Terraform Labs CEO and co-founder Do Kwon [has been arrested in Montenegro](/news/article/do-kwon-hiding-in-serbia). He oversaw the multi-billion dollar collapse of the TerraUSD-LUNA ecosystem and has been [charged with fraud](/news/article/terraform-labs-accused-of-fraud-by-sec) by US prosecutors.

## Do Kwon arrested: Series of events

In early 2023, Do Kwon and Terraform Labs [were accused of](/news/article/do-kwon-red-notice) "orchestrating a multi-billion dollar crypto asset securities fraud", with eight charges announced against him by US prosecutors.

He was arrested on 23 March in Montenegro, travelling under a false name and in possession of fake documents. South Korean authorities released a separate arrest warrant for him in September 2022. They were at the scene to confirm his identity through official fingerprint records.

## Do Kwon arrested: Why did the TerraUSD-LUNA ecosystem collapse?

The Terra ecosystem was created in 2018 by Terraform Labs and is largely known for its decentralised algorithmic stablecoin, TerraUSD (USD), and reserve asset cryptocurrency, Luna (LUNA). The (now defunct) algorithmic stablecoin system is simple to understand:

•	1 UST = $1 LUNA.

•	If UST<$1, burn UST and mint LUNA. Burning will raise UST's price.

•	If UST>$1, burn LUNA and mint UST. Minting will decrease UST's price.

What [made this system a Ponzi scheme](/news/article/terra-luna-collapse) was the unsustainable interest rate of nearly 20% offered upon staking UST on the Anchor Protocol.

## The system was built to fail.

Upon shifting from a fixed interest model to a dynamic one, UST began its downfall on 7 May, 2022, when a UST whale sold an enormous amount of the stablecoin.

To compensate for the de-pegging of UST, mass burning of the stablecoin began, leading to a surplus of LUNA on the open market. Both cryptocurrencies collapsed and more than $40B in UST-LUNA market value was wiped out. Even a $3.5B Bitcoin reserve fund failed to control the downslide of the value of both crypto tokens.

In a nutshell, the model was based on minting an endless supply of LUNA to maintain UST at $1 and keep investors happy with an unsustainable interest rate model.

It should be noted that Do Kwon and the algorithmic stablecoin system were called out by a renowned economist Frances Coppola well before all this unravelled. Do Kwon mocked her publicly.

![dokwon.png](https://s3.eu-west-2.amazonaws.com/prod-monitalks-media/dokwon_f0af2d76e8.png)
 
Source: [Twitter (@stablekwon)](https://twitter.com/stablekwon/status/1410491186196795398?s=20)

I hope that [Do Kwon’s arrest is one step](/news/article/do-kwon-terra) towards a safer and better crypto space for all.


do kwon beind bars in montenegro with red filter

Terraform Labs CEO Do Kwon Arrested

US regulators have accused eight well-known personalities, such as Lindsay Lohan and Jake Paul, of engaging in an illicit cryptocurrency scheme. The charges claim that these celebrities used their social media presence to enhance the value of two [crypto](/news/article/cryptocurrency-news-predictions) tokens without disclosing that they received payment for promoting them.

The US Securities and Exchange Commission (SEC) [officially announced](https://www.sec.gov/news/press-release/2023-59) the charges on Wednesday.
The SEC claims celebrities used social media to share their cryptocurrency promotional messages.

## Lindsay Lohan Charges

On February 11, 2021, Lindsay Lohan, who has more than 8 million Twitter followers, tweeted that she was already liking Justin Sun's cryptocurrencies, which included $TRX.

In the tweet, she praised the currencies' super-fast speed and lack of fees while commending Justin Sun. In March 2021, she [advertised](https://twitter.com/lindsaylohan/status/1377647992639954945?s=20) an auction for an [NFT](/news/article/nft-tax-uk-rules-explored) of one of her songs and tweeted about it on April 1, 2021, saying there were just over 9 hours left to bid.

SEC Chair Gary Gensler stated that the Lindsay Lohan charges and associated cases highlighted the significant risks investors are exposed to when crypto asset securities are marketed and sold without adequate disclosure.

## Other celebrities charged with illegally promoting crypto assets

Charges have been brought against several famous individuals, including musician Soulja Boy (real name DeAndre Cortez Way), aged 32; singer Austin Mahone, aged 26; porn actress Michele Mason (better known as Kendra Lust), aged 44; musician Ne-Yo (real name Shaffer Smith), aged 43; rapper Lil Yachty (real name Miles Parks McCollum), aged 25, and Senegalese-American singer Akon (real name Aliaune Thiam), aged 49.

According to the [SEC](/news/article/looming-coinbase-sec-probe-upsets-coin-price), they are accused of illegally promoting TRX and [BTT](/news/article/btt-crypto-price) crypto assets without disclosing their compensation.

Additionally, crypto investor and Grenada diplomat Justin Sun is accused of fraud for manipulating the trading activity of the two tokens to make it appear as if they were being actively traded. This practice is known as "wash trading".

Except for Mr. Cortez Way, Akon, and Mr. Mahone, all the celebrities, including Lindsay Lohan, have collectively paid over $400,000 to resolve the charges.


red image of crypto coins with celebrities Lindsey Lohan, Jake Paul, Ne-Yo and Akon standing in foreground

Lindsay Lohan Faces Charges from SEC 

A [threat](https://www.coinbase.com/blog/we-asked-the-sec-for-reasonable-crypto-rules-for-americans-we-got-legal) by the US Securities and Exchange Commission (SEC) to sue Coinbase Inc. has seen the Coinbase share price drop nearly 15% to $67.33 following extended hours of trading. The [Wells Notice](https://www.law.cornell.edu/wex/wells_notice) by SEC is a formal declaration that the US watchdog aims to recommend an enforcement action.

