criticized her for ignoring the risks and challenges posed by cryptocurrencies, including their potential use for illicit activities and their impact on the environment.

In recent years, South Dakota has emerged as a hub for the cryptocurrency and blockchain industries, with several major firms and startups operating in the state. However, the regulatory landscape for digital assets in South Dakota remains uncertain, with lawmakers and regulators grappling with the complexities and risks of this emerging sector.

Governor Noem’s veto of House Bill 1193 is likely to add further uncertainty and debate to the state’s approach to regulating cryptocurrencies and digital assets. The governor’s concerns about the potential impact of excluding cryptocurrencies from the definition of money and the risk of federal government overreach highlight the need for a nuanced and balanced regulatory framework that balances innovation and security.

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Nigerian President-elect’s Manifesto Includes Blockchain and Crypto Regulations

by Blockchain News

Nigeria is one of the countries where cryptocurrency adoption is on the rise. In recent years, the country has seen a surge in crypto trading and the use of cryptocurrencies for cross-border payments, remittances, and e-commerce. However, the lack of clear regulations and guidelines for the use of cryptocurrencies has been a hindrance to the growth of the sector.

To address this issue, Bola Tinubu, the Nigerian President-elect, has released a manifesto that includes proposals for the use of blockchain technology and cryptocurrencies in Nigeria’s banking and finance sector. The manifesto proposes a review of the existing Nigerian Security Exchange Commission regulations on digital assets to make them more business-friendly.

The proposed reforms would require digital asset companies to register with the SEC and comply with SEC regulations. The manifesto also proposes the establishment of an advisory committee to review the SEC regulations on digital assets to create a more efficient and business-friendly regulatory framework. The proposed regulations would enable the use of cryptocurrencies and other digital tokens in Nigeria’s banking and finance sector, as well as in identity management, revenue collection, and other areas.

The government hopes that the proposed reforms to the SEC regulations will help attract more investors in the digital and economic sectors and stimulate economic growth. The manifesto also aligns with the Central Bank of Nigeria’s eNaira, the country’s central bank digital currency. The government plans to expand the adoption of the eNaira, which has not lived up to expectations since its launch.

However, some cryptocurrency enthusiasts have criticized the existing regulations for lacking provisions that allow crypto users to transact with their local banks. The proposed reforms to the SEC regulations would address this issue and provide a framework for regulating digital assets like cryptocurrencies and other digital tokens in Nigeria.

The release of the manifesto coincides with the increasing adoption of cryptocurrencies in Nigeria, which is among the highest in the world. According to a report by Chainalysis, Nigeria ranks second in the world in terms of cryptocurrency adoption, after Ukraine. The report notes that Nigeria’s high adoption of cryptocurrencies is driven by a variety of factors, including high remittance fees, currency volatility, and a large young population with a high level of technology adoption.

The Nigerian government’s interest in cryptocurrencies is also reflected in the Central Bank of Nigeria’s milder position towards stablecoins. The bank recently published a research report titled “Nigeria’s Payment System Vision 2025,” which explores the creation of a new framework to introduce a stablecoin in Nigeria.

In conclusion, Bola Tinubu’s manifesto includes proposals for the use of blockchain technology and cryptocurrencies in Nigeria’s banking and finance sector. The proposed reforms to the SEC regulations would enable the use of cryptocurrencies and other digital tokens in Nigeria’s banking and finance sector, as well as in identity management, revenue collection, and other areas. The government hopes that the proposed reforms will help attract more investors in the digital and economic sectors and stimulate economic growth.

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G20 To Establish Standards For Global Crypto Regulatory Framework

by Blockchain News

It was announced on February 25 by the group of the 20 largest economies in the world, known collectively as the G20, that the Financial Stability Board (FSB), the International Monetary Fund (IMF), and the Bank for International Settlements (BIS) will deliver papers and recommendations establishing standards for a global crypto regulatory framework.

The Financial Stability Board (FSB) is expected to publish its recommendations by July 2023 on the regulation, supervision, and oversight of global stablecoins, crypto asset activities and markets, as stated in a document that provides a summary of the outcomes of a meeting with finance ministers and governors of central banks.

