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

Financial Action Task Force ([FATF](https://www.fatf-gafi.org/)) is a global financial policy-making body founded to combat money laundering and terrorism financing.

It provides guidelines for anti-money laundering ([AML](/news/article/crypto-aml)) and counter-terrorist financing (CTF) laws. In 2014, it expanded its mandate to digital assets, too. It was to prevent the misuse of funds for illegal activities.

Now, to ensure the FATF [crypto regulations](/news/tag/regulation), the organisation is planning to grey list the countries that fail to comply with its laws. According to an [Al Jazeera report,](https://www.aljazeera.com/economy/2022/11/7/countries-to-face-grey-list-for-shunning-crypto-guidelines) the financial watchdog will conduct annual surveys for each country’s performance. It will examine the countries’ measures to ensure FATF crypto regulations.  

## Annual reviews for FATF crypto laws compliance

The organisation has opted for annual reviewing instead of evaluations on 5-year cycles. This move reduces the time window for countries to impose terrorist financing and anti-money laundering regulations. Moreover, there will be the added pressure of greylisting. It will force them to bring virtual asset service providers and users within the country under regulations. 

The automatic greylisting of countries may affect their overall ratings. This may also result in being blacklisted by the organisation if no significant changes are evident in the country. 

## Response from the crypto industry

The industry leaders have responded to this move from the financial watchdog. They may reveal a plan of action in the Summit of G20 Leaders, which is scheduled this month. It is likely to highlight the difficulties cryptocurrency investors, exchanges, and other stakeholders face due to harsh regulatory measures.

Al Jazeera reported that Ron Tucker, the co-founder of the International Digital Asset Exchange Association (IDAXA), is of the view that it may cause trouble for the end user. The reason is that the greylisting fear will force “countries to unbank crypto exchanges.”

Ron Tucker also indicated risks to financial inclusion. He mentioned that the users of this asset class in developing countries would be affected. 
 



Defiance of FATF crypto laws may lead to countries greylisting

Santander said in an emailed statement on Friday that it will prohibit UK clients from transferring real-time payments to cryptocurrency exchanges beginning next year as part of steps to safeguard customers from fraudsters.

## When will the block begin?

The bank will implement a plan meaning all payments made to cryptocurrency exchanges via telephone banking and in-branch payments will be blocked, as well as internet and mobile banking, at an unspecified point in 2023.

The bank will follow in the footsteps of other UK retail banks in restricting client transfers to cryptocurrency exchanges. For transfers to crypto exchanges via mobile and online banking, its users will face restrictions of 1,000 pounds ($1,123) per transaction and 3,000 pounds overall in any rolling 30-day period. Last year, the [Natwest Group](https://www.reuters.com/technology/natwest-caps-transfers-crypto-exchanges-including-binance-over-fraud-concerns-2021-06-29/) in the United Kingdom set a daily limit for consumers to transmit to bitcoin exchanges. 

Customers will still be able to receive crypto [exchange](/news/article/best-exchanges-for-crypto-uk) payments into their accounts. [According to a note](https://www.santander.co.uk/personal/support/fraud-and-security/cryptocurrency) on the bank's website, there has been a significant increase in the number of UK clients who have become victims of cryptocurrency fraud in recent months. Global regulators have warned of the risks of scams and fraud in the primarily unregulated realm of cryptocurrency trading.

A spokeswoman for Santander stated that securing our clients from cryptocurrency fraud is a primary concern. "We want to further safeguard clients by barring all faster payments we find from Santander accounts to cryptocurrency exchanges - this will come into play in 2023".

## Faster Payments in the UK that Santander News refers to

Faster Payments is the infrastructure that enables real-time bank transactions for most UK bank accounts. Pay UK, which owns the respective company, stated in an email that it is working with authorities and the [payments](/news/article/russia-approves-cross-border-crypto) sector to create and implement more robust protection for fraud victims. 

Santander said it would continue to prohibit all payments to the cryptocurrency exchange Binance, a policy implemented in July 2021 in response to a warning from the UK's financial authority regarding the exchange. Binance did not reply immediately to a request for comment.




Santander UK news - Crypto transfers blocked

Is crypto legal in Hong Kong? It looks like it will be soon.

Hong Kong is taking steps to reclaim its position as a worldwide cryptocurrency hub. It intends to achieve this by launching several legal initiatives related to the crypto industry.

The Chinese city is willing to differentiate its crypto regulation approach from the crypto ban in mainland China.

Years of political upheaval and Covid restrictions prompted a talent departure from Hong Kong, undermining the city's claim to be Asia's financial hub. Officials are now attempting to repair some of the damage by luring businesses back, though how successful they will be remains to be seen.

