In a cryptocurrency fraud scheme that took place in late 2017 and early 2018, investors purchased BARs, a crypto token, to participate in an initial coin offering (ICO) for Titanium Blockchain Infrastructure Services (TBIS), a company founded by Michael Stollery. The ICO raised approximately $21 million from investors in the United States and overseas. However, in 2018, the United States Securities and Exchange Commission (SEC) accused Stollery of not registering the ICO with the regulator and other allegations.
In July 2022, Stollery pleaded guilty to one count of securities fraud for his role in the fraud scheme. He admitted to falsifying aspects of TBIS’ whitepapers, planting fake client testimonials on the TBIS website, and falsely claiming business relationships with the United States Federal Reserve, which misled investors about TBIS’ legitimacy and prospects for profit. He also admitted to commingling ICO investors’ funds with his own and using a portion to pay for unrelated expenses.
Although Stollery was facing up to 20 years in prison, he will instead serve a total of four years and three months for his involvement in the cryptocurrency fraud scheme. The SEC has been increasing its actions against the cryptocurrency space in recent years, with 30 enforcement actions against digital-asset market participants in 2022, up 50% from the 20 actions in 2021. Of the 30 enforcement actions in 2022, 14 involved initial coin offerings (ICOs), with more than half of these including a fraud allegation.
According to Abe Chernin, vice president of Cornerstone Research and co-head of its FinTech practice, the SEC continues to pursue actions alleging that tokens issued in ICO-related unregistered securities offerings were investment contracts subject to SEC regulation and enforcement. Chernin also noted an increase in assistance to the SEC from outside agencies and organizations during crypto-related investigations under the Gensler administration.
Overall, the sentencing of Michael Stollery is a reminder of the SEC’s increased scrutiny of the cryptocurrency industry and its commitment to prosecuting fraudulent activities.
His Majesty’s Treasury has finally released a long-awaited consultation document in preparation for the imminent regulation of cryptocurrencies in the United Kingdom. The comprehensive paper, which is 80 pages long, covers a wide variety of subjects, ranging from the challenges posed by algorithmic stablecoins to the concept of nonfungible tokens (NFTs) and initial coin offers (ICOs).
The Treasury has claimed that the recommendations aim to position the financial services sector of the United Kingdom in the forefront of crypto and to prevent harsh control measures that have gathered traction worldwide throughout the crypto winter. This is the intention behind the proposals.
It was declared by the Treasury that there would not be a distinct regulatory system for cryptocurrency since it will be governed under the framework of the Financial Services and Markets Act 2000 in the United Kingdom (FSMA). The objective is to create an environment in which crypto and conventional financial systems compete on an equal footing. However, the Financial Conduct Authority (FCA), which is Britain’s primary financial regulator, will modify the laws established by the FSMA in order to apply to the market for digital assets.
At the very least, one of the annoying effects of that ruling is that it requires participants in the cryptocurrency market to go through the registration process again. They were previously required to go through the procedure in order to get a licence under the FCA’s licencing framework, but now they will have to be evaluated “against a broader variety of indicators.”
The good news is that, unlike in the conventional banking industry, organisations dealing in cryptocurrencies won’t be required to frequently publish their market data. On the other hand, the exchanges would be obligated to store the data and ensure that it may be accessed at any time.
In contrast to several of its overseas peers, the Treasury Department has opted not to prohibit the use of algorithmic stablecoins. They will instead be classified as “unbacked crypto assets,” and not as “stablecoins,” as a result of this change. Despite this, the word “stable” cannot be used in any of the marketing for the algorithmic coins that are being done for cryptocurrencies.
According to the consultation document, a distinct regulatory framework for crypto lending platforms would be examined, and it should require lenders to take into consideration an acceptable collateral value and contingency preparations in case the participants’ main market counterparties collapse.
“Beginning immediately, the government need to promote deeper engagement with the business sector in order to design a comprehensive, risk-based framework that is in line with worldwide best practise.”
Nick Taylor, who is in charge of public policy for the EMEA region at the global cryptocurrency exchange Luno, believes that the sector is now through a watershed moment. He made the following observation: “Whilst there is still a distance to go until new laws come into place, we’re heartened by the size of the Government’s ambition.”
On April 30th, 2023, the consultation will come to an end. Up until that point, the British government is interested in hearing feedback from any and all relevant parties, including crypto companies, financial institutions, trade associations, representative bodies, academic institutions, law firms, and consumer advocacy organisations.
In a new chapter of the EOS community versus creators saga, the EOS Network Foundation’s (ENF) founder and “community-elected CEO” Yves La Rose revealed that they are preparing for a legal “war” against EOS creators Block.one.
According to La Rose, they are reviewing any potential legal action “to seek $4.1B in damages.” Currently, the EOS leader mentioned that a Canadian law firm is working with them to explore what legal action they can take against the original developers of EOS.
