South Korean prosecutors claim that the founder and CEO of [Terraform Labs](https://www.terra.money/), Do Kwon, is hiding in Serbia. They believe he left Singapore a couple of months earlier and moved to Serbia. 

[Do Kwon](/news/article/do-kwon-terra) is hiding as he was charged with a breach of financial laws. He is involved in the controversial collapse of the Terra ecosystem that startled the market. However, the global manhunt for the crypto fugitive is still going on. 

A report by [Chosun Media](https://www.chosun.com/economy/stock-finance/2022/12/12/VXFAUH7R7BFSVCYDEM7RNPRCXI/) says that the investigation authorities have stated that they received intelligence about his whereabouts in Serbia. They investigated further and “found it to be true".

## Do Kwon hiding: South Korean authorities seek cooperation

The South Korean investigation authority is already seeking to cooperate with the Serbian government. The Chosun Media report also suggests that the Financial and Securities Criminal Unit of Seoul Southern District Prosecutor will request assistance from Serbian officials. 

The authorities have yet to discover why Do Kwon left for Serbia. They believe it is only to avoid investigation and prosecution.

The notorious figure in the crypto industry earlier moved to Singapore just before [Terra-Luna collapsed](/news/article/terra-luna-collapse). In September, Seoul’s prosecutors issued red warrants for his arrest. The charges included breaching capital market regulations and also giving false information to investors. 

Since then, his whereabouts have not been known. The Korean authorities are yet to track down the fugitive's exact location. In October, they found out that he had left Singapore. He is believed to fly to Dubai and then to an unknown country. Singaporean officials also confirmed this news. 

![do kwon.png](https://s3.eu-west-2.amazonaws.com/prod-monitalks-media/do_kwon_810aeec14a.png)
  
In October, South Korea's Ministry of Foreign Affairs issued a warrant to surrender his passport. However, they have yet to get a response. Meanwhile, on Twitter, he maintained that he was not trying to hide.


red image of serbia with do kwon on foreground

Do Kwon hiding in Serbia, claim Prosecutors

A [report](https://www.wsj.com/amp/articles/ftx-hires-forensic-team-to-probe-money-trail-11670446435?mod=lead_feature_below_a_pos1) from the Wall Street Journal (7 December) claims that FTX has formed a team of financial experts to trace billions of dollars in “missing” customer funds from the company.

The new management at FTX is looking to get to the bottom of the entire crisis, and they’re not aiming for a slow process. The team has outsourced the matter to a group of financial forensic experts to find out how and where the funds could have gone missing.

To be specific, [AlixPartners](https://www.alixpartners.com/), a firm that specialises in financial matters, has been trusted with this mountain of a task. This advisory committee will be led by Matt Jacques, formerly with the US Securities and Exchange Commission (SEC) as a chief accountant.

FTX will try to recover as many of the missing assets as possible with the help of this newly formed committee. Furthermore, the crypto company will need further assistance to rebuild its financial infrastructure from the ground up.

## Summary of the FTX crash

If you're even the slightest bit involved in the crypto industry, you've probably heard the name FTX pop up a few times over the last couple of months - and not in a good light. The crypto company has been under fire for letting almost $450 million of customer funds disappear.

The whole debacle and the story of "[who’s to blame](/news/article/ftx-bankrupt-who-to-blame)" is a mystery, even after months of speculation.

It's not the first time the company's CEO, Sam Bankman-Fried, has been alleged to have mismanaged customer funds. In an interview with [Vox](https://www.vox.com/future-perfect/23462333/sam-bankman-fried-ftx-cryptocurrency-effective-altruism-crypto-bahamas-philanthropy), Bankman-Fried claimed to have passed customer funds through Alameda Research, FTX’s sister company. He did admit his lack of control over his company’s operations, as he [tweeted](https://twitter.com/sbf_ftx/status/1590709166515310593?s=46&t=Br1_HGNzUBwspKZ7pF6myA), "I'm sorry. I f--d up" after the fiasco broke.

The company filed for bankruptcy in November. It's difficult to see them making a comeback, largely due to two major factors:

•	The global negative PR that the company has been a victim of over the period of several months.

•	A low probability of recovering the lost funds.

FTX’s new management will need a miracle to even get crumbs from this entire mess.



red image of money with sam bankman-fried in the foreground

FTX Brings in Financial Experts

The ongoing [Celsius](/news/article/celsius-data-breach) bankruptcy case saw a new development this week as US judge Martin Glenn delivered a ruling. He issued a direction that the firm must pay back $50 million worth of crypto assets to users' custody accounts. 

The ruling during the hearing on Wednesday came after [Celsius](https://celsius.network/) stakeholders and advisers concluded that custody assets belong to customers, not the company.

## Verdict applies to $44 million custody assets

As per the [filing](https://cases.stretto.com/public/x191/11749/PLEADINGS/1174909012280000000022.pdf) that was made in September, the company owes roughly $44 million. However, that is said to represent only a small portion of the total debts of the firm.

The filing also shows that the company has around 58,300 users with about $210 million in withholding and [custody accounts](/news/article/celsius-network). The recent ruling by Judge Glenn applies only to the custody assets of 15,680 users.  

## Pending decision on interest-bearing accounts

Earlier, the bankrupt crypto lender also asked for the judge's consent to sell $18 million worth of virtual assets from interest-bearing accounts. The users deposited the amount in these accounts before the lender filed for Chapter 11 bankruptcy. However, Judge Glenn is yet to give a verdict on this request. 

