Terraform Labs (Luna) Co-Founder Pleads US Court to Dismiss SEC’s Fraud Allegations

The United States Securities and Exchange Commission (SEC) has filed claims of fraud and securities violations against Terraform Labs. Together with the company’s co-founder, Do Kwon, Terraform Labs is vigorously pursuing a dismissal of these charges from a U.S. District Court. The legal representatives for Kwon and Terraform Labs argued in a document that was submitted on October 27 to the United States District Court for the Southern District of New York that the cryptocurrencies Terra Classic (LUNC), TerraClassicUSD (USTC), Mirror Protocol (MIR), and mirrored assets (mAssets) are not securities as asserted by the SEC. The document was filed in response to the SEC’s claim that the cryptocurrencies are securities.

They emphasised that there is a lack of evidence to corroborate many of the SEC’s charges, and this was a major point of emphasis for them. The defence team vigorously refuted a particular claim, which said that Kwon and Terraform Labs had clandestinely moved millions of dollars into bank accounts in Switzerland for the purpose of enriching Kwon personally. The dispute centres on a claim that 10,000 Bitcoin were transferred to an account at a Swiss bank, resulting in the subsequent withdrawal of $100,000 from the financial institution. They emphasised, “The SEC knew this allegation was false when it filed this case,” which gave insight on what was seen as disinformation provided by the SEC.

Constant allegations from the SEC

The action that was brought by the SEC in February posited fraudulent behaviour by Kwon and Terraform Labs. This was a significant setback for the once thriving $40 billion Terra ecosystem, which came to an end in May 2022 when the TerraUSD (UST) stablecoin lost its peg to the United States dollar. The complicated legal situation exacerbated an already large decline for renowned bitcoin companies, with Terraform Labs at the forefront of this trend.

The Securities and Exchange Commission (SEC) said that the catastrophic collapse of TerraUSD (UST) and the Luna cryptocurrency was the consequence of unregistered securities sales that were part of a massive scheme that allegedly defrauded investors out of billions of dollars. This allegation contributes to the continuing legal conflict between crypto businesses and regulatory agencies over the basic principles that govern digital assets.

The Dynamics of the Courtroom

Even after a two-year-long investigation, over 20 depositions, and an exchange of more than two million pages of documents and data, Terraform Labs is adamant that the SEC has not shown sufficient proof to support a trial. This is evidenced by the company’s request for summary judgement, which elucidates the company’s opinion that the SEC has failed to do so. Do Kwon, who is being held in custody in Montenegro at the moment, has pleaded with the court to deny the SEC’s request to extradite him so that he may be questioned in the United States on the catastrophic failure of his company’s tokens.

The attorneys stated that extraditing Kwon for the purpose of obtaining testimony would be “impossible,” while vehemently rejecting any chance that would provide the SEC with a similar advantage. While the legal system is in disarray, Terraform Labs and Kwon continue their ardent defence against the claims made by the SEC. Both parties are working hard to clear their names and recover the reputations that have been severely damaged as a result of the allegations made against them in the cryptocurrency industry.

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Japanese Startups Can Now Raise Funds Using Cryptocurrencies

In a recent move to diversify funding methods for startups, the Japanese government has announced regulatory relaxations allowing startups to raise capital through cryptocurrencies, according to Nikkei. This decision comes as part of Japan’s efforts to catch up with international standards in handling digital assets.

Previously, startups in Japan primarily relied on traditional means like equity for fundraising. With this new regulation, startups can now offer digital assets, specifically cryptocurrencies, as an alternative to traditional securities when receiving investments from funds. This initiative is particularly targeted at funds known as Limited Partnership for Investment (LPS) in Japan.

This move is seen as a significant step for Japan, which has been perceived as lagging in the global digital asset space. By allowing startups to leverage cryptocurrencies for fundraising, the government aims to make the country more attractive for venture capital investments and to foster innovation in the burgeoning tech sector.

While Japan has been prudent in accepting crypto, it has actively adopted cryptocurrency regulations and initiatives. On June 27, 2023, as reported by Blockchain.News, the Financial Services Authority (FSA) of Japan announced its participation in the Monetary Authority of Singapore’s (MAS) “Project Guardian” initiative. Established by MAS in May 2022, “Project Guardian” explores the feasibility of applying digital technologies to various asset classes while ensuring financial stability and integrity.

According to MAS, the Financial Services Authority (FSA) of Japan is the first overseas regulator to join “Project Guardian.” MAS stated, “MAS is also pleased to welcome the Japan Financial Services Agency (JFSA) as the first overseas financial regulator to join Project Guardian. This paves the way for MAS and the JFSA to collaborate on digital asset innovation and best practices for asset tokenization, while safeguarding against risks to financial stability and integrity.”

Disclaimer & Copyright Notice: The content of this article is for informational purposes only and is not intended as financial advice. Always consult with a professional before making any financial decisions. This material is the exclusive property of Blockchain.News. Unauthorized use, duplication, or distribution without express permission is prohibited. Proper credit and direction to the original content are required for any permitted use.