As Founder of @EosNFoundation I share your frustrations! We are taking further steps to hold @B1 accountable for its past actions and broken promises against #EOS. Review of ALL possible legal recourse to seek $4.1B in damages underway. Let’s do this together! #4BillionDAO coming
— Yves La Rose (@BigBeardSamurai) February 10, 2022
In a blog post, the foundation announced that many members of the EOS community are very dissatisfied with Block.one.
“Block.one has not kept its word regarding past promises and that both the community and individual EOS users have been harmed as a result.”
Last year, the foundation announced that they have gone through negotiations with Block.one to find common ground. Both parties engaged in discussions in an attempt to settle the issues in a fair manner. However, ENF notes that Block.one walked away from the negotiations. As a result, the block producers of EOS deemed it necessary to freeze the vesting for future EOS token earnings for Block.one.
Related:New research claims 21 accounts pumped the $4.4B EOS ICO with wash trades
Back in 2018, Block.one conducted an initial coin offering of EOS tokens (EOS), selling 900 million tokens for more than $4 billion, the biggest ICO held during that time. However, since then, many have been disappointed by the direction that the company took.
A few months back, La Rose described EOS as a failure. Citing the market capitalization and the decrease in value, he said that it’s a terrible financial and time investment. He also said that the community lost key developers and turned away from blockchain development and shifted towards asset management.
DeFi banking protocol MELD recently made headlines for attracting more than $1 billion worth of staked Cardano (ADA) to its protocol through a novel funding mechanism called an initial stake pool offering, or ISPO, marking an important innovation in how early adopters support blockchain startups. Cointelegraph had the opportunity to connect with MELD CEO Ken Olling to discuss the significance of the ISPO as well as Cardano’s role in facilitating widescale participation in the stake pools.
ISPO: An overview
The ISPO is a novel way for investors and other early adopters to support a project by delegating cryptocurrency to public stake pools in exchange for the project’s tokens. MELD is currently the only known project to employ an ISPO even though the concept had been previously proposed elsewhere.
The MELD ISPO, which was initiated on July 1, allowed Cardano holders to stake their ADA for any duration and quantity in exchange for MELD tokens. The first stake pool was filled within 24 hours after roughly $100 million worth of ADA was contributed. Within five days, four stake pools equivalent to nearly $200 million were filled.
MELD stopped accepting new delegations on Oct. 27. By that time, nearly 620 million ADA had been staked for a cumulative value of over $1 billion. All said, the ISPO had over 40,000 participants. MELD also raked in $10 million in revenue.
The ISPO was a significant departure from previous crypto funding initiatives, most notably the initial coin offering (ICO) and security token offering (STO), and was a nod to Cardano’s growing ecosystem. It also highlighted pent-up demand in the market for DeFi projects, which continue to pique investors’ interest.
Blockchain projects raised billions of dollars in funding in 2017 and 2018 before regulatory crackdowns and a brutal crypto bear market put an end to the mania. Source: 3TS Capital
Why Cardano?
Of all the proof-of-stake (PoS) chains in existence, MELD selected Cardano for its ISPO for its lower transaction costs, attractive staking mechanism and overall architecture, according to CEO Ken Olling. During MELD’s initial development phase in mid-2020, Cardano was perceived to be the best option considering the circumstances surrounding Ethereum (ETH) at the time.
“There aren’t any more established blockchains,” Olling told Cointelegraph, adding:
“One of our requirements was a modern PoS blockchain. The only real option at the time was Cardano. You have Solana, which has a two-tiered, much more complex staking mechanic in regards to the blockchain. It also operates legally in a different way. And then you have other PoS blockchains, but none of them really provided the full picture or the full package.”
Related:How Solana and Cardano are paving new avenues for NFT growth
Olling said his firm is still “very bullish” about Cardano’s future despite its recent struggles. ADA’s performance has lagged considerably in recent months after being one of the crypto market’s hottest performers through September.
Achieving financial efficiency
At its core, MELD offers non-custodial banking services, enabling users to lend and borrow with both crypto and fiat currencies as well as stake their MELD tokens for interest. Lenders can deposit both cryptocurrency and fiat currency on the platform. Borrowers have the ability to borrow in both types of assets after posting their crypto as collateral.
The crypto collateral option is attractive for investors because it means they can borrow fiat to meet their expenses without having to sell their digital assets and thus incur a capital gains penalty. (Capital gains taxes are a source of consternation for cryptocurrency investors, with large bag holders always looking for ways to use their newfound wealth in the most efficient way possible.)
When asked about what differentiates MELD from other crypto lending and borrowing platforms, Olling identified two factors: first, “on the highest level, we offer transparency,” he said. “It’s on the blockchain, so what happens with funds on the protocol is completely open-sourced, unlike centralized crypto lending and borrowing services.”