## Crypto legalisation in Hong Kong

Hong Kong intends to legalise retail cryptocurrency trading to become a crypto hub.

The government unveiled a master plan to become a leading Asian crypto hub with legalised retail trading and digital-asset exchange-traded funds to reestablish the city's credentials as a financial centre.

According to a government statement issued on Monday, a consultation will begin on how the retail sector "may be given a suitable degree of access" to tokens. The city has invited global crypto exchanges to explore opportunities.

The Securities and Futures Commission detailed criteria for authorising crypto ETFs for the first time, which would initially only allow investment in Bitcoin and Ether traded on CME Group Inc. exchanges. The permitted futures portfolios could grow over time, according to the regulator.

According to SFC Deputy Chief Executive Julia Leung, asset managers and banks can apply to roll out such ETFs right away. She added that retail customers would be able to purchase the products.

In a policy paper, Hong Kong stated that it would be cautious about the risks to retail investors, improve education, and ensure the proper [regulatory](/news/article/uk-crypto-exchange) framework is in place.

The government also stated on Monday that it is willing to review property rights for tokenised assets and the legality of smart contracts.

The Hong Kong Special Administrative Region's government announced a bill suggesting creating a [regulatory framework](/news/article/g7-crypto-2022) for companies that offer virtual asset services. City authorities want to make Hong Kong an "international virtual assets centre" by embracing new technologies like non-fungible tokens and the Metaverse.

## Hong Kong crypto adoption 

Reports claim that Hong Kong has so far been successful in promoting the adoption of cryptocurrencies. In [a study](https://forexsuggest.com/worldwide-crypto-readiness-report/) by Forex Suggest released in July 2022, the city was ranked the best-prepared country for widespread crypto adoption, taking into account several factors, including crypto ATM installations, pro-[crypto regulations](/news/article/uk-crypto-regulation-eu), and start-up culture.


Is Crypto Legal in Hong Kong?

In the latest [SEC vs Ripple](/news/article/xrp-court-case-update) news, the Blockchain Association has come out in favour of Ripple Labs as it continues its legal battle with the Securities and Exchange Commission. The US crypto advocacy group argues that the case is critical to the future of the crypto sector.

## SEC vs Ripple - Basis of Case

In a 28 October article, the advocacy organization said it would "stand" with the American crypto economy by filing a legal brief in the SEC enforcement case against Ripple. 

The SEC said [nearly two years ago](https://www.sec.gov/news/press-release/2020-338) that it would sue Ripple, former CEO Christian Larsen, and current CEO Brad Garlinghouse for allegedly generating $1.3 billion through unregistered securities transactions using XRP. 

This case is just one in a long series of SEC efforts to regulate through enforcement," the organisation stated, highlighting its efforts to entrench and legitimise its broad interpretation of the Howey test.

The [Howey Test](https://www.forbes.com/sites/roslynlayton/2022/10/30/crypto-law-experts-suggest-sec-likely-to-lose-key-case-and-discredit-howey-test/) decides what qualifies as an investment contract and hence what is subject to US securities laws. 

## Why is Blockchain Association involved in SEC vs Ripple?

The Blockchain Association explained in its brief why it believes the SEC and Chairman Gary Gensler's views on securities rules might have disastrous implications for the crypto sector. 

It says that [blockchain technologies](/news/article/moonriver-staking) have several applications in the cryptocurrency business; tokens may be used to pay for products and services, transfer intellectual property rights, maintain inventories, and serve a specific role in a particular blockchain project. 

Applying securities rules to such tokens, whether or not via the lens of the Howey test, would severely limit their ability to function. 

The group further alleges that the regulatory body is ignoring clear Supreme Court and Second Circuit decisions establishing that transactions offshore are outside its authority.

## Blockchain Association hopes in SEC vs Ripple case

According to the Blockchain Association, the lawsuit allows the industry to push back against the "SEC's [regulation](/news/article/uk-crypto-tax-regulations) by enforcement agenda" and perhaps open the way to upgraded industry standards.

SEC vs Ripple News: The Latest

A [press release](https://www.gov.uk/government/news/cryptocurrency-trading-firm-shut-down-after-scamming-investors) issued by UK authorities has confirmed that cryptocurrency trading firm PGI Global UK has been shut down by the High Court.

The announcement from the UK Government was published yesterday (27 October). It was released by The Insolvency Agency, which is an executive agency sponsored by the Department for Business, Energy, and Industrial Strategy.