Market data shows the Coinbase share price closed at $77.14 during the typical trading session, having shed some 8.16% of its value. Nonetheless, COIN, the platform's native coin, dropped 15.8% of its value in the after-hours and closed the day at $64.95. The Coinbase stock has lost a cumulative 57% of its value over the last year. 

## Coinbase SEC probe targets essential products

The regulator has been [intensifying its efforts](/news/article/sec-crypto-enforcement-warning) to try and clean up the largely unregulated crypto market following the implosion of cryptocurrency exchange FTX late last year. 

According to the firm, the Coinbase SEC probe targets some of its essential products, such as the spot market, EARN, Prime and Wallet products, and staking, which has already been under scrutiny.

The SEC has previously trained its guns on [staking](/news/article/what-is-staking-crypto), a process through which cryptocurrency holders use their crypto holdings to stabilize platforms. They validate the blockchain transactions and receive eye-popping yields in return.

The regulator forced cryptocurrency exchange [Kraken](https://www.sec.gov/news/press-release/2023-25) to [wind up its cryptocurrency staking program](/news/article/crypto-tumbles-as-kraken-suspends-staking) last month, forcing the platform to part with $30 million in penalties for 'failing to register the program'. The SEC has already charged Chinese crypto enthusiast Justin Sun and several celebrities with illegally promoting crypto assets.

## A precursor for extra enforcement by the SEC

Per the SEC's allegations, staking, which involves the pooling of crypto resources, creates investment contracts and therefore qualifies as a security under the US Supreme Court case [SEC vs. Howey](https://www.investopedia.com/terms/h/howey-test.asp). The regulator opines that cryptocurrency exchanges violate the country's securities laws by offering such programs to investors.

The looming Coinbase SEC probe targeting products the regulator considers securities means that platforms offering staking as a service will be forced to restructure their programs to comply with the securities law or halt them altogether.

Staking service providers, most of which are cryptocurrency exchanges, must now wake up to the fact that the SEC is increasingly indicating that it considers most pooled staking programs as securities. For the larger crypto sphere, the regulator's actions should be seen as a precursor for extra enforcement by the SEC into the industry.


red image of coinbase website and coinbase coins with red filter

Looming Coinbase SEC Probe Upsets COIN Price 

Ben Armstrong, a crypto Youtuber, is facing legal scrutiny following allegations that he sent threatening messages to the lawyers leading a class action lawsuit against promoters of the [collapsed crypto exchange FTX](/news/article/is-crypto-dead). Armstrong, also known as "[BitBoy Crypto](/news/article/bitboy-crypto)," is among several FTX influencers facing a [$1B class-action lawsuit](https://cointelegraph.com/news/ftx-influencers-face-1-billion-class-action-lawsuit-over-alleged-crypto-fraud-promotion) for alleged [crypto fraud](/news/article/guo-wengui-accused-of-crypto-fraud) promotion.

The suit alleges that the influencers failed to disclose that they were paid to endorse FTX accounts to their substantial online following, which includes the BitBoy Crypto YouTube channel with 1.45 million subscribers.

## BitBoy crypto faces legal scrutiny over alleged threats

According to court documents [filed](https://www.courtlistener.com/docket/67017199/5/garrison-v-paffrath/) on 20 March, the lawyers heading the class action suit claim that Armstrong has been harassing one of the plaintiffs since the lawsuit was filed last week. They accuse him of making "endless phone calls, Tweets, and emails" to the plaintiff and posting "insulting and threatening posts" about him on social media.

Furthermore, in the court filing, the lawyers accused Armstrong of making 21 calls within 45 minutes from an unknown number to the lawyers' office and leaving a voicemail containing a warning that "First Amendment protesters" would surround the lawyer's house "24/7 day and night".

In another voicemail, he claimed that the "home addresses" of the "lawyers" were being circulated on Reddit.

The filing alleges that he also sent profanity-laced emails to Adam Moskowitz - one of the attorneys in the FTX class action suit - and a message warning him that he was "choosing war with an anonymous community while you yourself are not".

It also claims that BitBoy posted a YouTube [video](https://www.youtube.com/watch?v=dp1F5lJUBf4) on 16 March directed at lawyers and individuals who bought the lawsuit against him and warned them that he was "coming at them with full force".

In another alleged message to Moskowitz, Armstrong reportedly warned him that "these people are dangerous" and that they could result in "you and your family shot".

The filing also included an email that Armstrong allegedly sent to Moskowitz in which he referred to him as a "b*tch" and an "unbelievably dumb mother f*cker”.

![Picture 1.png](https://s3.eu-west-2.amazonaws.com/prod-monitalks-media/Picture_1_80ec6a5484.png)
  
## BitBoy Crypto's response to accusations

In a statement to Cointelegraph, BitBoy denied making calls, tweeting, or emailing the FTX class-action lawyers. Furthermore, in his video, he denied promoting [FTX](/news/article/ftx-funds-political-donations-to-be-recovered) and threatened Moskowitz with a countersuit.


red image of bitboy crypto youtuber holding his tweet about threatening lawyers

BitBoy Crypto Accused of Threatening Lawyers 

On Wednesday, the US DOJ (Department of Justice) and the Securities and Exchange Commission (SEC) reported that Guo Wengui, a Chinese billionaire living in exile, was detained in New York for supposedly planning a fraud scheme worth more than $1 billion which involved cryptocurrency.