Secondly, and on a more practical level, MELD offers “users fiat currencies for their crypto-backed loans, whereas other […] DeFi competitors can only offer other cryptocurrencies.”
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Related: DeFi can be 100 times larger than today in 5 years
Cryptocurrency lending has emerged as one of the biggest use cases within DeFi, with the likes of Aave and Compound achieving over $14 billion and $11 billion in total value locked (TVL), respectively. More than two-dozen other protocols have achieved a TVL of at least $100 million, according to industry data.
Although the emergence of DeFi has presented a sort of threat to the traditional financial system, the industry’s growth has been largely driven by users who already have access to legacy banking systems. That appears to be slowly changing as crypto entrepreneurs target the globe’s vast unbanked and underbanked populations in pursuit of financial inclusion. According to Olling, financial inclusion is a by-product of a more efficient financial system that is made possible through DeFi.
A new debate in the EOS community has emerged over B1’s share of the EOS token supply.
Community-backed EOS Network Foundation (ENF) has raised concerns over the 45 million tokens that B1 controls.
The CEO of ENF, Yves La Rose, said the community could attempt to remove B1’s vesting code.
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A group representing the EOS community wants to delete vested tokens held by Block.one, claiming the team failed to deliver on promises.
EOS Network Foundation Goes to War Against B1
The ongoing battle between EOS Network Foundation, and the project’s founding team Block.one (B1) has taken a new turn. There is now a raging debate in the EOS community over B1’s vested share of the EOS token supply.
It has been reported that B1’s CEO Brendan Blumer and co-founder Brock Pierce met with the EOS Network Foundation (ENF) to discuss a contention over B1’s vested EOS tokens.
At the network genesis, B1 allocated itself 10% of EOS’s total supply of 1 billion vested over a period of 10 years. Currently, out of a share of 100 million tokens, B1 has access to about 45 million tokens.
B1, the development team behind EOS, raised $4 billion in a 2017-18 initial coin offering (ICO) on the promise of creating a better and faster alternative to Ethereum. Later, EOS failed to find any kind of reasonable adoption. When B1’s technology lead Dan Larimer left, it caused a major blow to the network’s prospects of becoming an “Ethereum killer.” The token has been dwindling ever since in terms of value and overall market capitalization. After years of poor network growth and token performance, the EOS community and block producers (EOS network validators) decided to reboot the project.
Under the leadership of Yves La Rose, a community-backed group EOS Network Foundation (ENF) was created in August 2021 and declared a new roadmap for the EOS ecosystem. In an address to the EOS community, La Rose accused the B1 executives of “negligence and fraud” and said the community planned to distance the blockchain from B1’s centralized control.
In November, B1 said it was entering into an agreement to transfer ownership of the 45 million EOS tokens (worth $196 million) to Helios, a firm owned by B1’s co-founder Brock Pierce. In response, ENF expressed its disapproval and claimed the tokens did not belong to B1 in the first place, as it had failed to deliver on its “social contract” of supporting the network.
Commenting on ongoing negotiations with B1, La Rose said the network consensus is that the tokens held by EOS do not belong to them. In a tweet, he said:
“The gist of the disagreement and why negotiations are happening is that B1 believes the tokens they sold (still vesting) belong to them, while the network through consensus as it exists believes the opposite, those tokens do not belong to B1.”
Update from Yves about the negotiations with B1 #EOS pic.twitter.com/RGyu4sp3Y4
— EOS Bull (@EOSBull) November 15, 2021
La Rose wrote further that “the network could remove the vesting code, and the network believes it is within their rights to do so.”
It is not surprising that B1 disagrees with ENF’s claims. B1 co-founder Brock Pierce said the $45 million tokens will be used to grow the EOS ecosystem. On Twitter, Pierce said B1 has many “plans in the pipeline” including a potential launch of an exchange-traded fund (ETF) tied to EOS. In this Twitter thread, Pierce added:
“I don’t thinkEOSwill benefit from authoritarian control over account balances that will undermine property rights, and I think the ecosystem should focus on collaborating together to succeed.”
The community does not appear to be convinced of B1’s stated financial motives. The idea has not resonated with many community members who appear to simply want B1 out of the way. Such members have supported the idea of a takeover at the protocol level. “Just delete them. There’s no good compromise for eos”, one anonymous member wrote. Another member called B1 a scam and that it is “going against their publicly stated commitments.”
As a consequence, ENF, with support from the community, may attempt to fork the EOS software code to change the original token allocation. It is still unclear how ENF can achieve that fork unless it controls the smart contract for genesis token deployment. It is more likely that the two sides will come to a mutually beneficial compromise before a drastic move is made.