## PGI Global promised 200% returns

Between July 2020 and February 2021, the UK-based business gathered around £612,000, or $710,000, from potential investors. It told these investors that their investments in the firm would provide a 200% return. When it failed to keep its commitment, it forbade its investors from withdrawing their money.

Investigations discovered that the business utilised three accounts to collect the payments. As a result, PGI had allegedly diverted about £200,000 by paying no less than £195,000 to personal accounts and £10,000 to a luxury department shop.

## Director fails to comply

According to the Court, Ramil Ventura Palafox, the company's only director, refused to participate in the [inquiry](/news/article/token-sniffer-threats) into the charges. 
Furthermore, Insolvency Service Chief Investigator Mark George emphasises that limited liability safeguards need compliance with the Companies Act by both companies and individuals. 

He adds that this case demonstrates that if we have legitimate concerns about a firm's trading practices, the court will take a poor view of any failure to cooperate with a statutory investigation and will wind up with the company in the public interest. 

## Background

PGI UK is a subsidiary of Praetorian Group International Trading, which is in the United States. After obtaining a seizure warrant from the US District [Court](/news/article/xrp-court-case-update) for the Eastern side of Virginia, the US Department of Justice closed the corporation.

According to a Chainalysis [analysis](https://blog.chainalysis.com/reports/2022-crypto-crime-report-introduction/), cryptocurrency-related crime hit an all-time high in 2021, with illegitimate addresses collecting $14 billion, up from $7.8 billion in 2020. In contrast, according to another Intelligent CIO [analysis](https://www.intelligentcio.com/me/2022/08/22/crypto-criminal-activity-has-fallen-in-2022-with-illicit-cryptocurrency-volumes-down-15-yoy/), illicit cryptocurrency volumes fell 15% year over year in 2022, owing to a decline in crypto-criminal activities.



PGI Global Closed by UK High Court

Ruja Ignatova, aka Cryptoqueen, the founder of OneCoin, has been on the run since 2017. She is allegedly involved in a multibillion-dollar [Ponzi scheme](/news/article/crypto-hacks-peaking-october).

Now, three of her associates have been presented to the German court. The charges against them include money laundering, fraud, and embezzlement.

On 18 October, a lawyer from Munich and a couple who allegedly worked for Cryptoqueen appeared in court. [Reportedly](https://www.bloomberg.com/news/articles/2022-10-18/onecoin-s-cryptoqueen-associates-face-german-fraud-trial#xj4y7vzkg), the lawyer helped Ignatova in purchasing two apartments in London. For this, it is claimed, he transferred $19.7 million (€20 million) from the Cayman Islands.

The couple was allegedly involved in payment handling for [OneCoin](https://www.investopedia.com/terms/o/onecoin.asp). Within a year, they are said to have dealt with $315.4 million (€320 million).

## Charges of $4 billion against Cryptoqueen’s OneCoin

Ruja Ignatova founded the OneCoin platform in 2014. She falsely claimed that it is a cryptocurrency and trade platform. However, after the US’s Federal Bureau of Investigation ([FBI](https://www.fbi.gov/)) investigated, it turned out to be a multi-level marketing [Ponzi scheme](/news/tag/scam). 

The platform allured investors through false claims. It claimed to run a token mining program, but in truth, there was not any. As per the investigation by the FBI, Cryptoqueen's company scammed more than three million investors. The total amount fraudulently obtained is roughly $4 billion.

Ruja Ignatova disappeared in 2017. Reportedly, she was last seen in Athens, Greece. The FBI also added her to the top ten most wanted criminals list. The bureau also announced a $100,000 reward for anyone who could share information about her whereabouts.

The OneCoin company also allegedly bribed the presidents of Bulgaria and Serbia. An economist, Angelina Lazar, claimed this in an [interview](https://cointelegraph.com/news/angelina-lazar-presidents-of-serbia-bulgaria-took-bribes-from-onecoin-my-war-against-onecoin-part-2). 

Previously, some other actors who were part of the company also faced charges. Christopher Hamilton was one of them. He faced [money laundering](/news/article/crypto-aml) charges involving around $105 million in embezzlement. 

Ruja’s brother, Konstantin Ignatov, was also accused of money laundering and pleaded guilty in 2019.



cryptoqueen ruja ignatova and crypto fraud

Cryptoqueen Associates Face Fraud Trial

South Africa's crypto regulation is being redefined as authorities recognise cryptocurrencies as financial products. It will likely include all digital tokens and assets in the country's financial laws. This move is a long-awaited step towards the complete [regularisation](/news/article/crypto-regulations) of the cryptocurrency market in the country.