The next set of guidelines is not anticipated to be released until September 2023. At that time, the FSB and the IMF are scheduled to jointly provide “a synthesis document incorporating the macroeconomic and regulatory aspects of crypto assets.” Another research on the “possible macro-financial ramifications of the broad adoption” of central bank digital currencies is scheduled to be published by the International Monetary Fund (IMF) in the same month (CBDCs). The following is an excerpt from the statement that was released by the G20: “We look forward to the IMF-FSB Synthesis Paper which will support a coordinated and comprehensive policy approach to crypto-assets, by considering macroeconomic and regulatory perspectives, including the full range of risks posed by crypto assets.”

Additionally, the BIS will provide a paper that discusses analytical and conceptual concerns in addition to potential risk reduction techniques associated with crypto assets. The text does not include any information on the deadline for this report. The use of cryptocurrency assets to finance terrorist operations will also be investigated by a financial task group established by the G20.

During the course of the event, United States Secretary of the Treasury Janet Yellen said that it was “essential to put in place a solid regulatory framework” for activities relating to cryptocurrencies. In addition to this, she emphasized that the nation is not advocating for a “outright ban on crypto activity.” In a brief conversation with reporters on the margins of the main event, the managing director of the IMF, Kristalina Georgieva, suggested that the G20 nations need to have the option of outlawing cryptocurrencies.

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FATF Releases Action Plan to Improve Implementation of Global Standards on Crypto

by Blockchain News

According to a study published by the Financial Action Task Force, often known as FATF, its delegates have reached a consensus on an action plan “to encourage prompt worldwide implementation” of global standards on cryptocurrencies.

According to a publication that was released on February 24 by the Financial Action Task Force (FATF), the plenary for the financial watchdog, which is comprised of delegates from more than 200 jurisdictions, recently met in Paris and reached a consensus on a roadmap that is intended to strengthen the “implementation of FATF Standards on virtual assets and virtual asset service providers.” The task force has said that it would provide a report on how FATF members have progressed in implementing the crypto standards in 2024. This study will include topics such as the regulation and monitoring of VASPs.

According to the findings of the research, “the absence of regulation of virtual assets in many nations presents possibilities that are used by criminals and terrorist financiers.” “Since the FATF strengthened its Recommendation 15 in October 2018 to address virtual assets and virtual asset service providers, many countries have failed to implement these revised requirements,” the Financial Action Task Force (FATF) writes. “This includes the ‘travel rule,’ which requires obtaining, holding, and transmitting originator and beneficiary information relating to virtual asset transactions.”

The “Travel Rule” established by the FATF contains a section that recommends virtual asset service providers (VASPs), financial institutions, and regulated organizations in member states gather information on the originators and beneficiaries of certain digital currency transactions. The financial watchdog said that as of April 2022, several nations were not in accordance with its requirements for combating the financing of terrorism and anti-money laundering.

The nations of Japan, South Korea, and Singapore have been among those that have shown the most willingness to put policies in place that are in line with the Travel Rule. According to reports, a number of countries, including Iran and North Korea, have been added to the “grey list” maintained by the FATF in order to monitor potentially illicit financial activities.

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G20 Discusses Crypto Regulations Under India Presidency

by Blockchain News

During the time that India presided over the G20, the first meeting of its kind for the group’s Finance Ministers and Central Bank Governors (FMCBG) was conducted. At this meeting, key issues pertaining to financial stability and regulatory oversight were discussed. India has urged the other member nations to acknowledge the macro-financial consequences of crypto assets and has advocated the development of a coordinated worldwide strategy. In addition, India has proposed the formation of a global strategy coordination group.

In light of the fact that cryptographic assets are traded all over the globe, Nirmala Sitharaman, India’s Finance Minister, has in the past voiced her support for the establishment of crypto regulations in collaboration with other countries. This story is now being told as part of the discussions that are being held in the mainstream while India holds the presidency of the G20.

During the 24th and 25th of February, members of the G20 gathered with the FMCBG to discuss the prospects of technological advances while placing a focus on finding a balance between the risks associated with such developments. Among the most significant subjects that were discussed during the G20 meeting were the significance of financial stability and regulatory goals, policy measures for boosting financial inclusion, and productivity increases.