Guo, also known as Miles Guo and Ho Wan Kwok, or "Brother Seven," has been accused of committing 12 counts of wire fraud, securities [fraud](/news/article/terraform-labs-accused-of-fraud-by-sec), bank fraud, and money laundering. The DOJ stated that he allegedly used false statements and representations to persuade hundreds of thousands of his online followers to invest in various entities, resulting in more than $262 million in victim funds being obtained through the Himalaya Exchange, a supposed [cryptocurrency](/news/article/what-is-future-of-cryptocurrency) ecosystem.

The DOJ disclosed that it had seized around $634 million from 21 bank accounts linked to the alleged fraud.

The DOJ also [stated](https://www.justice.gov/usao-sdny/pr/ho-wan-kwok-aka-miles-guo-arrested-orchestrating-over-1-billion-dollar-fraud-conspiracy) that Guo Wengui is accused of making false statements and offering his investors inflated returns in exchange for supporting various ventures, including GTV Media Group Inc. In addition, Guo has been charged by the SEC for participating in unregistered and deceitful offerings that garnered more than $850 million.

## Bail Denied for Guo Wengui

According to the SEC, an investment scheme that employed cryptocurrency security called "H-Coin" or "Himalaya Coin" deceptively collected hundreds of millions of dollars from investors.

The project falsely stated that 20% of the coin's value was supported by gold and that the issuer would compensate investors in the event of any losses. According to Gurbir S. Grewal, the director of the SEC's enforcement division, the issuer, Guo, capitalized on the hype and appeal of cryptocurrency and other investments to victimize thousands and fund his and his family's luxurious lifestyle.

On Wednesday, the SEC made this statement, and CNN reported that Guo was denied bail at a hearing held the same day.

US Attorney Damian Williams claimed that Guo had committed the crime of profiting from embezzled money. Williams specifically mentioned that Guo had used the [stolen funds](https://twitter.com/SDNYnews/status/1636013342962712577?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1636013342962712577%7Ctwgr%5E5aa49442bd1adc0405714d5fc3a9c0868d934968%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fforkast.news%2Fheadlines%2Fus-accuses-exiled-chinese-tycoon-guo-wengui-of-1-billion-crypto-linked-fraud%2F) to buy a 50,000 square-foot mansion in New Jersey for himself and his close relatives, as well as a Ferrari valued at $3.5 million, two mattresses worth $36,000 each, and a lavish yacht that cost a whopping $37 million.


red backgound of money with guo wengui and a white dog

Guo Wengui Accused of $1 Billion Crypto Fraud 

The founder of the Bitzlato crypto exchange, Anatoly Legkodymov, has denied money laundering charges against him in a US court.
He is accused of processing more than $700 million through his firm. Relating to these charges, he was arrested on 17 January in Miami.  

## First court appearance for Bitzlato crypto firm founder

The proceedings of a money laundering case against Legkodymov are ongoing in the federal court of New York. He appeared before the court for the first time on 14 March, 2023, when he denied all the fraud charges.

The court has ordered the detention of Legkodymov without bail for the charges of illegally processing money. The Federal Bureau of Investigation ([FBI](https://www.fbi.gov/investigate)) was involved in arresting the crypto exchange founder. 

## Allegations involve $700 million

Allegedly, the founder of Bitzlato is a Russian national and a resident of China. The FBI detained him for his alleged involvement in illegal money transfers through the exchange.

He is accused of managing a Hong Kong-based cryptocurrency firm and did not ensure [anti-money laundering](/news/article/crypto-aml) measures were followed.

According to reports, the business [allegedly processed](/news/article/bitzlato-co-founder-charged-with-money-laundering) around $700 million of illegal funds. The illicit funds are related to numerous crimes like drug trafficking and ransomware. 

Bitzlato may also have ties with the darknet market called Hydra, according to further reports. Moreover, another member of [a crypto pyramid scheme related to Russia](https://news.bitcoin.com/another-member-of-russian-crypto-pyramid-finiko-arrested-in-uae/) was arrested in the UAE.  

## Accusations against other members of Bitzlato

More crypto exchange members were also detained in late January. Three members of the executive body were arrested in Europe.

The firm's co-founder, Anton Shkurenko, was also involved in the investigations. In February, he was interrogated by the Russian authorities, but later released. He has also given an interview recently where he mentioned that he would be restoring operations of the firm from Russia.


Anatoly Legkodymov founder of bitzlato with red image of court

Bitzlato Crypto Exchange Founder Denies Charges 

The collapse of crypto-friendly Signature Bank happened so fast that it qualifies to become a textbook case of a classic bank run. Together with Silvergate and [Silicon Valley Bank](/news/article/silicon-valley-bank-uk-to-be-bought-by-hsbc) (SVB), the trio that have been the go-to financial institutions involved in crypto banking suffered massive operational blows within less than a week.  

Startled by the sudden collapse of SVB, customers had a run on Signature Bank last Friday, March 10. They withdrew more than $10 billion in deposits, leading to the third-largest bank failure in the history of the US. Regulator Federal Deposit Insurance Corporation (FDIC) [announced last Sunday](https://www.fdic.gov/news/press-releases/2023/pr23017.html) that it was taking over Signature to protect depositors and help stabilize the US financial system.  
  
## Customers had a run on Signature Bank

The sudden move has shocked the New York-based institution, which has deep ties with not only the crypto but also the legal and real estate industries and boasts more than 40 branches, deposits of $88.59 billion, and assets worth $110.36 billion by the end of 2022. 