The US judge says he wants the Celsius bankruptcy case to move forward as quickly as possible. According to a [Bloomberg report](https://www.bloomberg.com/news/articles/2022-12-07/celsius-judge-orders-return-of-user-crypto-worth-50-million?sref=17Td6NBb&leadSource=uverify%20wall), he also announced that he wants creditors to get back "as much as they possibly can" and "as soon as they possibly can".

This pending decision is crucial for the case because Celsius might claim these assets. There were more than $200 million in custody accounts in September. However, a large part of the holdings was transferred from the interest-bearing funds just before the company filed for [bankruptcy](/news/article/celsius-bankruptcy-protection). That’s why the rules of preferential transfers may benefit the company. This decision could also set a legal precedent in bankruptcy cases.



red picture with celsius logo and the word "bankrupt"

Celsius Bankruptcy: Judge Orders Return of $50m

New UK regulation could restrict crypto adverts, criminalize the provision of services by unlicensed operators, restrict foreign companies' involvement, and control how companies are wound up. 

## Urgency to create order 

The urgency to create order in finance’s “wild west” has been necessitated by crypto exchange [FTX’s collapse](/news/article/ftx-collapse-blockfi-suspend-withdrawals) last month after filing for US bankruptcy court protection. Sources told the [Financial Times](https://www.ft.com/content/481d45d8-943e-484b-84ca-3b11f02c0ee4) that the planned package of regulations gives the Financial Conduct Authority (FCA) sweeping powers to rein in the sector. It also allows the FCA to check how crypto firms operate and advertise their products. The laws could also limit how overseas firms access the British market.

The UK House of Commons unanimously passed the new Financial Services and Markets Bill that restricts crypto adverts and criminalizes unauthorized crypto operators last October. The committee added the measures to those agreed upon earlier, notwithstanding industry concerns that the new regulatory regime would make it harder to get crypto ads approved.

## Crypto regulation UK agenda

While he was still Chancellor, current Prime Minister Rishi Sunak announced a [grand plan](https://www.cnbc.com/2022/04/04/uk-to-mint-its-own-nft-and-push-forward-with-crypto-regulation.html) to make the UK a crypto hub. The Government pressed on with its crypto regulation UK agenda amid the political turbulence that precipitated the fall of Boris Johnson and then Liz truss as leader.

Minister Andrew Griffith [told lawmakers](https://publications.parliament.uk/pa/bills/cbill/58-03/0146/PBC146_FinServMarketsBill_1st8th_Compilation_01_11_2022.pdf) on 25 October that the new laws would enable regulating stablecoins and activities relating to other crypto assets like Bitcoin (BTC) and Ether (ETH). The original bill primarily focused on introducing a stablecoin as a means of payment that would be tied to tangible assets like the British pound.  
    
British crypto firms and investors were optimistic that Sunak, a former Goldman Sachs analyst and [a vocal crypto advocate](/news/article/rishi-sunak-crypto-believer-uk-pm), could turn around the UK's diminishing crypto aspirations. However, the persisting political instability, punishing digital asset prices, and a slew of corporate bankruptcies have left many industry players wondering how much he could do to change the fortunes of the crypto market that's still licking its wounds.   
  
Crypto regulation UK may not exactly be on Sunak's priority list, but some insiders feel there's reason to be optimistic. While the FCA has faced criticism for its snail-paced approach in licensing crypto firms, leading to some companies winding down and relocating elsewhere in Europe, the recent licensing of the [fintech app Revolut](/news/article/revolut-business-account), after numerous extensions, offers a ray of hope.


Crypto Regulation: UK Efforts Ramp Up

The [FTX collapse](/news/article/ftx-collapse-blockfi-suspend-withdrawals) has left Genesis brokers in heavy debt, another example of the spreading contagion from the exchange collapse. According to a [report](https://www.ft.com/content/32977a99-c1c3-4f34-9ecc-4057217bf974) by newspaper the Financial Times, the crypto broker and the [Digital Currency Group (DCG)](https://dcg.co/) owe around $900 million to the Winklevoss twins’ exchange, Gemini. 

DCG is a venture capital company that owns Grayscale asset manager and [Genesis brokerage](/news/article/genesis-crypto-claim). Last month, its founder, Barry Silbert, addressed the company's shareholders about market turmoil in a letter. It shared that the company owes more than $575 million to the brokerage's lending arm.

The borrowed amount was to be used for new investment opportunities and was due in May 2023. The loan was taken when DCG assumed control of Genesis Trading after the default of [Three Arrows Capital (3AC)](https://www.threearrowscap.com/).

## Gemini seeking to recover its customers’ funds

Genesis brokers and Gemini crypto exchange worked together for a digital asset lending program called Earn. The debts affected its operations, and it halted withdrawals from customers’ accounts. Now, Gemini has set up a creditors committee that will make efforts to retrieve the funds from DCG and its subsidiary, crypto lender.

Currently, a creditor group is in talks with the company about $1.8 billion worth of loans. Another creditor group, accounting for $900 million, is taking advice from the law firm [Proskauer Rose](https://www.proskauer.com/). 

## Genesis brokers may file for bankruptcy

Genesis Global Capital is likely to file for bankruptcy. However, the firm has acquired the services of investment bank Moelis to explore its options. On 16 November, the firm suspended withdrawals from customer accounts. The initiative was taken after the sudden decline of the Sam Bankman-Fried exchange, FTX.

The suspension also triggered an unexpected outage for the [Gemini exchange](/news/article/gemini-crypto-exchange-falls-prey). The overall operations of the crypto exchange are being affected due to the spread of FTX contagion.