Sitharaman expressed appreciation to individuals who supported efforts to modify rules pertaining to crypto assets in her closing remarks. To be more specific, the Minister of Finance asked for a concerted effort “for creating and comprehending the macro-financial ramifications,” which could be used to change crypto legislation on a global scale. Specifically, the Minister of Finance asked for a concerted effort “for creating and comprehending the macro-financial ramifications.”

She then continued by expressing her appreciation to the International Monetary Fund (IMF) for producing a thorough paper on the implications that crypto assets will have on the overall macroeconomic system. In her final comments, Sitharaman underlined the need of cooperation between the nations that are members of the G20 “to foster responsible technological breakthroughs and protect the stability of the financial system.”

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Blockchain Association Rejects Court’s Securities Ruling on Private Blockchains

by Blockchain News

Following the decision of a federal judge to allow a lawsuit against Dapper Labs’ NBA Top Shot nonfungible tokens (NFTs) to go forward, the chief legal officer of the Blockchain Association stated that “it would be absurd” for a United States court to rule that digital assets on private blockchains are securities. This statement was made in response to the judge’s decision to allow the lawsuit to go forward.

U.S. attorney Jake Chervinsky issued a statement after a federal court refused a move to dismiss a 2021 lawsuit claiming Dapper Labs of marketing NFTs as unregistered securities. The ruling prompted Chervinsky’s comments.

Chervinsky was one of a number of attorneys who posted on Twitter to repeat that the judge’s rejection of the motion does not indicate that a decision has been reached about the complaint; rather, it just indicates that the lawsuit was “facially plausible.”

“The judge didn’t make any decisions at all. Because the securities allegations were at least “plausible,” an exceedingly low standard and not at all a final determination, he permitted the case to go beyond a request to dismiss it. He noted that this decision was not a final judgement at all.

“Putting this debate to the side for a moment, it would be completely ridiculous if every valuable digital object held on centralized databases was a security.”

According to his explanation, this would force every major video game producer, event ticketing site, travel rewards program, and so on to become publicly traded companies that are subject to regulation by the SEC.

Jesse Hynes, an additional attorney in the United States, weighed in on the move in a tweet on February 22. He said that motions to dismiss are “rarely ever successful” due to the fact that the plaintiff just has to allege sufficient evidence for the case to continue.

“The court concluded in the Dapper case that the plaintiff presented sufficient evidence showing, IF ALL THE ALLEGATIONS ARE TRUE, then there is a securities breach,” the judge said.

“Now we enter the phase of discovery in which we seek to uncover what the actual facts are. The attorney continued by saying that after that is finished, Dapper would most likely submit a move for a summary judgment.

The charges that Dapper Labs distributed the NBA Top Shot Moments NFTs on a privately-run blockchain were a “fundamental” component for the court’s decision to deny the motion to dismiss, according to another United States attorney by the name of James Murphy, also known as “MetaLawMan.”

As a result of this, MetaLawMan proposed that the fact that XRP (XRP) is issued on a public blockchain “could be considered a net positive” for Ripple in its case against the U.S. Securities Exchange Commission (SEC). This was prompted by the fact that this “could be considered a net positive” for Ripple.

Plaintiff Jeeun Friel initiated the class-action lawsuit against Dapper Labs in May 2021. In the complaint, Ms. Friel said that the defendant offered NFTs in the capacity of unregistered securities.

On February 22, Judge Marreo ruled against the plaintiff’s petition to dismiss the complaint. He said that the method through which Dapper Labs provides the NFTs has the ability to establish a suitable legal connection between investors and themselves, which fulfills the investment contract conditions outlined in the Howey test. This is the case because the Howey test was developed.

However, given that Marreo said that not all NFTs would constitute securities and that each case will need to be evaluated on a case-by-case basis, it is very doubtful that the eventual result of this case will set a precedent for NFTs.

In the 15 minutes after the termination, the price of the Dapper Labs-issued Flow (FLOW) token dropped by 6.4%, moving from $1.24 to $1.16. According to CoinGecko, the FLOW token has recently made a comeback and is now trading at $1.29.

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