Trouble for US banks associated with crypto and tech startups reached a crescendo last week with the announcement of the winding down of the crypto-friendly Silvergate Bank. 

While [Silvergate’s demise was imminent](/news/article/silvergate-on-verge-of-collapse), it ignited panic about uninsured customer deposits in institutions. That led to Venture capital investors and founders draining their accounts at SVB Thursday last week and its subsequent seizure by midday Friday. The ensuing worries must have spread to Signature, First Republic, and others that now risk a similar fate out of fears that uninsured deposits could be locked up or lose value. Both situations could be fatal to startups.

## Decision not directly related to crypto

According to New York’s [financial regulator](https://www.reuters.com/business/finance/signature-banks-closure-had-nothing-do-with-crypto-new-york-regulator-2023-03-14/), the decision to seize Signature Bank wasn’t directly related to crypto but rather a “crisis of confidence” in the institution’s leadership following the SVB crisis. 

Signature has been an integral institution for the crypto industry and hosts tools that facilitate digital transactions for mainstream crypto companies. The bank is part of a small group of mainstream banks serving the crypto industry.  

Federal regulators will now most likely shine their spotlight on other banks offering crypto services, while traditional banks could think twice before dipping their toes. Considering the volatility of the crypto market and the cost of maintaining compliance, there may be a need for players within the crypto space to work harder to retain the growing interest in banks experimenting with crypto and related blockchain technology.


Why Signature Bank Fell So Fast

Giant banking firm HSBC Holdings Plc (HSBA) is planning to buy Silicon Valley Bank's British unit. According to the [filing](https://www.londonstockexchange.com/news-article/HSBA/hsbc-acquires-silicon-valley-bank-uk/15871682) released on 13 March, 2023, HSBC will acquire the firm for £1.

SVB UK collapsed, reeling from severe losses. The finance company had total debts of around £5.5 billion and had deposits of more than £6.7 billion until 10 March.

## UK Government facilitated the Silicon Valley Bank sale

On Monday, the Bank of England also released an [official statement](https://www.bankofengland.co.uk/news/2023/march/statement-on-silicon-valley-bank) regarding the matter. As per the statement, a number of other UK authorities were also involved. These included HM Treasury, the Prudential Regulation Authority, and the Financial Conduct Authority.
  
HSBC itself is regulated by the [FCA](/news/article/fca-crypto-regulation) and PRA, a fact which is likely help SVB UK recover from the losses. The statement issued by the Bank of England said that the step was taken to strengthen and stabilise the banking system of the United Kingdom. 

The central bank statement added that the move would ensure the continuity of banking services, minimise disruption to the country's tech sector, and support.

The Bank of England also guaranteed that all depositors' funds with the collapsed bank would be secured after its sale to HSBC.

## PM Rishi Sunak on the decline of SVB

The Bank of England released the official statement detailing plans for the sale of SVB UK just after [Britain's Prime Minister Rishi Sunak](/news/article/rishi-sunak-crypto-believer-uk-pm) assured the nation about the "sound" financial system of the country.

In talks with the media regarding the US bank's subsidiary's downfall, the Prime Minister said, "There's nothing to worry about."

He went on to add further reassurance that the country's financial health is "resilient" and would not be affected by the decline of SVB. The PM is currently in San Diego, where he will likely meet President Joe Biden.


silicon valley bank branch with red filter and money falling

Silicon Valley Bank UK to Be Bought by HSBC 

A crypto firm backed by US rapper Jayceon Terrell Taylor, also known as "The Game", had its licence revoked by the US Securities and Exchange Commission [for violating securities laws](/news/article/sec-probe-paxos-over-busd) after falling short of submitting the necessary periodic reports.

The crypto startup, called ParagonCoin Limited, leverages blockchain technology for the legal cannabis sector and was founded in 2017 by Jessica VerSteeg.

## Why was ParagonCoin Limited’s registration revoked?

According to a class-action suit against ParagonCoin Limited in January 2018, the cryptocurrency startup [allegedly violated securities laws](/news/article/crypto-exchange-kraken-faces-sec-probe) in the initial coin offering (ICO) it held back in 2017, raising $70M.

The cannabis crypto firm promoted its native token 'PRG' as a currency for the legal cannabis industry and hired American rapper The Game to promote its offering. 

However, it failed to register its token sale with the SEC.
As such, a civil penalty was imposed on the cryptocurrency startup, requiring it to pay a fine of $250,000, register its token PRG as a security, and file periodic reports with the SEC.

The SEC was prompted to commence legal proceedings against the firm in February 2022, as it violated the [terms of its settlement with the SEC](/news/article/paul-pierce-settles-with-sec). ParagonCoin Limited failed to file a report since March 2019, in which the company stated that it lost more than $10M in 2018.

According to the SEC, the cannabis cryptocurrency startup ignored a delinquency letter sent to it by the SEC.
Additionally, [the SEC pointed out](/news/article/sec-crypto-enforcement-warning) that ParagonCoin Limited did not reply to its order commencing proceedings in February 2022, nor did it respond five months later to offer reasons why it should not be found guilty as things stand.

This is not the first mess The Game and the startup have found themselves in. However, this could be the last for ParagonCoin Limited. Back in 2021, both the rapper and the cryptocurrency startup's executives were found to be liable for more than $12M in a class-action lawsuit. You can read more here.

