Tag: Investigation

Binance Crypto Withdrawals Spike Before CFTC Accusations

by Blockchain News

On March 27th, the United States Commodity Futures Trading Commission (CFTC) filed a suit against Binance, accusing the crypto exchange of regulatory violations. The accusation, however, did not come without warning. Shortly before the indictment was made public, almost a billion dollars worth of cryptocurrency was reportedly withdrawn from Binance’s wallets. According to data from Thanefield Capital, the withdrawals were substantial and occurred within hours of the announcement.

In the 12 hours leading up to the indictment, a total of almost $1.5 billion was withdrawn from platforms such as Binance, Kraken, Coinbase, and Bitfinex. Of that amount, more than half, or $850 million, was withdrawn from Binance alone. One hour after the announcement, Binance saw an additional $240 million withdrawn. According to data from Nansen, in the past 24 hours, more than $400 million in Ethereum-based funds were withdrawn.

Despite the withdrawals, Binance still holds an impressive $63.36 billion worth of cryptocurrency assets. These assets include over $2 billion worth of Tether (USDT), $17 billion worth of Bitcoin (BTC), and $8.1 billion worth of Ether (ETH).

The CFTC’s accusations against Binance and its CEO Changpeng Zhao include failing to meet regulatory obligations by not properly registering with the derivatives regulator. The CFTC alleges that Binance conducted transactions in Bitcoin, Ether, and Litecoin for U.S. citizens since at least 2019. This investigation by the CFTC is not the only regulatory scrutiny that Binance has faced in recent times.

Binance has also been investigated by the Internal Revenue Service and federal prosecutors over its adherence to Anti-Money Laundering rules. Additionally, the Securities and Exchange Commission conducted its own inquiry into whether Binance allowed U.S. traders to access unregistered securities.

In response to the CFTC’s allegations, Binance’s CEO, Changpeng Zhao, has denied any wrongdoing. He argues that Binance “does not trade for profit or ‘manipulate’ the market under any circumstances.” Despite the denial, the regulatory scrutiny and the recent withdrawals may lead to a tumultuous time ahead for Binance and the wider cryptocurrency market.

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Signature Bank Under Investigation by US Government Bodies

by Blockchain News

Signature Bank, a cryptocurrency-friendly bank, is reportedly under investigation by two United States government bodies over concerns that it did not take adequate measures to detect potential money laundering by its clients. According to a Bloomberg report on March 15, investigators with the Justice Department were examining whether Signature was taking preemptive measures to monitor transactions for “signs of criminality” and properly vetting account holders. A separate probe by the Securities and Exchange Commission was also “taking a look” at the bank, although details regarding the nature of the SEC’s probe were not reported.

The investigations may have contributed to the recent decision by New York state regulators to close the bank, although it is unclear when the investigations began and what effect, if any, they had on the closure. Signature and its staff are not accused of wrongdoing, and the investigations may be finalized without any charges or further action taken by the SEC or the Department of Justice.

The report comes after a class action lawsuit was filed by Signature shareholders on March 14, alleging that the bank and former executives claimed to be “financially strong” just three days before it was forcibly shuttered. Barney Frank, a former board member of Signature Bank, has claimed that the regulators wanted “to send a very strong anti-crypto message” and that the bank became the “poster boy” for this message, despite there being “no insolvency based on the fundamentals.”

Signature Bank was closed on March 12 as part of a series of bank closures that also included Silvergate Capital and Silicon Valley Bank. The DOJ and the SEC have reportedly since initiated separate investigations into the collapse of Silvergate Capital and SVB. The regulators will examine the events leading up to the bank’s collapse, including scrutinizing security filings that disclosed the sale of SVB shares by the firm’s CEO Greg Becker and CFO Daniel Beck that took place two weeks prior to its downfall.

The SEC has not formally commented on the matters, but SEC chair Gary Gensler said on March 12 that it “will investigate and bring enforcement actions if we find violations of the federal securities laws.” The investigations into Signature Bank and other cryptocurrency-friendly banks highlight the increasing scrutiny of the cryptocurrency industry by regulatory bodies, particularly in the United States.

