Bittrex Faces Potential Legal Action from US SEC

The US Securities and Exchange Commission’s (SEC) enforcement division is reportedly considering recommending legal action against Bittrex, a Seattle-based cryptocurrency exchange, over alleged violations related to investor protection. Bittrex’s general counsel, David Maria, confirmed that the enforcement unit had notified the company about the potential action in March. By that time, Bittrex had already begun the process of winding down its US operations.

The SEC’s notice of potential enforcement action, also known as a Wells notice, stated that Bittrex had violated laws by operating as an exchange, broker-dealer, and clearinghouse without registering with the regulator. In late 2022, Bittrex reportedly discussed with the SEC how to register its operations but found that there was no opportunity to comply with the SEC’s rules without essentially ceasing all of its revenue-producing activities in the country.

Bittrex has been operating in the US since 2014 and has been one of the larger cryptocurrency exchanges in the country. The exchange has faced regulatory scrutiny in the past, including in 2018 when it was denied a license to operate in the state of New York.

The SEC’s potential legal action against Bittrex comes amid increasing regulatory scrutiny of the cryptocurrency industry in the US. The SEC has been actively targeting cryptocurrency exchanges and other players in the industry for non-compliance with securities laws and regulations.

Many in the cryptocurrency industry have called for clearer regulatory guidelines to provide more certainty and stability to the market. The lack of regulatory clarity has been cited as a barrier to institutional adoption of cryptocurrencies, which some believe could help to legitimize the industry and bring in more investment.

In response to the potential legal action from the SEC, Bittrex has said that it is committed to complying with all applicable laws and regulations and that it has been working with regulators to ensure compliance. The exchange has also stated that it will continue to operate in other jurisdictions outside of the US.

In conclusion, the potential legal action from the SEC against Bittrex underscores the increasing regulatory scrutiny of the cryptocurrency industry in the US. While many in the industry have called for clearer guidelines, regulators are taking a more active approach to enforcement, which could have significant implications for the industry going forward. Bittrex’s decision to wind down its US operations highlights the challenges faced by cryptocurrency exchanges in navigating the complex and evolving regulatory landscape.


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Celsius Network Considers Legal Action Against Crypto Blogger

Celsius Network, a crypto lending platform, has been considering legal action against Tiffany Fong, a crypto blogger and Celsius creditor, for sharing leaked internal information regarding the company’s bankruptcy case. Fong, who has roughly $119,000 worth of crypto assets locked on Celsius, has been reporting on the bankruptcy case via YouTube and other social media platforms since the firm paused withdrawals in mid-June 2022 and filed for Chapter 11 bankruptcy the following month.

According to a recent court filing, Celsius’ legal counsel, Kirkland & Ellis International, has been working on the case for Fong since January 26, 2023. The filing shows that the law firm had worked 77 billable hours worth roughly $72,000 on an invoice titled “Tiffany Fong litigation” as of April 14, 2023. While no concrete legal action has been formulated yet, the filing suggests that Celsius’ legal counsel has been looking into the leaked information Fong reported on via her social media accounts.

Fong claims that she received the leaked information privately from disgruntled former Celsius employees, and has reported on various internal details, such as company bids on Celsius assets, alleged audio of private company discussions, and alleged transaction activity of executives such as former CEO and founder Alex Mashinsky.

In the filing, Celsius’ law firm also outlined that it was drafting cease and desist letters for Fong and a motion to compel, which generally asks courts to enforce a request for information relevant to a case. While Fong maintains that she has not done anything illegal, Celsius Network is seeking to prevent further dissemination of internal information related to its bankruptcy proceedings.

Fong’s attendance at the 2023 NYC NFT event has added fuel to the fire. In a Twitter post on April 15, she revealed that she had found Alex Mashinsky and his wife, Krissy Mashinsky, in public and approached them. A video posted to Twitter also shows the Mashinsky couple hurriedly walking away as other crypto content creators, such as BitBoy Crypto, approach alongside Fong in an attempt to engage them in conversation.