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CFTC Charges Fundsz and Individuals for Fraudulent Cryptocurrency and Precious Metals Solicitation

The Commodity Futures Trading Commission (CFTC) has filed a complaint against Rene Larralde, Juan Pablo Valcarce, Brian Early, Alisha Ann Kingrey, and their unincorporated entity, Fundsz, in the U.S. District Court for the Middle District of Florida. The complaint, announced on August 2, 2023, charges the defendants with fraudulent solicitation from clients to purportedly trade in cryptocurrencies and precious metals.

According to the complaint, from approximately October 2020 to the present, the defendants solicited participants with claims that Fundsz has historically produced over 3% returns per week using a “proprietary algorithm” for trading cryptocurrencies and precious metals. They described this as their “secret sauce” and claimed that a one-time $2,500 contribution to Fundsz could grow to $1 million within 48 months with no additional deposits.

Furthermore, the defendants pitched Fundsz as if it had a charitable purpose, using the tagline “Fundsz For Your Cause” and falsely implying that contributing to Fundsz would support various humanitarian efforts. However, the complaint alleges that Fundsz does not trade customer funds at all, and any customer gains are illusory, as the defendants simply make up fictional weekly returns to report to customers.

The CFTC’s complaint was successful in obtaining an ex parte statutory restraining order, signed by U.S. District Court Judge Wendy Berger, which freezes the defendants’ assets, preserves records, and appoints a temporary receiver. A hearing on the CFTC’s motion for a preliminary injunction is scheduled for August 23, 2023.

As part of its ongoing legal actions, the CFTC is pursuing compensation for deceived investors, the return of unlawfully acquired profits, financial penalties, enduring bans on trading and registration, and a lasting order to prevent any more breaches of the Commodity Exchange Act (CEA).

Director of Enforcement, Ian McGinley, commented, “The CFTC remains steadfast in identifying and taking action against those who deceive clients in the realms of cryptocurrency and precious metals. Even if the offerings and tactics of these fraudsters evolve — as seen with their use of social media in this instance — the timeless wisdom that ‘when an offer seems too advantageous, it likely has a catch’ still holds true.”

In addition, the CFTC has disseminated guidance and resources, such as the Precious Metals Fraud Advisory, aiming to inform the public about the risks of fraud in precious metals trading and offering strategies to recognize, sidestep, and report potential deceit.

The public is encouraged to confirm a firm’s registration status with the CFTC prior to investing and to alert the Division of Enforcement about any dubious activities or potential breaches of trading regulations.

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PwC Report: Asian Institutional Investors Opt for Third-Party Custody Solutions for Digital Assets

A joint report by Aspen Digital and PwC titled “State of Digital Asset Custody – Understanding and implementing digital asset custody for institutional investors” reveals a rising demand for institutional-grade digital asset custody solutions among family offices, high-net-worth individuals (HNWIs), and external asset managers (EAMs) in Asia.

The report highlights that digital assets, now a $1.2 trillion market, have evolved into an alternative asset class over the past decade, with more than 120 custody providers as of April 2023. While self-custody solutions offer full control and access over digital assets, many institutions are recognizing their limitations for ongoing trading and operational needs, leading to a preference for third-party custody service providers.

According to PwC’s 2022 Metaverse Survey, 82% of executives expect to integrate metaverse into their business activities within three years. However, the report indicates that most NFT custody services offered by self-custody solutions may pose a challenge for institutions new to the industry.

Digital asset custodians have expanded their role from merely safeguarding cryptocurrencies to helping investors navigate and participate in new business opportunities and asset classes, such as Decentralized Finance (DeFi), non-fungible tokens (NFTs), and metaverse. The report predicts an increase in third-party custodians worldwide enhancing their technical capabilities and service offerings.

Duncan Fitzgerald, Digital Assets & Web3 Co-Leader of PwC, emphasized the importance of safekeeping assets in the digital environment. Elliot Andrews, CEO of Aspen Digital, stated that understanding the unique characteristics of custody solutions and providers compared with traditional assets is one of the biggest impediments when considering investment.

Despite the growing need for institutional-grade digital asset custody, there are hesitations among family offices and HNWIs about adopting custodian solutions, particularly regarding asset security, navigating fragmented regulations across jurisdictions, and providing comprehensive insurance coverage.

The report findings are based on feedback from family offices, HNWIs, and EAMs based in Asia in the second quarter of 2023. In-depth follow-up interviews were also conducted to acquire additional perspectives on custodian adoption.

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Over $30 Billion Lost to Blockchain Hacks, Reveals SlowMist Hacked Statistics

According to a research by SlowMist Hacked Statistics, the total amount of money that has been stolen from blockchains is an astounding $30,011,604,576.24. This information comes as a stunning surprise.

The data, which encompasses a total of 1,101 hack occurrences, highlights the mounting worries over the sector’s security as blockchain and cryptocurrencies continue to gain popularity.

The study includes a thorough analysis of the losses by category, showing the sectors that have been most impacted by the aforementioned security breaches.