It is yet to be seen what steps ParagonCoin Limited will take to salvage the situation. Rapper The Game, meanwhile, continues to thrive in the Web3 space, with numerous partnerships in place, including as co-founder of the popular Web3 live-streaming platform, Shiller.


red image of rapper "the Game" and Paragon coin logo

Rapper The Game's Crypto Firm Licence Revoked

US payment goliaths Visa and Mastercard are pausing the launch of certain [crypto-based services and products](/news/article/visa-crypto-wallet-plans-outlined) in the wake of numerous high-profile collapses in the crypto industry, such as [FTX](/news/article/ftx-funds-political-donations-to-be-recovered) and BlockFi.

The bankruptcies/shortcomings of several major players in the industry, current market conditions, and [increased regulatory scrutiny](/news/article/imf-crypto-regulation-g20-summit) have led Visa and Mastercard to change their plans with immediate effect.

## Why have Visa, Mastercard pushed back the launch of crypto services and products?

Over the past few years, card giants such as Visa and [Mastercard explored partnerships](/news/article/mastercard-start-path) with leading crypto firms. They set up dedicated teams to survey and potentially integrate blockchain technology into their products and services.

In April 2022, Mastercard and Nexo teamed up to launch the world’s first [crypto-backed payment card](/news/article/nexo-card-or-binance-card).

In October 2022, [Visa announced](/news/article/visa-crypto-consulting) global debit card agreements with disgraced cryptocurrency exchange FTX as part of an expanded partnership. Following the downfall of the crypto trading platform a few weeks later, Visa terminated the partnership in November.

In 2021, American Express said it would consider using cryptocurrency to redeem reward points.

An unnamed American Express spokesperson said that while the organisation continues to explore the significant use cases of blockchain technology, crypto will not replace their "core payment and lending services", "in the near term".

While Visa and Mastercard have put a halt to [crypto service and product](/news/article/visa-bitcoin-debit-card-review) rollout at the time of writing, they are optimistic about the future of blockchain technology. Their cryptocurrency-centric strategy and focus remain unchanged.

In a conversation with [Reuters](https://www.reuters.com/), a Visa spokesperson said the high-profile failures seen recently in the sector act as "an important reminder" that there is a long way to go before cryptocurrency is "part of mainstream payments and financial services".

Talking to Reuters, a Mastercard spokesperson commented on how the company intends to continue to apply blockchain technology to “build more efficient systems” that “help address current pain points”.
It should be noted that the delayed launch of cryptocurrency services and products by massive payment corporations like Visa, Mastercard, and American Express and the halt on the forging of new partnerships is not a poor reflection of blockchain technology. Instead, it is a sign of the times.

With [global crypto regulatory frameworks](/news/article/australia-crypto-regulation) being built as we speak, it makes the utmost sense to explore blockchain technology further and play the waiting game while the market settles and consumer/investor confidence rebuilds itself.


visa and mastercard cards with red filter

Visa, Mastercard Pause Crypto Services Launch 

[Becca Balint](https://vtdigger.org/2023/02/28/becca-balints-1-million-crypto-benefactor-pleads-guilty-to-campaign-finance-fraud/), a member of the US House of Representatives from the state of Vermont, has been thrown into the spotlight again after Nishad Singh, an ex-executive of insolvent cryptocurrency exchange FTX who contributed $1 million in advertising money to her congressional push, pleaded guilty to campaign finance fraud on 28 February.

Singh said he is sorry for his role in the bankrupt crypto firm. He reiterated that he only knew by mid-2022 that Alameda Research, the hedge fund run by founder [Sam Bankman-Fried](/news/article/sam-bankman-fried-bail-co-signers-revealed) (SBF), was borrowing customer funds at [FTX](/news/article/ftx-funds-political-donations-to-be-recovered) without informing depositors.

The association of the politician with FTX has added more fuel to the fire as allies of SBF, which included Singh, contributed a minimum of $26,000 directly to support her campaign. Aside from that, the Democratic Party in Vermont was also a beneficiary of FTX contributions. 

SBF's inner circle continues to crumble. Singh is the third member of the once-thriving crypto firm to collaborate with US prosecutors with the hope of working out a deal. 
  
The latest link to Bankman-Fried's ally comes a few days after a superseding [indictment](https://vtdigger.org/2023/02/23/becca-balint-cooperating-with-federal-prosecutors-as-new-allegations-against-sam-bankman-fried-emerge/) filed on 23 February laid out an alleged scheme by the founder and former CEO to illegally move investor money to political campaigns to help improve his standing with representatives in Washington, DC.

Prosecutors believe his consistent donations were a way of pushing decision-makers to consider his preferred regulatory agenda for the entire decentralized finance economy.  

## Becca Balint is cooperating with authorities 

According to her campaign manager, Natalie Silver, Vermont's leader in the House of Representatives is fully cooperating with federal authorities in the investigation into SBF's scheme to pour a minimum of $1 million into a super PAC (political action committee) to support a candidate who favoured LGBTQ issues.   

After serving as a member of the Vermont Senate, Balint made history by becoming the first person from the LGBTQ+ community to be elected to Congress.


red image of becca balint and sam bankman-fried in front of sign saying guilty

Becca Balint Contributor Admits Fraud 

Crypto lawyers have rejected cryptocurrency claims made by SEC chair Gary Gensler, who recently stated in an interview that all cryptocurrencies except Bitcoin are securities that fall under its jurisdiction.