Genesis Brokers Owes $900 Million to Gemini

In the latest XRP lawsuit twist, [the US Securities and Exchange Commission (SEC)](https://finance.yahoo.com/news/sec-gets-support-sports-economy-085511025.html) has received backing from sports investment organisation New Sports Economy Institute. The NSEI filed an amicus brief on Friday in the continuing dispute between the SEC and Ripple Labs Inc. 

In the [amicus brief](https://www.courtlistener.com/docket/19857399/717/securities-and-exchange-commission-v-ripple-labs-inc/), NSEI compared cryptocurrencies to a "chameleon engaged in regulatory arbitrage, identifying themselves as assets when it wants to attract money and pleaded to 'investors,' but a currency when it confronts regulatory scrutiny".

"This flip-flopping is deceptive but also unlikely," claimed NSEI.

Even if the Court finds [XRP](/news/article/ripple-price-prediction) to be more of a currency and less of a speculative asset proxy, that will make it an exception rather than a rule. Any ruling in the XRP lawsuit like that should be constructed to avoid significant harm to future crypto speculators, who, in all likelihood, aren't even aware that they aren't investing in the first place, NSEI stated.  

The SEC filed a [complaint](https://forkast.news/sec-pushes-back-on-ripple-interrogatories-over-xrp/) against Ripple and its officials in December 2020, stating that the sale of XRP represented an issue of unregistered securities worth more than US$1.38 billion.

## XRP lawsuit: Coinbase amicus brief 

Coinbase, a cryptocurrency exchange in the US, has formally filed an amicus brief in favour of Ripple Labs Inc. in the case launched by the SEC in 2020. Coinbase, which claims to be the largest crypto trading platform in the US by trade volume, filed a brief in support of Ripple's fair notice defence on [Monday](https://www.courtlistener.com/docket/19857399/705/securities-and-exchange-commission-v-ripple-labs-inc/). 

The [Court](/news/article/xrp-court-case-update) should "deny the SEC's petition for summary judgement on this issue to guarantee that the current due process precedents on which the fair notice argument is based continue to safeguard against unlawful regulatory enforcement when warranted", Coinbase argued in the filing.

According to Coinbase, government bodies cannot condemn activity as a breach of the law unless fair notice is provided. It adds that by prosecuting sellers of XRP tokens after making public remarks suggesting that those transactions were legitimate, the SEC has lost sight of this foundational principle.

## XRP lawsuit: Likely verdict 

According to the CEO of Ripple (XRP), the SEC litigation might go on for another three months. However, many legal experts believe Ripple will prevail because the SEC has yet to give any substantial proof. 

According to legal experts, the SEC's chances of winning the lawsuit have dwindled even more. According to Roslyn Layton, senior analyst at Forbes and senior vice president at Strand Consult, "signs" of a "brutal loss" for the SEC are mounting. The SEC could not establish that Ripple and XRP investors were conscious of, or should have known, the token's claimed position as a security.

According to Layton, the participation of tens of thousands of XRP investors represented by attorney John E Deaton caused the SEC's case to crumble at last. 

Despite dismissing the motion to intervene, Judge Torres allowed the filing of amicus papers, "sending a strong message to the SEC that she would be listening". An affidavit was presented by more than 3,000 XRP investors from Deaton's group of over 75,000. 

Verret believes that if the SEC files an appeal with the Supreme Court, it will be defeated. If the SEC concludes that XRP is not a security, Ripple has already agreed to pay a charge. Currently, though, a resolution looks improbable.

## XRP lawsuit: General consensus  

The crypto community has [rallied around Ripple](https://zycrypto.com/ripple-heading-towards-historical-win-against-sec-in-xrp-suit-as-industry-supports-ripple-en-masse/) since the case was filed in 2020, with more than a dozen firms filing amicus curiae filings in support. Whereas most Ripple supporters say that securities regulations have been improperly used to create uncertainty for the whole sector, the regulator maintains that "most" cryptocurrencies are securities. 

However, CryptoLaw's John E. Deaton cautioned against drawing any conclusions from the Ripple action, implying that the Court may decide otherwise.



XRP Lawsuit Update

US Deputy Treasury Secretary Wally Adeyemo has emphasized the need for the United States to collaborate with other countries to develop cryptocurrency regulations effectively.

This development comes a few weeks after FTX, the second most popular crypto exchange, based in the Bahamas, [became insolvent](/news/article/ftx-bankrupt-who-to-blame). CEO Sam Bankman-Fried declared that the protocol did not have sufficient assets to meet customers' demands.

Speaking at the [Reuters NEXT](https://events.reutersevents.com/next) conference, Adeyemo said countries must enact regulatory laws to protest investors, promote financial stability, and block illicit crypto users.

"This is a global phenomenon," Adeyemi said. He added that the US would work closely with international partners to design a regulatory framework to protect the global economy, especially with crypto innovations.

The Deputy Treasury Secretary noted that since FTX was not based in the US, regulatory efforts must be broadened.

## Crypto regulation post-FTX collapse

FTX declared insolvency and Bankman-Fried resigned from his position as CEO on 11 November, a few days after the world's biggest crypto exchange, Binance, dumped a deal to rescue the exchange. This was followed by angry traders pulling $6 billion out.

As a result, Rostin Behnam, chairman of the Commodity Future Trading Commission (CFTC), urged lawmakers on Thursday to quickly design a regulatory framework for crypto assets.