Celsius Network’s bankruptcy case is ongoing, with the company’s legal counsel actively pursuing action against Fong for leaking internal information. The case highlights the potential legal consequences of sharing confidential information regarding a company’s bankruptcy proceedings, even if the information is provided by former employees.


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“Parody” Token Struck Down by Estate of J.R.R. Tolkien

Key Takeaways

  • The Estate of J.R.R. Tolkien has won an intellectual property dispute against a U.S. developer’s “JRR Token” project.
  • The developer was accused of trademark infringement and his defenses were rejected.
  • JRR Token NFTs remain on OpenSea, though these were minted after the complaint was already filed.

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The Estate of J.R.R. Tolkien, author of The Lord of the Rings and The Hobbit, has successfully won the intellectual property case it had filed against the developer of the JRR Token cryptocurrency. As a result, the Estate has won ownership of the project’s domain name and the developer will be required to delete infringing content. 

Tolkien Estate Wins IP Case

The Estate of J.R.R. Tolkien has won its intellectual property dispute against the developer of the JRR Token cryptocurrency, whom it accused of trademark infringement.

The JRR Token ($JRR) was launched in August of this year; the day after its launch, the Estate filed a complaint with the World Intellectual Property Organization (WIPO). The project was accused of trademark infringement for deliberately imitating the style and substance of Tolkien’s work; an example is that one of the token’s stated aims was to “organize the people towards a common goal of making JRR Token ‘The One Token That Rules Them All’”—phrasing quite similar to the famous line from The Lord of The Rings, “One ring to rule them all.” 

The developer responded that the project was intended to be a parody rather than an act of bad faith and that the acronym “JRR” stood for “Journey through Risk to Reward” instead of John Ronald Reuel. Ultimately, the WIPO found that argument to be unpersuasive. 

The Estate’s lawyers also accused the U.S. developer, who had to pay  “significant” legal costs as a result of the ruling, of designing the website in a misleading way that might lead people to think that it was legitimately connected with the author or franchise. The Estate has historically been rather litigious and protective of its trademarks from perceived infringement; the Estate solicitor, Steven Maier, also said that it was “continually monitoring activity in the cryptocurrency and NFT” spaces for such instances.

As a result of the decision, the Tolkien Estate has recovered the domain name, the project can no longer operate under that name, and the developer is required to delete all infringing content. However, at the time of writing, the token itself still appeared on Binance Smart Chain’s BSCScan, with 516 holders and a market cap of $0.

The project has NFTs on OpenSea associated with it, and while these were not included in the case brought to WIPO, this likely has to do with the fact that they were minted after the Estate filed its complaint. While many of these NFTs have been sent to burn addresses, others are still owned by active addresses.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other cryptocurrencies. 

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Alameda Research, Reef Finance Clash Offers Stark Crypto Warning

Key Takeaways

  • Alameda has cut ties with Reef Finance while sister company FTX accused Reef of being a scam, tanking REEF token by 26%.
  • Reef Finance leaked documents revealing that Alameda had threatened to ruin the project by dumping tokens, delisting it, and discrediting it.
  • It appears that an $80 million business deal fell through due to a miscommunication handled entirely through Telegram with no formal legal contract.

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Days after “investing” $20 million in Reef Finance, Alameda Research refuted all ties with the DeFi project, leveling numerous accusations against it.

Reef Finance, however, reveals a wholly different take. So, what happened?

With screenshots and transcripts now available, the debacle ultimately reveals that $80 million deals are best brokered with legal contracts, not messaging apps.

FTX Denounces Reef as Rug Pull, Alameda Cuts Ties

On Mar. 15, the official Twitter account for FTX accused Reef Finance of being a scam, telling Reef Finance investors that their money was being stolen.

FTX did not respond to Crypto Briefing comment requests and has since deleted the tweet in question.

At around the same time, Alameda trader Sam Trabucco stated that Alameda had no connection to Reef Finance. He characterized the $20 million transaction as an OTC trade rather than a business investment, adding that Reef reneged on their deal and prematurely went to the media about it.

Brian Lee of Alameda’s Venture Capital department retweeted Trabucco’s post.

The claims from Alameda and FTX directly preceded a 26% drop in the price of REEF. Social media erupted with the news that Reef may be a scam and may have invented the story of an Alameda investment to pump its prices.