In an [interview](https://nymag.com/intelligencer/2023/02/gary-gensler-on-meeting-with-sbf-and-his-crypto-crackdown.html) with New York Magazine on 23 February, Gensler stated that "everything other than Bitcoin" falls under the US Securities and Exchange's jurisdiction as a security. He elaborated that crypto projects, besides Bitcoin, are considered securities because they involve a group in the middle, and the public anticipates profits based on that group. However, he noted that this is not the case with Bitcoin. 

## Crypto attorney's opinion on SEC's regulatory jurisdiction

Lawyer and policy lead at the Blockchain Association, Jake Chervinsky, argued with the comments by Gary Gensler on his authority over the cryptocurrency sector.

He [tweeted](https://twitter.com/jchervinsky/status/1629871537217044481?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1629871537217044481%7Ctwgr%5E91719ed73ca7c438481d7858aed2e4689c4c61c9%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fcointelegraph.com%2Fnews%2Fcrypto-lawyers-flame-gensler-over-claims-that-all-crypto-are-securities) on 26 February that Gensler's opinion is not legally binding, and the SEC must prove its jurisdiction over each token in court before regulating any of them. 

Lawyer Logan Bolinger also supported Chervinsky's view by [tweeting](https://twitter.com/TheWhyOfFI/status/1629649343627116545?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1629649343627116545%7Ctwgr%5E91719ed73ca7c438481d7858aed2e4689c4c61c9%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fcointelegraph.com%2Fnews%2Fcrypto-lawyers-flame-gensler-over-claims-that-all-crypto-are-securities) that Gensler's opinions on what is or isn't security are not legally conclusive, as the ultimate decision is up to the judges, not the SEC chairs.

Also, Jason Brett, the policy lead at the Bitcoin Policy Institute, tweeted that Gary Gensler's comments "shouldn't be celebrated, but feared" and that there are alternative ways to win than with a "regulatory moat".

## Enforcement challenges: Gabriel Shapiro

Gabriel Shapiro, the general counsel at investment firm Delphi Labs, took to [Twitter](https://twitter.com/lex_node/status/1629965092547620864?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1629965094430932993%7Ctwgr%5E91719ed73ca7c438481d7858aed2e4689c4c61c9%7Ctwcon%5Es2_&ref_url=https%3A%2F%2Fcointelegraph.com%2Fnews%2Fcrypto-lawyers-flame-gensler-over-claims-that-all-crypto-are-securities) to explain the difficulty the Securities and Exchange Commission would face in enforcing its rule on the [cryptocurrency](/news/article/what-is-future-of-cryptocurrency) industry. 

According to Shapiro, more than 12,305 tokens valued at around $663 billion are considered unregistered securities and thus illegal in the US. Per Chervinsky's comments, the SEC would have to file a lawsuit against each token creator for enforcement.

Shapiro outlined that the SEC has two main ways of handling cryptocurrencies: imposing fines on token creators and requiring registration or by imposing fines and directing that the created tokens be destroyed and delisted from exchanges. However, he noted that SEC registration is too expensive for most token creators, and there is no clear path for token registration.

Shapiro questioned the SEC's plan for the industry, given that registration appears unfeasible, leading to potentially huge fines, work stoppages, destruction of dev premines, and delisting from trading. He concluded that such a plan would require 12,305 lawsuits and put billions of American dollars at risk, leaving everyone wondering about the SEC's plan.


Gary Gensler in front of red image of crypto markets

Gary Gensler Crypto Claims Challenged

The IMF has shared its views on the need for crypto regulation during a meeting of senior government officials from around the world.

At the G20 Summit 2023 in Bengaluru, India, on 24-25 February 2023, all G20 Finance Ministers and Central Bank Governors met in the quest to encourage global economic stability and growth by facilitating cooperation and dialogue among G20 members (19 countries and the European Union).

Many topics were discussed, including a [modern international tax system](https://www.livemint.com/news/india/g20-aims-for-global-deal-on-mnc-taxing-rights-in-h1-2023-11677432143132.html). One topic which caught our attention was crypto regulation. Managing Director of the IMF (International Monetary Fund), Kristalina Georgieva, called for [greater private crypto regulation](/news/article/japanese-crypto-regulation-call-made), citing the risk of financial stability.

## IMF crypto regulation calls

Georgieva shared the IMF crypto regulation view at a press briefing during the G20 Summit 2023 in Bengaluru and stated that “private crypto assets are not money”.

She urged regulators to implement stricter measures, asserting that if regulation fails or is implemented too slowly, then "we should not take off the table banning those assets", adding they could create a "financial stability risk".

Georgieva underlined that the IMF, joined by the Financial Stability Board alongside the Bank for International Settlements, is devoted to establishing a foundation for regulating crypto assets not issued by central banks or governments.

Georgieva said, "We have to differentiate between central bank digital currencies (CBDCs) that are backed by the state and stablecoins, and crypto assets that are privately issued."

To summarise, according to Georgieva, regulating (or potentially banning) private cryptocurrencies is important, as they can pose significant risks to financial stability. The IMF, BIS, and FSB are working towards establishing a regulatory foundation for private crypto tokens.

This is not a new theme of discussion. Several [countries are actively working](/news/article/australia-crypto-regulation) towards a stringent regulatory environment for cryptocurrencies.

Following US President Joe Biden's executive order in March 2022, for example, arrangements towards greater crypto regulation were accommodated in the 2023 budget proposal (also released in March 2022). A framework was brought forward in September 2022 based on the executive order.

[The UK plans](/news/article/cryptocurrency-regulation-uk) to make digital assets a regulated financial instrument. The Swiss government has already inculcated a mature cryptocurrency framework into its regulatory system.