After several congressional hearings to examine the collapse of FTX, members of the Senate Agriculture Committee asked Behnam if the FTX collapse would have been controlled with better oversight.

However, the recent setback in the crypto market has not affected the banking sector. This is according to Janet Yellen, the US Treasury Secretary, who remains skeptical about the crypto industry. She believes in the need for adequate regulation.

While speaking at the DealBook event hosted by New York Times, the Treasury Secretary said adequate customer protection is needed in the crypto sector.

Just like Wally Adeyemo, she agrees that it is important to remain open to financial innovations, given that cryptocurrencies can lower the cost of cross-border transactions and promote financial inclusion.

"I have been skeptical, and I remain quite skeptical," Yellen said. She noted that recent developments are not centered on financial inclusion and cross-border payment.



Wally Adeyemo Calls for Crypto Regulation

Following Portugal's footsteps, another European government is poised to tighten [crypto laws](/news/article/fatf-crypto-laws) and expand taxes on transactions related to cryptocurrencies. A proposal in Italy's budget plan for 2023 wants to levy a startling 26% tax on capital profits obtained from cryptocurrency trading.

However, this tax bracket will apply if the cryptocurrency profits exceed 2,000 euros ($2,062.3). The Italian authorities regard cryptocurrencies and tokens as foreign currencies.

The bill proposed by Prime Minister Giorgia Meloni's cabinet also allows taxpayers to declare the worth of their assets as of 1 January, 2023, and pay a 14% tax. The goal is to encourage Italians to register their digital asset ownership in their tax forms. 

The proposed legislation, which may be changed in parliament, contains transparency requirements and extends stamp duty to cryptocurrency intermediary fees and a 4% taxation on free cryptocurrency transfers in the case of an inheritance.

The new laws follow after a lengthy drop in digital asset prices, which has resulted in the demise of several prominent cryptocurrency platforms. The current spate of bankruptcies and spectacular collapses, like the recent meltdown of the [exchange FTX](/news/article/ftx-bankrupt-who-to-blame), has prompted regulators worldwide to increase their examination of the young asset class.

## Crypto Taxes Italy and Europe

The current plans in Italy come as [Portugal](/news/article/potugal-crypto-tax), Europe's most crypto-friendly location, announced identical plans to tax cryptocurrency gains. Portugal said in October 2022 that it intends to slap a massive 28% tax on short-term gains on digital assets.

As of now, digital assets are owned by 2.3% of Italy's total population of 1.3 million people. Crypto usage is lower than in other countries, such as France (3.3%) and the United Kingdom (less than 5%). With such high crypto taxes Italy may dissuade other participants from entering the crypto industry.

Many prominent cryptocurrency exchanges have been expanding into Italy, claiming significant economic opportunities. The Italian government approved establishing Binance's facility earlier this year. Nexo and [Gemini](https://www.gemini.com/) have also been allowed to register with an Italian authority. As a result, they will be able to service Italian crypto enthusiasts.



Italy Plans Crypto Gain Taxes

In the latest XRP lawsuit twist, [the US Securities and Exchange Commission](https://finance.yahoo.com/news/sec-gets-support-sports-economy-085511025.html) (SEC) has received backing from sports investment organisation New Sports Economy Institute. The NSEI filed an amicus brief on Friday in the continuing dispute between the SEC and Ripple Labs Inc. 

In the [amicus brief]https://www.courtlistener.com/docket/19857399/717/securities-and-exchange-commission-v-ripple-labs-inc/(), NSEI compared cryptocurrencies to a "chameleon engaged in regulatory arbitrage, identifying themselves as assets when it wants to attract money and pleaded to 'investors,' but a currency when it confronts regulatory scrutiny".

"This flip-flopping is deceptive but also unlikely," claimed NSEI.

Even if the Court finds [XRP](/news/article/ripple-price-prediction) to be more of a currency and less of a speculative asset proxy, that will make it an exception rather than a rule. Any ruling in the XRP lawsuit like that should be constructed to avoid significant harm to future crypto speculators, who, in all likelihood, aren't even aware that they aren't investing in the first place, NSEI stated.  

The SEC filed a [complaint](https://forkast.news/sec-pushes-back-on-ripple-interrogatories-over-xrp/) against Ripple and its officials in December 2020, stating that the sale of XRP represented an issue of unregistered securities worth more than US$1.38 billion.

## XRP lawsuit: Coinbase amicus brief 

Coinbase, a cryptocurrency exchange in the US, has formally filed an amicus brief in favour of Ripple Labs Inc. in the case launched by the SEC in 2020. Coinbase, which claims to be the largest crypto trading platform in the US by trade volume, filed a brief in support of Ripple's fair notice defence on [Monday](https://www.courtlistener.com/docket/19857399/705/securities-and-exchange-commission-v-ripple-labs-inc/). 

The [Court](/news/article/xrp-court-case-update) should "deny the SEC's petition for summary judgement on this issue to guarantee that the current due process precedents on which the fair notice argument is based continue to safeguard against unlawful regulatory enforcement when warranted", Coinbase argued in the filing.

According to Coinbase, government bodies cannot condemn activity as a breach of the law unless fair notice is provided. It adds that by prosecuting sellers of XRP tokens after making public remarks suggesting that those transactions were legitimate, the SEC has lost sight of this foundational principle.

## XRP lawsuit: Likely verdict 

According to the CEO of Ripple (XRP), the SEC litigation might go on for another three months. However, many legal experts believe Ripple will prevail because the SEC has yet to give any substantial proof. 