However, none of these claims offered the full story.

Crypto Briefing has obtained evidence that an investment announcement was carefully co-ordinated between both projects and released at the agreed time. Brian Lee himself greenlit the announcement, including the disclosure of a $20 million investment, on Mar. 10.

On Mar. 12, the announcement was made.

It appears that Alameda then sold some of their REEF, using the Binance exchange rather than their sister company, the FTX exchange.

An OTC Trade, Not an Investment

Alameda and FTX declined to comment, though Trabucco told Crypto Briefing that Alameda’s blog post on the matter constituted his comments.

In the post, Alameda released conversation transcripts of their own. On Mar. 8, it appears that Alameda brokered a deal for $80 million worth of tokens at a fixed price, settling the first tranche of $20 million.

They agreed to market this OTC trade as an investment in Reef Finance.

Source: Alameda Research

Reef wanted to reframe the trade as an investment for the public, saying, I assume it is fine with announcing you guys as a big investor, right?”

20% Token Discount Without Vesting

Speaking to Crypto Briefing, Reef Finance CEO Denko Mancheski stated that the token sell-off was unexpected, believing Alameda would lock up their new holdings until further notice.

Reef Finance sources claim that Alameda bought $20 million worth of tokens at a 20% discount and then tried to squeeze the project for more tokens at discounted prices.

“They said that they are investing long term and wanted to buy $80 million,” said Mancheski. “I sent them offers with vesting schedule but they said they are very reputable and long-term investors and professionals and have bought in even bigger projects even bigger amounts without lockups.”

Crypto Briefing has seen no evidence that Alameda agreed to lock up tokens, and Mancheski claimed to no longer have access to the conversation logs where aspects of the deal were discussed.

SIMETRI 10x potential

Mancheski stated that Alameda started selling their tokens on Binance “the moment we settled the $20 million,” further claiming that “they are lying that they still own the majority of the tokens.” It certainly appears that Alameda did indeed move tokens to Binance, although how many were sold is unclear.

Alameda transferred reef tokens to binance
Source: Etherscan

“The moment we realized we are getting basically scammed (instead of investing they are lying us and selling the tokens), we decided to stop,” said Mancheski.

This contradicts the quotes posted by Alameda, in which Reef agreed to sell $80 million and merely marketed the transaction as an investment for the public, fully aware that the deal was to broker an $80 million trade in multiple tranches.

Reef shared screenshots indicating that Alameda essentially threatened to ruin Reef Finance.

Threats included to publicly cut ties, dump their holdings and likely impact price, delisting REEF token, and even convincing other exchanges, including Binance, to delist REEF.

The legality of this last threat and of FTX accusing Reef Finance of being a “rug pull” stealing all investor holdings is unclear at this time.

alameda threatened reef finance

Alameda also told Reef that they had notified their legal department, threatening legal action “should this not settle.”

However, it’s difficult to say to what extent legal action can apply to a deal carried out in such a casual, ad-hoc way by both parties.

An $80 Million Business Agreement on Telegram

At the end of the day, while one could argue both sides are guilty of misrepresenting the truth and carrying out shady business practices, the deal fell apart due to a misunderstanding on both sides.

Alameda was supposed to buy $80 million worth of tokens at a discount, and Reef pulled out when Alameda started to sell earlier than expected.

The most noteworthy aspect of this story is that no formal legal agreement appears to have been written up for a deal worth $80 million.

According to Reef, the entire deal was brokered in good faith and through Telegram messenger, and Alameda representatives refused to comment on whether a legal document was in place.

Likely, the contract Alameda refers to in the Medium blog post was simply the written agreement in which Alameda asked Reef to “pls confirm” that an $80 million transaction was on the table. Sometimes written agreements hold up in court, and sometimes they don’t.

“There is literally nothing they can do legally since there was no paperwork,” Mancheski bluntly told Crypto Briefing.

In traditional finance, brokering a deal of this size with no formal legal contract would be unheard of.

In crypto, it’s business as usual.

This news was brought to you by ANKR, our preferred DeFi Partner.

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