On Wednesday, October 19, the South African crypto regulation authority, the FSCA (Financial Sector Conduct Authority), notified the public about the [update](https://www.greengazette.co.za/notices/financial-sector-conduct-authority-finansi%C3%ABle-sektor-gedragsowerheid-1350-financial-advisory-and-intermediary-services-act-37-2002-declaration-of-a-crypto-asset-as-a-financial_20221019-GGN-47334-00000.pdf). It briefed about the amendments in the Financial Advisory and Financial Intermediary Services Act (FAIS) of 2002.

## A new definition of cryptocurrencies

The notification declared that the cryptocurrencies are "a digital representation of value". Moreover, the new regulation defined them as values that can be traded, transferred, and reserved on a distributed ledger. It also maintained that these are to be recognised as "financial products".

Therefore, all the laws that apply to traditional financial products will also apply to cryptocurrencies. The update in the act is likely to boost the regulatory efforts in the country.

## Earlier indications for South Africa crypto regulation upgrade

Earlier this year, in July, the regulatory body and the South African Reserve Bank (SARB) indicated upgrades in monetary laws. It specified that BTC and altcoins will be defined as assets. 

However, a [draft](/news/article/south-africa-crypto-regulation) for this declaration was published back in November 2020. After that, in mid-2021, The Intergovernmental Fintech Working Group (IFWG) proposed a complete roadmap in a [position paper on crypto assets](https://www.resbank.co.za/en/home/publications/publication-detail-pages/media-releases/2021/IFWG-CAR-Working-Group-position-paper-on-crypto-assets). 

It discussed in detail the anti-money laundering ([AML](/news/article/crypto-aml)) laws and the KYC (know your customer) requirements for service providers. Also, among the digital asset community in RSA, there were debates about their inclusion in monetary laws.

Thus, the step was highly anticipated among virtual asset holders and issuers. And now, they have finally made the reforms in the laws with the FAIS Act 2022. It will guide them on how the market will shape RSA in the coming years. 

Besides, RSA is a growing country for cryptocurrencies; many firms are providing related services. With the introduction of this act, authorities will be able to manage them efficiently.


South Africa Crypto Regulation Update

In the first week of GameStop’s recently launched NFT marketplace, NiFTy Arcade was the most popular collection. However, a piracy issue occurred.

NiFTy Arcade’s minter was suspended for selling unoriginal and unlicensed NFTs of indie games on the GameStop NFTs marketplace.

The original NFT creator of the controversial game claimed he didn’t give anyone permission to sell his work.

[Ars Technica](https://arstechnica.com/gaming/2022/08/indie-devs-outraged-by-unlicensed-game-sales-on-gamestops-nft-market/) first reported that NiFTy Arcade's "interactive NFTs" were being minted and sold without permission, and there was no “financial arrangement for the creators to share crypto profits."

Upon looking into the matter, [Gamestop NFT](https://nft.gamestop.com/) stated that the pirate behind  NiFTy Arcade had been suspended.

However, the pirate is still holding on to the cryptocurrencies made illegally before being suspended on the GameStop NFT platform, Ars reported.

The creator of NiFTy Arcade (the game comprising pirated NFTs) identified as Nathan Ello. They clearly stated his aim to be a creator of games that [NFT marketplace](/news/article/nft-art-marketplaces) users can benefit from. "The games I am creating are not meant to benefit a certain group of people either by purchasing at no fee from their wallet or GameStop profile without the need of using my profile," they said.

Two games - Galactic wars and Worm Nom Nom - had questionable sources. But, according to Ello, Galatic Wars had an "unlicensed" tag, which proved false.

Ars discovered that Worm Nom's license prohibited commercial use on further investigation.

Ello subsequently confirmed that he "did not seek permission from the original creators before selling them."

Ello confirmed that his account on the GameStop NFT storefront has been suspended "until [the IP issue] is resolved."  Gamestop is yet to respond to comments on the piracy issue.

## NFTs “a solution to piracy issues?”

One of the problems NFT is meant to solve is piracy. Non-fungible tokens are intended to have a sole proprietorship with accurately traceable origins.

However, this recent event reinforced that piracy and plagiarism are prevalent in the current NFT ecosystem. Unfortunately, the laws governing intellectual property and copyright remain unclear to buyers.

If a piracy issue like Ello’s could still occur in 2022, it makes one wonder if NFTs are the solution.

While piracy can be traced and promptly stopped, it's left to see if NFTs can take further steps - such that the issue doesn't occur in the first place. A case like this shows that more work is to be done, especially for platforms like GameStop.

## How can GameStop NFT prevent further issues?

Being a new NFT marketplace, it’s pertinent that GameStop invests heavily in due diligence. Measures should be put in place to check and confirm that NFTs minted on the marketplace are owned by the user uploading them.