According to legal experts, the SEC's chances of winning the lawsuit have dwindled even more. According to Roslyn Layton, senior analyst at Forbes and senior vice president at Strand Consult, "signs" of a "brutal loss" for the SEC are mounting. The SEC could not establish that Ripple and XRP investors were conscious of, or should have known, the token's claimed position as a security.

According to Layton, the participation of tens of thousands of XRP investors represented by attorney John E Deaton caused the SEC's case to crumble at last. 

Despite dismissing the motion to intervene, Judge Torres allowed the filing of amicus papers, "sending a strong message to the SEC that she would be listening". An affidavit was presented by more than 3,000 XRP investors from Deaton's group of over 75,000. 

Verret believes that if the SEC files an appeal with the Supreme Court, it will be defeated. If the SEC concludes that XRP is not a security, Ripple has already agreed to pay a charge. Currently, though, a resolution looks improbable.

## XRP lawsuit: General consensus  

The crypto community has [rallied around Ripple](https://zycrypto.com/ripple-heading-towards-historical-win-against-sec-in-xrp-suit-as-industry-supports-ripple-en-masse/) since the case was filed in 2020, with more than a dozen firms filing amicus curiae filings in support. Whereas most Ripple supporters say that securities regulations have been improperly used to create uncertainty for the whole sector, the regulator maintains that "most" cryptocurrencies are securities. 

However, CryptoLaw's John E. Deaton cautioned against drawing any conclusions from the Ripple action, implying that the Court may decide otherwise.



XRP vs SEC Lawsuit Update

Crypto lender [BlockFi](/news/article/is-blockfi-bankrupt), which offered unsecured crypto loans to retail investors, filed for Chapter 11 bankruptcy late Monday. There had been indications that the FTX scandal could render crypto lender [BlockFi bankrupt](https://www.nytimes.com/2022/11/28/business/blockfi-bankruptcy-cryptocurrency-ftx.html?smtyp=cur&smid=tw-nytimes) due to its exposure to the fallen exchange. It is now official.

[BlockFi had suspended withdrawals](https://www.bloomberg.com/news/articles/2022-11-11/blockfi-pauses-withdrawals-says-can-no-longer-operate-as-usual) soon after the collapse of FTX, citing significant exposure to the Bahamas-based exchange. The role of [FTX's failure](/news/article/ftx-bankrupt-who-to-blame) in making BlockFi bankrupt is becoming more evident by the day. 

BlockFi says it owes $275m to FTX US in the bankruptcy filings before a New Jersey court. This amount was part of a $400m lifeline FTX offered BlockFi in June when it began experiencing a liquidity crunch following the collapse of crypto lenders Voyager and Celsius. There was also an option for FTX to buy BlockFi. These facts are only becoming public as the scope of the FTX scandal widens.

BlockFi's bankruptcy filing indicates that the firm had $10 billion in assets and liabilities. While the company said in its bankruptcy filing that it was working to recover obligations owed by several counterparties, it adds that any recovery efforts risked delays from FTX's bankruptcy proceedings.

## BlockFi bankrupt: What next?

BlockFi had been in trouble with the US Securities and Exchange Commission (SEC) over its lending activities. It had been fined $100m by the SEC for not registering its crypto lending products as securities. In declaring BlockFi bankrupt, the filing said it still owes the regulator $30m, among other sums owed to more than 100,000 creditors.

The extent of BlockFi's entanglement with FTX continues to unravel. Bankruptcy filings reveal BlockFi made nearly $680 million in collateralized crypto loans to former FTX CEO Sam Bankman-Fried's Alameda Research hedge fund, even as it got a financial reprieve from the FTX exchange. 

Initial reports indicate that billions of dollars in the FTX balance sheet are unaccounted for. Where FTX got the funds, it used to bail out BlockFi in June is now a subject of speculation. Answers may come in the weeks ahead.


BlockFi Bankrupt - Court Documents

[The UK's](/news/article/uk-crypto-tax-regulations) Starling Bank has tightened its grip on crypto trading, [announcing a ban on all crypto transactions](https://twitter.com/StarlingBank/status/1595095825884930050?t=8EiBd2taolnSd4Wb8VbUvw&s=19) for users, describing the activity as "high risk and heavily used for criminal purposes"'.

Following the collapse of the [FTX exchange](/news/article/ftx-bankrupt-who-to-blame) earlier this month, banks have stressed the need for crypto regulation.

## Starling Bank customers woke up to bad news

Starling Bank crypto customers received a text message stating, "we view the crypto activity as high risk".
The bank said it had decided to halt all card payments to cryptocurrency merchants and "impose additional limitations on outgoing and incoming transfers".

It comes just two weeks after [Santander imposed new limits on Bitcoin and Ethereum](/news/article/santander-uk-news) transactions and warned of the potential consequences of investing in crypto assets.

As of 15 November, Santander's mobile and online banking customers were limited to a £1,000 limit per cryptocurrency transaction and a £3,000 cap on transactions made over a rolling 30-day period. While payments will still be allowed from the cryptocurrency exchange, including Binance, payments sent to Binance will remain blocked.

## Starling is not backing off

A representative of Starling Bank said the institution has had restrictions on cryptocurrency transactions of varying degrees for a long time.

The purpose of this communication, he continued, was to ensure that this was understood by clients who had previously completed such transactions.

He added that while the cutting-edge technology that underlies cryptocurrencies has significant advantages, the high risk and widespread criminal use meant the organisation could no longer support them.