The Exchange category is at the top of the list with 118 occurrences that resulted in losses of nearly $10.95 billion.

The ETH Ecosystem is next, which has had 217 occurrences and losses totalling more than $3.12 billion during the duration of its existence.

The 162 and 184 events, respectively, have resulted in significant losses for both the BSC Ecosystem and the Other category. Losses from both incidents have totaled around $10.95 billion and $1.45 billion, respectively.

It’s noteworthy to observe that these security vulnerabilities have not spared the recently flourishing NFT business.

The survey found that there were 85 instances in this category, resulting in losses of about $200 million.

These findings also bring to light the vulnerabilities that exist among a variety of blockchain ecosystems.

For example, the EOS Ecosystem has been subjected to 119 occurrences, which have ultimately resulted in losses of around $25.9 million.

This research provides as a sharp reminder of the security difficulties that the blockchain and cryptocurrency industry confronts and acts as an excellent resource for doing so.

The need of implementing comprehensive security policies and procedures is only going to increase as the industry continues its process of growth and development.

The figures raise concerns, but they also provide a chance for information security firms that concentrate on blockchain and cryptocurrency technologies.

As the industry strives to address the security concerns that have been highlighted, demand for more advanced security solutions is predicted to rise. This will provide new possibilities for growth and innovation in the area of cybersecurity.


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NY Fed’s digital currency Test Reveals Feasibility

The Innovation Center of the Federal Reserve Bank of New York (NYIC) has successfully completed its proof-of-concept of a regulated liability network (RLN), which was carried out in collaboration with nine significant financial institutions and the Swift network.

Using distributed ledger technology and a simulated central bank digital currency (CBDC) in the United States, the project developed a theoretical infrastructure for exchanging and settling commercial bank deposit tokens and central bank liabilities. This infrastructure was constructed by the project.

At the moment, transactions involving assets are completed by sending messages back and forth between the various parties involved.

Tony McLaughlin, head of emerging payments and business development at Citi Treasury and Trade Solutions, said in a webcast that introduced the study findings that although messaging happens virtually quickly, settlement does not.

The project decided to remove trustlessness and anonymity from its blockchain, in addition to other aspects, in order to develop a system that stored value in the ledger rather than resolving disputes via messaging.

According to McLaughlin, the simulated RLN was capable of functioning around the clock and had multi-asset settlement in addition to programmability.

According to what McLaughlin claimed, the simulated RLN maintained complete anti-money laundering and Know Your Customer safeguards for the United States in foreign settlements.

He referred to the RLN as “a game changer for international users of the dollar” and predicted that it will enable the dollar continue to play the role as the preferred international currency.

In addition, the findings of the research were compiled into distinct papers that focused on business, law, and technology respectively.

The initiative only considered regulated assets, therefore cryptocurrencies and stablecoins were excluded from consideration.

In November, it was revealed that the initiative will be a pilot for a period of twelve weeks.

In addition to the New York Investment Company (NYIC), this endeavor entails working in conjunction with a number of top financial institutions and payment firms. These companies include Wells Fargo, BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, and Truist. This initiative’s technology is supported by Amazon Web Services and is provided by SETL in partnership with Digital Asset.


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Bitcoin Retreats to Around $30k: Decoding the Technical Indicators and Regulatory Factors

In today’s market developments, Bitcoin has retracted to around $30k, weighed down by various technical factors and a series of recent regulatory interventions.

Techinical analysis

  • An initially strong Bitcoin rally has given way to resistance, largely due to the continued downward trend of the monthly Bollinger Bands’ midline. In June, this midline stood at 31409, with Bitcoin reaching a short-term peak of 31432 on June 23rd.
  • This surge on June 23rd also demonstrated an evident bearish divergence in Bitcoin’s RSI (Relative Strength Index) and MACD (Moving Average Convergence Divergence) on the 4-hour chart. Such a pattern is often a harbinger of a significant imminent adjustment.
  • On the 1-hour chart, a clear double top pattern has further underscored the downtrend.
  • Currently, market-watchers’ focus is trained on the Bollinger Bands’ midline on the daily chart. This could potentially create a support level at 29500, paving the way for market consolidation around this figure.

News analysis

Regulatory news, a vital external factor, is exerting pressure on Bitcoin’s value as well. Binance Australia is currently grappling with an investigation, while Danish bank Saxo Bank has received instructions from regulatory authorities to divest its cryptocurrency holdings and discontinue its cryptocurrency services.

These regulatory actions serve as a reminder of the persistent volatility in the world of cryptocurrencies. As Bitcoin continues to navigate this precarious landscape, it’s crucial for investors to stay informed and vigilant. While the potential for high returns remains, it’s accompanied by substantial risk and uncertainty.


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SPAC CFO Sentenced to Prison for Embezzling $5M

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

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

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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Bitcoin (BTC) $ 41,872.22 5.73%
Ethereum (ETH) $ 2,252.36 4.19%
Litecoin (LTC) $ 73.36 1.87%
Bitcoin Cash (BCH) $ 245.51 8.36%