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Voyager reportedly sells assets on Coinbase exchange

by Blockchain News

It has been revealed that the centralized finance (CeFi) platform known as Voyager Digital has been selling its assets via the cryptocurrency exchange known as Coinbase. Voyager Digital filed for Chapter 11 bankruptcy in July 2022. On-chain data suggests that Voyager was paid a minimum of one hundred million dollars in USD Coin (USDC) over the course of three days beginning on February 24.

According to the assertions of the on-chain expert Lookonchain, Voyager has been sending cryptocurrency assets to Coinbase on an almost daily basis since Valentine’s Day. According to the findings of the inquiry, Voyager moved millions of dollars using a variety of cryptocurrency tokens, such as Chainlink (LINK), Ether (ETH), and Shiba Inu (SHIB) (LINK). In spite of what seems to be a sell-off, Voyager still has about $530 million worth of cryptocurrency in its possession, with the greatest amounts held in Ether (about $276 million) and Shiba Inu (about $81 million).

The purported sale of money takes place at the same time as the United States Securities and Exchange Commission (SEC) has expressed concerns over Binance.acquisition US’s of over one billion dollars’ worth of assets that had belonged to Voyager. The SEC has raised concerns regarding the legality of such a transaction, and as a result, they have objected to the acquisition. Additionally, they have requested additional information from Binance.US in order to determine whether or not the transaction is in compliance with the regulatory requirements.

Voyager Digital has suffered a significant setback as a result of the bankruptcy petition that was filed in July 2022, and the company has been making efforts to reorganize its finances ever since then. It is widely acknowledged that the selling of its assets on Coinbase is a key step for the company to acquire funds and remain operational. On the other hand, a number of industry professionals have voiced their worry over the effect that such a massive sell-off would have on the cryptocurrency market and the possible repercussions that it will have for investors.

It is not yet clear what lies ahead for Voyager Digital and whether or not the company will be able to emerge victorious from its current financial predicament. Despite this, the decision to sell assets on Coinbase is indicative of the company’s proactive actions to solve its financial issues and seek new opportunities for development.

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Silvergate Bank Probed by DOJ for Ties to FTX Exchange

by Blockchain News

It has been claimed that the fraud section of the United States Department of Justice is conducting an investigation against the crypto bank Silvergate for its participation with the defunct FTX exchange and its affiliates.

According to a story published on February 3 by Bloomberg, which cited “people familiar with the subject,” the investigation is looking at Silvergate’s hosting of accounts that are tied to the companies of former FTX CEO Sam Bankman-Fried.

The cryptocurrency bank situated in California is not suspected of committing any crimes; nonetheless, detectives are trying to determine the extent to which the business was conducted with FTX and Alameda.

The failure of FTX in November had a significant negative effect on Silvergate, which resulted in a loss of one billion dollars in the most recent quarter. As a result of the collapse of the SBF empire, the bank was forced to lay off forty percent of its workforce and admit that it had taken out loans worth billions of dollars in order to avert a liquidity crisis and a bank run.

Investigators from the federal government are attempting to determine whether or not Silvergate and any other businesses that collaborate with FTX were aware of the issue.

According to Silvergate, Alameda signed up for a banking relationship with the institution in 2018, which was before to the release of FTX. According to the report, it asserts that it exercised appropriate due diligence and maintained continuing monitoring at the relevant period.

A spokesman from the financial institution said earlier this week that the company “has a rigorous compliance and risk management procedure.”

Josh Rager, a crypto trader, remarked on the potential effects that this most recent criminal probe may have on cryptocurrency exchanges that are connected to Silvergate.

On January 27, Silvergate announced that company will be temporarily suspending dividend payments, citing “recent volatility in the digital asset business.” At the time, it said that it had a “cash position that was in excess of their digital asset customer-related deposits.”