## More banks restrict crypto transactions

The Starling Bank crypto stance is the latest [bank](/news/article/crypto-friendly-banks-uk) move to restrict customer crypto activity. Lloyds, [Barclays](/news/article/barclays-crypto), and RBS have implemented various new measures, such as blocking transactions with cryptocurrency exchanges.

According to finder.com, 47% of UK banks forbid customers from communicating with cryptocurrency exchanges.


Starling Bank Bans Crypto Trading

Tornado Cash developer Alexey Pertsev could be in custody until February after being detained in the Netherlands.

Before Advocate WK Cheng gave his first defence argument on [22 November](https://uk.news.yahoo.com/tornado-cash-developer-alexey-pertsev-132129612.html), the prosecution provided a detailed summary of its research. It depicts Pertsev as a pivotal actor in the operation.

## Defence view

Cheng outlined numerous use cases for Tornado Cash and common misunderstandings about its capabilities.
"I am upset with the [court's](/news/article/pgi-global-closed) ruling. We've attempted to convey the defence's positions as plainly as possible," Cheng said after the preliminary hearing. 

The attorney acknowledged that the first session had been rescheduled for 20 February, 2023, and reaffirmed his conviction that the state had provided a biased interpretation of Pertsev's connection with [Tornado Cash](/news/article/tornado-cash).

Despite a slew of pledges from his defence team, including home surveillance and check-ins at the local police station each week, the prosecution expressed anxiety that Pertsev might flee if released before the first session. The attorney added that they would make some requests and investigations, and there are certain things they need to work out to be ready for the next court session.

## Positive support for Pertsev 

In a Tweet, crypto investor Ryan Adams [stated](https://twitter.com/RyanSAdams/status/1562475044126699521) that the Tornado Cash creator did something positive for the public by writing the code. The forum member said that "a few evil folks" opted to utilise Pertsev's code, and now the developer is paying the price. 

Aside from Adams, crypto expert Jill Gunter [said](https://twitter.com/jillrgunter/status/1562549817535959040) they hadn't released enough information on Pertsev's arrest. Gunter called the accusations' current position "confusing", describing the scenario as a "scary problem".

Protesters gathered in Amsterdam to demand the developer's release. Protesters chanted, "open source is not a crime", urging the authorities to apprehend the criminals rather than the creators.

On 12 August, the court [detained](https://www.theblock.co/post/163297/arrested-tornado-cash-developer-is-alexey-pertsev-his-wife-confirms) the developer on allegations of money laundering using the Tornado mixer. Authorities in the Netherlands stated that the mixer was used to conceal large amounts of money from criminals and can link to crypto frauds and hacks.


Tornado Cash Developer Stays in Detention

The [American CryptoFed DAO](https://www.americancryptofed.org/) is about to fight a legal battle with the US Securities and Exchange Commission ([SEC](/news/article/sec-crypto-news)). It will become the country's first authorised decentralised autonomous organisation to do so. The issue is token registration, which the regulators approved in 2021. 

But now, the SEC has [announced](https://www.sec.gov/news/press-release/2022-208#.Y3f3-2DgThg.mailto) that the US DAO provided “misleading” information for the public offering of its tokens. It further accused the organisation of non-compliance in the investigation procedure. So, the regulatory authority will initiate an administrative proceeding against the firm. 

## Accusations from the regulators

The Enforcement Division of the crypto watchdog stated that the company provided incomplete information in Form S-1. It did not provide audited financial statements and other necessary documents related to its operations. Moreover, the statements seemed inconsistent and misleading regarding the nature of its tokens.
 
Regulators noted that the CryptoFed tokens might fall under [securities laws](/news/article/ether-staking). The firm also failed to cooperate with the regulatory body, it is alleged. Therefore, they may have to cancel the registration for their tokens.

## US DAO not to take assistance from an attorney

The US DAO, CryptoFed, has decided to fight the case without taking assistance from a legal advisor. It successfully registered two of its tokens in 2021 with the regulators. One was a stablecoin, Ducat, and the second was an interdependent governance token, Locke. 

[Cointelegraph](https://cointelegraph.com/news/first-official-dao-in-the-us-to-fight-sec-without-attorneys) has reported remarks from the COO and organiser of the firm, Xiaomeng Zhou. He confirmed it has lodged the notice of appearance per the [SEC’s regulations](/news/article/us-sec-regulation). It also reports that the firm will represent itself in court without a solicitor.

CryptoFed may also apply for an extension in the deadline to prepare its answer. If the application gets approved, the firm will likely get an extension of around 20 days to defend its stance.


US DAO to Battle SEC Without Solicitor

The crypto lending firm, [BlockFi](https://blockfi.com/), certainly finds itself in hot waters after the [FTX collapse](/news/article/ftx-collapse-blockfi-suspend-withdrawals). Recently, it suspended withdrawals from client wallets and interest accounts. It is also facing a severe liquidity crisis as the [FTX exchange](/news/article/ftx-exchange-under-investigation) crashed. There are reports suggesting that the firm plans to lay off its workforce. So, is BlockFi bankrupt?

## Is BlockFi bankrupt?

Earlier, the firm denied having a line of credit of around $400 million from FTX. However, later it accepted its affiliation with the crashed exchange. The [Sam Bankman-Fried](/news/article/sam-bankman-fried) owned exchange provided this fund to BlockFi to bail it out in July. As the business has collapsed, it has again created financial problems for the crypto lender. 

Rumours suggest that the crypto lender is pondering filing for insolvency amid this situation. Other than that, it may even sack some of its employees to cut down its expenses. 