India has a strict crypto taxation framework, while the United Arab Emirates is assembling an authority focused solely on digital currencies. It is safe to say that cryptocurrency regulation is underway, whether you like it or not.


IMF Crypto Regulation Calls at G20 Summit 2023

On 22 February, New York Attorney General Letitia James filed a lawsuit against CoinEx. The allegations state that the cryptocurrency exchange conducted business unlawfully as it failed to register with the state.

## New York sues CoinEx exchange

James charged CoinEx exchange with failing to register as a commodities and securities broker-dealer in the state. The 38-page [petition](https://ag.ny.gov/sites/default/files/memorandum_of_law_in_support_of_petition._nyoag_v._vinogloballtd_dba_coinex.pdf) filed in the New York Supreme Court alleged that CoinEx violated the state's Martin Act, which is known as one of the most rigorous anti-fraud and securities regulation laws in the US.

According to the petition, [CoinEx](/news/article/coinex-smart-chain) was "engaged in repeated and persistent fraudulent practices". The lawsuit also accused the exchange of listing tokens such as Amp, LBRY Credits (LBC), Rally (RLY), and [Terra](/news/article/terra-luna-second-airdrop) LUNA, which qualified as "both commodities and securities".

James [stated](https://ag.ny.gov/press-release/2023/attorney-general-james-sues-cryptocurrency-platform-failing-register-new-york) that the crypto exchange was not registered with the Commodity Futures Trading Commission or the Securities and Exchange Commission, as required under New York law to sell these tokens.

The petition further alleges that the company failed to comply with a 22 December subpoena sent by the Attorney General's Office to "provide testimony concerning the virtual asset trading activities of its platform".

As per the petition, James seeks a court order to prevent CoinEx from marketing itself as an exchange and stop it from operating in the state by ordering it to geoblock internet addresses and GPS location data from New York.

## Cryptocurrency exchanges must comply with legal standards

James made it clear that cryptocurrency companies cannot ignore regulatory requirements. In a statement, she said the days of cryptocurrency companies behaving as if rules do not apply to them "are over".

With this lawsuit, the New York Attorney General's office is taking a stance on upholding securities regulation laws and ensuring that companies operating in the state comply with them.


CoinEx Exchange Sued by NY Attorney General

The Securities and Exchange Commission has charged former Boston Celtics player Paul Pierce for promoting the cryptocurrency EthereumMax on Twitter without disclosing that he was being paid to do so. To resolve these charges, Pierce has agreed to pay a fine of $1.1 million and around $240,000 in disgorgement and prejudgement interest.

## SEC fines Paul Pierce $1.1M for promoting EthereumMax

The Securities and Exchange Commission has [accused](https://www.sec.gov/news/press-release/2023-34) former NBA star and ESPN employee Paul Pierce of violating the federal Securities Act. The SEC claims that Pierce failed to disclose receiving compensation from a cryptocurrency company for promoting their product online and made money from "an untrue statement of a material fact". 

The [SEC](/news/article/crypto-exchange-kraken-faces-sec-probe) further alleged that Pierce misled the public about his holdings of EMAX, sharing misleading screenshots of his EMAX holdings and profits. Also, he failed to disclose that his actual personal holdings were significantly lower.

He has been fined $1.1 million by the SEC for promoting cryptocurrency, EthereumMax (EMAX). This is the same security product that influencer [Kim Kardashian was previously charged for touting](/news/article/kim-kardashian-crypto-ad).

The NBA star used Twitter to promote EMAX tokens without disclosing that he had received more than $244,000 in the cryptocurrency as payment for his promotions. He did not admit any wrongdoing as part of the settlement and has agreed to pay a $1.1 million penalty and disgorge around $240,000.

Furthermore, he has also been banned from promoting any crypto asset securities for three years, according to the SEC.

The SEC Chairman, [Gary Gensler](/news/article/sec-crypto), said the case is a reminder to celebrities that the law requires them to disclose how much they are being paid to promote investment in securities. He added, "you can't lie to investors when you tout a security".

SEC has recently intensified its efforts to enforce regulations in the cryptocurrency industry. On Thursday, it [charged Terraform](/news/article/terraform-labs-accused-of-fraud-by-sec), a stablecoin issuer, and its CEO, Do Kwon, with crypto fraud.


blue image of paul pierce next to SEC logo

Paul Pierce Settles with SEC Over Crypto Row 

South Korea’s Financial Services Commission (FSC) has published a new set of guidelines requiring security firms and crypto industry players to self-regulate. Per the [new guidelines](https://www.fsc.go.kr/no010101/79386?srchCtgry=&curPage=&srchKey=&srchText=&srchBeginDt=&srchEndDt=) published Monday, February 13, 2022, the FSC seeks to bring the country's position on security tokens in line with other Asian nations.

## Freedom to self-regulate could boost asset innovation

According to Angela Ang, a former regulator at the Monetary Authority of Singapore and now a senior policy adviser at TRM Labs, a blockchain intelligence firm, South Korea was trying to align its definition of securities with countries like Hong Kong and Singapore. Coming at a time when traditional securities firms had allegedly developed cold feet about entering the market, Ang opines that the freedom to self-regulate could boost asset innovation in the country’s capital markets. 

Mooni Kim, an attorney working with local law firm Kim & Chang, commented that the fundamental standpoint of the new security law on tokens resembled the US version, but what remained now was how it would be applied.

Even before the ink dries, the announcement by FSC seems to have elicited mixed reactions in the country's crypto space. 