According to MarketWatch, Silvergate stock has dropped by 13% during the day, and it is now trading at $17.14 in after-hours trading. In addition, the price of SI is today 92% lower than it was in November 2021, when it was at its all-time high of $220.

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U.S. Federal prosecutors allege that Sam Bankman-Fried

by Blockchain News

The United States government may have uncovered another another component of Sam Bankman-cryptocurrency Fried’s enterprise thanks to their investigation.

According to The New York Times, federal prosecutors in the United States have accused that Bankman-Fried invested money from the FTX exchange in the venture capital (VC) business Modulo Capital using funds obtained from the FTX exchange.

It was previously stated that SBF’s hedge fund and FTX’s sister business, Alameda Research, spent a total of $400 million in Modulo in 2022. This was one of SBF’s most substantial investments, and it became one of the most prominent investments overall.

The fact that Modulo, a relatively unknown company, was able to raise a considerable amount of cash amid hard times for the cryptocurrency market drew the attention of authorities, who have shown a special interest in the fundraising.

According to the most recent information obtained by the detectives working for SBF, the investment in Modulo was most likely made using the profits of a crime or with money that had been stolen from FTX clients and placed with the exchange.

According to the authorities, Modulo had developed into an essential component of the inquiry.

As the attorneys for FTX struggle to collect the billions of dollars owed to reimburse their customers, investors, and other creditors, Modulo’s assets are apparently coming into focus for their investigation.

The location of the SBF’s 400 million dollar investment has not been revealed as of yet.

Modulo Capital was created in March 2022 by three former executives of Jane Street, a New York-based business that had employed Bankman-Fried and Alameda CEO Caroline Ellison.

According to reports, Duncan Rheingans-Yoo, who was purportedly one of the founders, had just recently graduated from college.

Xiaoyun Zhang, sometimes known as Lily, was another one of Modulo’s co-founders. She had worked as a trader on Wall Street in the past and had some connections to SBF.

It is also common knowledge that Modulo operates its business out of the same condo complex in the Bahamas from where SBF operated.

The disclosure comes at a time when a commissioner for the United States Commodity Futures Trading Commission, Christy Goldsmith Romero, is calling into question the work that venture capitalists and money managers that sponsored FTX did in terms of their due diligence.

Earlier, the Deputy Prime Minister of Singapore confirmed that the investment company Temasek, which is controlled by the Singaporean government, was at risk of suffering “reputational harm” as a result of their investment in FTX.

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Coinbase Is Under SEC Scrutiny for Staking Programs

by Blockchain News

Cryptocurrency exchange Coinbase released its second-quarter earnings Tuesday and published its letter to shareholders.

In its quarterly form 10-Q filing, US-based Coinbase disclosed that it is under the U.S. Securities and Exchange Commission’s (SEC) scrutiny over its staking programs that allow customers to earn rewards for holding cryptocurrencies.

According to the filing, Coinbase “has received investigative subpoenas and requests from the SEC for documents and information about certain customer programs, operations and existing and intended future products.”

The requests are related to Coinbase staking programs, asset-listing process, classification of assets, and stablecoin products, the firm elaborated.

At Coinbase, blockchain-rewards income, majorly from staking, accounted for 8.5% of internet income in the second quarter. It dropped by 16% to $68.4 million in the course of the quarter, compared to the first quarter.

In the letter to the shareholders, Coinbase stated the SEC might dispatch a voluntary request for its token listings and listing process. But the exchange said it does not know whether the same will turn into a formal investigation.

Coinbase further mentioned within the letter: “As with all regulators around the world, we are committed to a productive discussion with the SEC about crypto assets and securities regulation, and to working alongside all policymakers to build a workable regulatory framework for the crypto economy that addresses any areas of risk, while enabling the development and adoption of digital innovation for the benefit of the broader society.”

Late last month, Coinbase was reportedly facing a probe from the SEC over whether it allowed users to trade unregistered securities. Bloomberg media first reported the matter. However, the SEC has not made the investigation public.