Moreover, it has already restricted activities on the platform, suspending withdrawals for its clients. These moves indicate that the firm might have to move towards complete closure. 

## Impact of FTX crash on other crypto firms

FTX collapse has rattled the entire crypto market. BlockFi is not the only platform that is facing issues after the decline of Sam Bankman-Fried’s exchange. Another digital asset lending platform, SALT, has also paused deposits and withdrawals. It has notified its users that “in light of recent industry events”, the firm has taken this step.

![blockfi.png](https://s3.eu-west-2.amazonaws.com/prod-monitalks-media/blockfi_d647bef6a0.png)
 
Furthermore, [SALT](https://saltlending.com/) has admitted that the fall of [SBF companies](/news/article/sam-bankman-fried-lost-billions) has also affected its business. Therefore, it is taking this step as a precautionary measure. However, the platform’s CEO, Shawn Owen, has clarified that it is [not going bust](https://twitter.com/Shawn_OwenJ/status/1592586857509896192). This is a temporary measure. It is to examine how much the events have affected the platform. Nonetheless, it will be effective immediately to limit potential risks.



Layoffs, & paused withdrawal: Is BlockFi bankrupt?

After facing the digital equivalent of a bank run, the [imploding crypto trading](https://www.seattletimes.com/business/explainer-whats-happening-at-bankrupt-crypto-exchange-ftx/) business is now in the red by billions of dollars. FTX, one of the biggest exchanges in the world, filed for bankruptcy last week. Its CEO and founder also resigned. The trading firm afterward stated that there had been "unauthorised access" and that cash had vanished.  

According to analysts, hundreds of millions in cash may have gone. Elliptic, an analytics firm, estimated on Saturday that $477 million was missing from the transaction. On social media, there was a debate about whether the exchange was hacked or whether a business insider had taken assets, which cryptocurrency analysts couldn't rule out.

Its new CEO, John Ray III, announced that it would disable the ability to trade or withdraw cash and would take actions to safeguard consumers' assets.

## FTX Bankrupt: How did it happen?

Customers abandoned the exchange due to concerns over its funds and agreed a sale to rival crypto [exchange](/news/article/ftx-uk-warning) Binance. However, the transaction fell through while Binance conducted due diligence on [FTX's](/news/article/ftx-vs-binance-liquidate-funds) balance sheet.

According to its bankruptcy petition, the crypto business estimated its assets at between $10 billion and $50 billion and identified more than 130 associated firms worldwide.

On Friday, FTX and hundreds of linked entities, including founder Sam Bankman-Fried's hedgefund Alameda Research, filed for bankruptcy in Delaware.

## FTX Bankrupt: Bankman-Fried accepts blame

Sam Bankman-Fried apologised on [Twitter Thursday morning](https://twitter.com/sbf_ftx/status/1590709166515310593?s=46&amp;t=Br1_HGNzUBwspKZ7pF6myA), saying he "f—-ed up" and should have done better. Bankman-Fried also announced the closure of Alameda Research, the trading business he co-founded with FTX.

The tweet comes as the former crypto industry star pleads for billions of dollars to avoid bankruptcy. 

This week has been a rapid fall from grace for FTX. After valuing the exchange at $32 billion earlier this year, Bankman-Fried is now searching for someone to backstop the crypto business [after rival exchange Binance withdrew from a plan](https://www.cnbc.com/2022/11/09/binance-backs-out-of-ftx-rescue-leaving-the-crypto-exchange-on-the-brink-of-collapse.html) to purchase it.

He is worth an estimated $23 billion and has been a major political donor to Democrats.



FTX bankrupt: Who's to blame?

The exchange platform [Crypto.com is under investigation after sending $405 million to the wrong person](https://finance.yahoo.com/news/cryptocom-ftx-fiasco-233855168.html), raising concerns among crypto watchers in the wake of competitor exchange [FTX's](/news/article/ftx-vs-binance-liquidate-funds) bankruptcy filing on Friday.

Observers who closely examined the transaction theorised it was an attempt to inflate trading volume. The analyst who initially noticed the transaction was a [Coinbase](/news/article/coinbase-nft-platform) employee.

Before this Crypto.com investigation, the company made headlines when it sent $10.5 million by mistake instead of a $100 refund to a woman in Australia in December.

## Crypto.com investigation

CEO of Crypto.com Kris Marszalek claimed on Twitter that the transaction was an accident. A company representative told Yahoo Finance that money was sent to Gate.io, another cryptocurrency exchange, when it should have gone to an offline cold storage wallet.

The spokesperson explained that the movement of funds from the Crypto.com custody system is only possible between approved and whitelisted addresses that are attached to its cold wallets, hot wallets (connected to the internet), and corporate accounts at third-party exchanges."

Nonetheless, the transaction triggered crypto investors, who drove Crypto.com's exchange token (CRO-USD) price down by 24% in the last 24 hours. Bitcoin (BTC-USD) also decreased by less than 2.5% over the same period, while ether (ETH-USD) dropped by 2.5%.

## Exchanges publish "Proof of Reserves"

The Crypto.com investigation also follows a rush by several exchanges to publish their "Proof of Reserves," demonstrating that they are not using investor funds during the week following FTX's collapse.

On Thursday, [Crypto.com](/news/article/crypto.com-news-uk-approval) released its Proof of Reserves in its wallets, claiming to have $3 billion in total customer assets. According to the exchange wallets tracked by blockchain analytics platform Nansen, the figure was $2.55 billion as of Saturday, a 15% drop.