Industry players like [Shinhan Investment and Securities](https://open.shinhansec.com/new_eng/) have sounded a clarion call inviting interested parties to set up industry standards and educate investors on the potential benefits of token securities. 

## Debating 17 crypto-related laws

However, on the flip side, a crypto exchange executive who spoke on condition of anonymity because of his relationship with regulators expressed doubts about how the new development would boost the crypto industry. According to the official, it would have been prudent for FSC to begin by clearly defining the types of assets that qualify to be called securities instead before asking firms to self-regulate. 

South Korea is an integral player in the cryptocurrency industry, and the country’s national assembly is debating at least 17 crypto-related laws. The [proposed laws](https://www.koreatimes.co.kr/www/nation/2022/12/602_340645.html) range from guidelines on implementing reserve requirements at crypto exchanges to fair trade practices to create safeguards to [protect local crypto investors](/news/article/south-korea-crypto).           

[Regulators worldwide](/news/article/crypto-regulations) are burning the midnight oil to put in place frameworks to protect thirsty crypto investors, especially following a string of bankrupted crypto exchanges. The debate will culminate in a comprehensive [legal framework](https://www.news1.kr/articles/?4756185) called the Digital Asset Basic Act (DABA) that aims to introduce regulatory guidelines for the budding crypto industry. However, there is little chance that a piecemeal country-by-country approach will become effective without global coordination.


yellow image of regulation document and korean flag

Crypto Firms Can Self-Regulate in South Korea

Cryptocurrency firms that offer crypto trading advice will be scrutinised by the US SEC (Securities and Exchange Commission). The financial watchdog has announced its 2023 priorities to protect retail investor rights. 

On 7 February, the US regulator [released an official statement](https://www.sec.gov/news/press-release/2023-24) outlining its annual agenda. It indicated that the Division of Examinations would inspect crypto advisors and brokers' businesses. These firms need to have appropriate market exposure and the right strategies for advising traders.

## Firms offering advice need to be careful

The SEC has remarked that financial advisors need to be cautious while giving buying and selling advice. Moreover, they must be watchful of the digital assets they recommend. 

The commission’s Division of Examinations will observe how firms make referrals and recommend a product. The Division will also inspect whether its registered firms continually update their strategies for providing [crypto trading](/news/article/how-does-crypto-trading-work) advice. Advisors’ and brokers’ strategies should comply with the regulations and ensure risk management for traders.

![sec.png](https://s3.eu-west-2.amazonaws.com/prod-monitalks-media/sec_3bdabdfea6.png)
 
Source: Twitter

## What’s on the SEC's 2023 agenda?

The US crypto regulator publishes its priorities annually to outline its agenda. Previously, the SEC released its [priorities for 2022](https://www.sec.gov/news/press-release/2022-57). Its focus was more on ESG investment, private funds, and emerging technologies in the market. 

However, the regulators’ focus shifted toward digital investment advisors in 2023. As per the statement, the “changing landscape and associated risks in the securities market” prompted the change. 

The emphasis of the crypto regulators will be on the policies of Advisors Act policies. For this reason, SEC’s Division will continually scrutinise registered investment advisers (RIAs). It will ensure that the advisors comply with the policies and follow the standard procedures. The main objective behind this is to provide security to retail investors. 

On the other hand, ESG, private funds, emerging technologies, and operational resiliency are also part of the SEC’s agenda.



red image with man and woman giving advice with gold coins 

SEC to probe firms giving advice for crypto trading

Yes, you read that right. According to newly proposed advertising [laws from the United Kingdom](/news/article/cryptocurrency-regulation-uk) Financial Conduct Authority (FCA), executives of crypto firms in the region could face up to two years of jail if they fail to meet specific requirements around advertising crypto.

## What is the FCA and what did it propose?

[The UK FCA is a financial regulatory body](/news/article/uk-fca-explains-low-crypto-approval) that operates independently of the Government. The agency is tasked with regulating financial firms that provide services to consumers and maintaining financial market integrity.

In a [statement released](https://www.fca.org.uk/news/statements/cryptoasset-firms-marketing-uk-consumers-must-get-ready-financial-promotions-regime) on 6 February, 2023, the FCA announced that cryptocurrency firms marketing to consumers in the UK must prepare for the "financial promotions regime". This includes firms based overseas.

If consented to by the Parliament, under the FCA's proposed "promotions regime", crypto firms must either have permission from the agency to advertise their services or a bespoke exemption under the Financial Promotion Order.

If and when this "regime" comes into being, there will be only four courses for advertising [crypto asset services in the UK](/news/article/fintech-companies-uk-2023):

1.	The promotion is communicated by FCA-authorised personnel.

2.	The promotion is made by unauthorised personnel but approved by the FCA. At the moment, legislation is making its way through the Parliament which, if approved, would bring into being a [regulatory gateway](https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/995565/HMT_WR_113_Consultation_Response.pdf) that authorised firms will need to pass through to approve financial promotions for unauthorised personnel.

3.	The promotion is conveyed by a crypto firm registered with the FCA under the 2017 regulations known as MLRs (Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer)).

4.	The promotion abides by the conditions of a bespoke exemption in the Financial Promotion Order.

The FCA further said promotions not following one of those routes would be a breach of FSMA (Financial Services and Markets Act 2000) section 21, "which is a criminal offence punishable by up to two years imprisonment".

Along with jail time for crypto firm executives, illegally advertising crypto in the UK could lead to public warnings, websites being taken down, and further enforcement actions.

## Prepare now

Indeed. It is worth noting that the implementation period for this regime is four months from the date of approval by the Parliament.


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