This investigation was separate from the SEC’s case against former Coinbase product manager Ishan Wahi, his brother, Nikhil Wahi, and his friend, Sameer Ramani.

Earlier last month, the watchdog charged the three with insider trading, alleging Ishan repeatedly tipped the timing and information about upcoming listings to his brother and friend, who, as a result, made profits worth over $1.1 million out of trading.

The investigation involving the staking programs might go the same way the SEC dealt with Coinbase last year.

In September last year, the SEC threatened to sue Coinbase if the exchange went ahead with launching its planned lending program. Users were primed to earn interest through the program by lending their tokens, but Coinbase later cancelled the project.

Image source: Shutterstock

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Hotbit Suspends Trading, Withdrawals amid Criminal Investigation

by Blockchain News

Hotbit, a cryptocurrency trading platform based in Hong Kong, announced on Wednesday that it has suspended trading, deposit, withdrawal and funding functions because law-enforcement agencies have frozen some of the company’s funds during a criminal investigation involving a former employee.

Hotbit confirmed an employee in question worked for the company until April this year. The exchange further stated that last year, the employee was involved in an external project, contrary to the company’s guidelines, and is now suspected of violating criminal laws.

Hotbit did not disclose many details about the investigation or the employee’s identity. The firm did not even disclose which jurisdiction is the investigation being conducted.

Hotbit only stated that the person, a former management employee, is under investigation because of his involvement in an external project in 2021, which is alleged to violate criminal laws.

Since the start of last month, the company said that law enforcement authorities summoned several senior managers of Hotbit to assist in the investigation.

But Hotbit clarified that the company and other employees did not have knowledge about the matter and were not involved in the project in question.

In a statement in its blog post, Hotbit wrote: “Law enforcement has frozen some funds of Hotbit, which has prevented Hotbit from running normally. Hotbit will resume normal service as soon as the assets are unfrozen.” The firm further added that the assets and data of all users are safe and said it has sent its application to the law enforcement authorities to release the frozen funds.

Hotbit was established in 2018 and registered in Hong Kong and Estonia, with most of its workers coming from China, Taiwan, and the U.S. According to the company’s website, the exchange has over 1 million registered users from more than 170 countries.

As per its blog post, the exchange cancelled open orders during the suspension and liquidated all users’ leveraged exchange-traded fund (ETF) positions according to their values at 12:00 UTC on August 10 Wednesday to prevent losses.

Image source: Shutterstock

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Reuters: Binance was withholding information from regulators, repeatedly shunned own compliance department

by Cointelegraph

In a report published on Friday, Reuters laid out the findings of its investigation into the regulatory compliance practices of Binance, the world’s largest cryptocurrency exchange by trading volume.

The authors suggest the existence of a recurring pattern whereby the company’s CEO Changpeng Zhao, while proclaiming its openness to government oversight, ran an organization that systematically denied regulators’ requests for financial and corporate structure information and shirked proper client background checks.

The reported findings are based on the accounts of Binance’s former senior employees and advisers, as well as the review of documents such as internal correspondence and confidential messages between several national regulators and the company. According to the document, several high-ranking employees have repeatedly raised concerns of weak Know Your Customer/Anti-Money Laundering (KYC/AML) standards at the company but were ignored by the CEO.

Additionally, the company reportedly acted against the recommendations of its own compliance department when it continued onboarding new customers from seven countries designated to be of extreme money-laundering risk.

The big-picture takeaway that the authors of the report offered is that the described pattern of behavior allowed Binance to maintain ambiguous jurisdictional affiliation and opaque corporate structure while offering financial products that would normally require regulatory approval or licensing in many of its countries of operation.

In response to Reuters’ inquiry, the company spokesperson said that the report’s findings were based on outdated or outright incorrect information. Binance CEO Changpeng Zhao later commented via Twitter saying:

As Cointelegraph reported, despite ongoing investigations into suspicious activity on its platform in several jurisdictions, Binance continues expanding into new markets, with the most recent move tied to a possible deployment in Thailand.