Proof of Reserves has long been used by some cryptocurrency exchanges, including the [Kraken](/news/article/kraken-review) exchange based in the US. However, depending on the frequency and amount of a company's disclosed balance sheet, the measure may still be insufficient.

According to CEO and co-founder of Chainlink Labs Sergey Nazarov, Proof of Reserves can prove solvency. It shows, he said, if the assets a company claims to have are available in real time.

Michael Anderson, a co-founder of the crypto venture capital firm Framework, said the mechanism is 'great', as long as there is proof of liabilities and assets.

However, he added: "It gives you a portion of the story."

Anderson continued: "It helps people know if a company is using its customer assets as collateral to borrow money."


Crypto.com Under Investigation

A leading crypto lending firm, [BlockFi](https://blockfi.com/), has enforced the suspension of withdrawals for its clients. The firm has taken the step after the sudden collapse of [FTX](/news/article/ftx-vs-binance-liquidate-funds) that affected the entire market. 

Regarding this issue, the firm has put out a statement on Twitter to give clarity to its customers. It has announced that "we aren't able to operate business as usual".

The cryptocurrency lender has cited a need for more clarity by FTX.com, FTX US, and Alameda on this issue. It has further notified that it has to pause withdrawals until these platforms provide more clarity. Moreover, it has requested its clients not to deposit funds in its interest accounts and wallets.

![Picture1.png](https://s3.eu-west-2.amazonaws.com/prod-monitalks-media/Picture1_938e08c10e.png)

## Earlier statement of BlockFi’s founder and COO

Paradoxically, this statement came just a few days after the COO and founder of BlockFi gave assurances about its operationality. On 8 November, Flori Marquez posted a long [thread](https://twitter.com/FounderFlori/status/1590030309076058112) to assure the clients that it was completely operational.

Marquez’s statement for the market downturn was that BlockFi could handle such situations. Moreover, he mentioned that the company runs independently and will remain the same till July 2023. 

Furthermore, he maintained that the company has access to 400 million USD through a line of credit from FTXUS. He also assured customers that the business was processing all client withdrawals in accordance with the Terms of Service.

However, today's announcement has refuted all these assurances. Clients cannot withdraw funds from their BlockFi wallets for an unknown period.  

## What happened to Sam Bankman-Fried’s exchange?

Sam Bankman-Fried has recently lost over [$14.6 billion](/news/article/sam-bankman-fried-lost-billions), which has removed him from Bloomberg’s list of billionaires. The reason for this is his company’s potential insolvency. Meanwhile, there’s also no lack of certainty whether Changpeng Zhao, [Binance’s](/news/article/guide-to-binance-uk) CEO, will assist the firm or not. 

Earlier, the FTT token also crashed, and Zhao announced to sell off all of its FTT holdings. Currently, both firms are in a clash, which could be one of the reasons the crypto market is tumbling.



FTX collapse prompts BlockFi to suspend withdrawals

The FTX exchange is being investigated for mishandling consumer funds and violating securities regulations. Regulatory investigations were among the primary reasons Binance decided not to acquire the firm.

## FTX exchange agreed to sell to Binance

After undergoing the cryptocurrency equivalent of a bank run, the [crypto business](https://fortune.com/crypto/2022/11/10/ftx-sam-bankman-fried-doj-sec-examining-source-says/) decided earlier this week to sell itself to a larger rival, Binance. Customers abandoned the exchange after getting worried about their capital.

## Why is SEC investigating the FTX exchange?

The [cryptocurrency market](https://www.reuters.com/technology/us-probes-ftx-over-handling-client-funds-bloomberg-news-2022-11-09/) has been volatile, with worries over the company's financial stability leading to $6 billion in withdrawals in the 72 hours following Tuesday morning. Binance later announced a [non-binding deal](https://www.reuters.com/markets/currencies/cryptocurrencies-slide-concerns-over-ftx-exchange-rattle-markets-2022-11-08/) to purchase FTX's non-US business to address a "liquidity constraint" at the rival exchange.

According to the source, the SEC is also looking into the business's ties with its US equivalent FTX US and Chief Executive Officer Sam Bankman-Fried's trading firm. The SEC does not want to speak on the existence or nonexistence of a prospective probe, said an SEC representative. A CFTC spokeswoman declined to comment as well.

The crypto community's and securities authorities' inquiry into [Bankman-Fried](/news/article/sam-bankman-fried-lost-billions) and his crypto company are centred on the potential that the firm utilised client deposits to support bets at Bankman-hedge Fried's fund, Alameda Research. Brokers in conventional markets are supposed to keep customer cash apart from other firm assets. Regulators can punish violations. 

An individual acquainted with the [FTX and Binance](/news/article/ftx-vs-binance-liquidate-funds) transactions described them as a "black hole" in which it was hard to distinguish between assets and liabilities. This individual said Bankman-Fried committed the "ultimate sin" by using custodial assets to support Alameda Research.

## Gensler's view on FTX exchange

Under Democratic leadership, the SEC has increased its examination of the cryptocurrency industry. Chair Gary Gensler has already expressed concerns about whether crypto platforms effectively separate funds and if their market-making operations are trading against their clients.

Earlier this year, a cryptocurrency start-up BlockFi Inc subsidiary [agreed to pay](https://cointelegraph.com/news/blockfi-limits-platform-activity-including-a-halt-on-client-withdrawals) a record penalty to resolve allegations connected to its retail lending product. Other organisations, like FTX, enable users to "stake" certain cryptocurrency tokens in exchange for a return.



FTX Exchange Under Investigation

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