Disclosure: At the time of writing this feature, the author owned, ETH, SOL, and other cryptocurrencies.
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Subsquid, a query node framework for Substrate-based blockchains, announced Thursday that it has closed a $3.8-million seed round led by Hypersphere Ventures.
The company said that it expects to use this seed capital for developing the first blockchain indexing solution. The new data query technology, as per the announcement, will tap into a network of indexers and allow anyone to join and contribute data to Subsquid data users.
While commenting on the successful seed closure, Subsquid’s technical founder, Dmitry Zhelezov, stated that:
“We are looking forward to rolling out more functionalities in the coming weeks, allowing blockchain developers to harness Subsquid’s next generation technology and take DApps to a new level of speed and functionality.”
The seed round was led by Hypersphere Ventures, with notable participants including Zeeprime, the Illusionist Group, Zeitgeist, Chainflip, Astar Network, Dia Data, DFG, 0x Ventures, Faculty Group and others.
Subsquid plans to debut the new blockchain indexing technique in February 2022. To make it more efficient and parallelized for blockchain data users, the network will separate indexing from the data retrieval process.
The company believes that this decentralization and distribution of the indexing process will make it faster and more efficient for blockchain data users. Commenting on the new development, Hypersphere Ventures co-founder Jack Platts said the firm is “excited to be supporting Subsquid as one of the key infrastructure pieces for the parachain ecosystem.”
Indexing is an extremely critical process for blockchains. All the data, transactions and smart contracts are indexed to make them easily accessible. Existing blockchain indexing technology mainly employs a centralized model, which is often plagued with quite a few issues such as security, privacy and scalability.
The Securities Exchange and Commission of Thailand (SEC) has a license to an asset-backed token offering service based on the Ethereum blockchain.
Fraction, a wholly-owned subsidiary of the Hong Kong-based fintech firm Fraction Group, has received a license allowing it to list and trade tokens for fractional ownership of physical or digital assets, the firm announced Sept. 16.
The license was granted through the Thai SEC’s official portal for initial coin offering (ICO) established back in 2018. The license lays out the foundation for Fraction’s upcoming service for asset digitization and fractionalization, referred to as an initial fraction offering (ICO).
The firm expects to list the first IFOs for subscriptions in Q1 2022, focusing on tokens for properties in collaboration with local real estate firms. According to the announcement, Fraction is exploring an IFO with an aggregate value of more than $460 million.
“Now you can legally own a part of this villa — maybe 1% of it — rather than having to fork out $5 million to buy the whole thing,” Fraction co-founder and CEO Eka Nirapathpongporn said. The minimum amount to participate in an IFO would be around $150, he added.
Fraction co-founder and chief technology officer Shaun Sales said, “While many have been talking about it or trying to do it, our platform is completed, already up and running, and ready to list public assets.”
Related:Blockchain-based platform for fractional property ownership launches in India
The industry of tokenized property has remained relatively niche due to the technology’s nascent status and regulatory uncertainty about such offerings. According to estimations by British accountancy network Moore Global, the tokenized real estate market could hit $1.4 trillion in the next five years if just 0.5% of the total global property market were to be tokenized.
The United States Securities and Exchange Commission (SEC) has charged three of Chinese billionaire Guo Wengui’s companies over an initial coin offering (ICO) and initial public offering (IPO) that fetched around $487 million combined.
The infamous Wengui, also known as Miles Kwok or Miles Guo, is an exiled Chinese businessman who currently resides in New York. Wengui is known for his controversial political takes and his ties to Donald Trump confidant, Steve Bannon.
The SEC submitted a cease and desist order on Sept. 13, with the documents showing that Guo’s companies have agreed to pay a settlement with the SEC within 14 days.
The SEC outlined two unregistered securities offerings from Guo’s firms, with GTV Media Group, Saraca Media Group and Voice of Guo Media conducting an IPO between April 1 and June 2020. Saraca and Voice of Guo, dubbed the “G Entities,” also conducted an ICO over the same period.
The ICO raised $34 million from investors seeking exposure to the firms’ G-Dollars — a virtual currency the issuer claimed could be exchanged for gold or fiat currency or used to purchase goods on the G Entities’ online platform.
The SEC found that the G Entities did not provide investors with information regarding how its purported digital asset and platform would be developed, adding:
“The G Entities have yet to develop or distribute the digital assets sold in the Coin Offering or a platform that would allow users to transact with or sell digital assets.”
Related:SEC chair doubles down, tells crypto firms ‘come in and talk to us’
Proceeds from the ICO were commingling with the funds raised in its $453 million stock offering that purported to distribute 10% of GTV’s common shares. The unregistered IPO attracted participation from 5,500 people.
The firms have agreed to pay $486.6 million in fines, prejudgment interest of $17.6 million and a civil penalty of $35 million combined.