Such holistic investment in due diligence will deepen creators’ and consumers’ trust in the platform.

GameStop must also do more to verify consumers or NFT collectors using the marketplace. For instance, a blue tick could help indicate verified projects. Doing this will go a long way to protect consumers from patronizing questionable creators on the platform.


GameStop NFT "Creator" Suspended

Fintech (financial technology) has created numerous opportunities for disruptive economic entrepreneurship. More companies in Singapore are looking to provide services for buying and selling digital payment tokens (such as cryptocurrency) or a platform for exchanging such digital payment tokens.

As a result, the Monetary Authority of Singapore (MAS) enacted the Payment Services Act (PSA) to accommodate and regulate such payment service transactions, requiring any business that intends to provide digital payment token services first to obtain the necessary licences.

Recently, the Singapore-based arm of the US cryptocurrency exchange [Coinbase received Singapore's MAS "in-principle approval"](https://www.coinbase.com/blog/singapore-ipa-announcement)to provide crypto services in the country.

![Coinbase.PNG](https://s3.eu-west-2.amazonaws.com/prod-monitalks-media/Coinbase_3caa112189.PNG)

Hassan Ahmed, CEO of Coinbase Singapore and the exchange's regional director for Southeast Asia, told in a statement that Singapore is a critical institutional market for the exchange in Asia because businesses there continue to show interest in crypto and digital advancements. 

According to Ahmed, the city-state also serves as Coinbase's Asia-Pacific tech hub, with an on-the-ground team of engineers in charge of the company's international expansion efforts and platform localisation.

With the new approval to offer Digital Payment Token services, Ahmed said [Coinbase](/news/article/blackrock-crypto) would seek to collaborate with regional platforms and expand its fiat capabilities. Coinbase was already offering services, including its institutional platform, under an exemption granted by MAS.

The exchange claims it has ongoing collaborations with regional Web3 organisations like the Singapore Fintech Association(SFA) and the Association of Crypto-Currency Enterprises and Start-ups (ACCESS).

## Other firms to qualify for in-principle approval

Under a new regime, approximately 180 crypto companies applied for a crypto payments licence with the Monetary Authority of Singapore in 2020. Following extensive due diligence, the country has granted 17 in-principle approvals and licences.

Among those who have received licences are Coinbase, [Crypto.com](/news/article/crypto.com-news-uk-approval), and DBS Vickers, the brokerage run by the country's largest bank DBS (DBSM.SI).
 



Coinbase gets Singapore in-principle approval for DPT license

[Celsius network](https://celsius.network/) was recently accused of withdrawing large sums of money before the bankruptcy filing. There is a development in the Celsius data breach, as the document containing its client information has been publicised. It confirms that the company’s executives cashed out around $17 million just before [filing for bankruptcy](/news/article/celsius-bankruptcy-protection). 

The [document](https://drive.google.com/drive/folders/1M2QNrghkgBg3T2ZkRVVD47QpjgR8r6HB) on the internet contains information about the crypto lender’s clients. There are details about the names, emails, and crypto assets that the clients own. Through this, anyone can verify how many assets their customers have with them.

## Crypto lender withdrew $17m before bankruptcy

The executive body of the [crypto asset](/news/article/celsius-crypto-news) lending company withdrew large sums before filing bankruptcy protection. Among them, former CSO Daniel Leon and former CEO Alex Mashinsky are the top names. They allegedly cashed out BTC, ETH, CEL, and USDC tokens from their accounts. 

This was before the company announced bankruptcy and suspended its customers’ withdrawal. Other than that, the document does not show other notable withdrawals. 

## Customer.io accused of Celsius data breach

Earlier, the crypto lending firm admitted to the [Celsius](/news/article/celsius-network) data breach. The bankrupt firm warned its clients that the breach occurred through a third-party platform. Allegedly, an individual from the email delivery service provider, [Customer.io](https://customer.io/), was responsible for the violation. However, initially, the company downplayed the risks of the breach and later warned its customers through email. 

In [response](https://customer.io/blog/update-to-compromised-email-addresses-incident/) to the incident, the third-party platform blamed an engineer in management who had authorised access. He compromised the client details by providing them to cybercriminals. 

The firm further maintained that it was an individual’s actions and that the firm itself is not responsible. Meanwhile, the same platform was also behind the compromised emails of the NFT marketplace, [OpenSea](https://opensea.io/).



Celsius data breach reveals exec’s withdrawing $17m

[Kim Kardashian has been fined $1.26 million](https://www.forbes.com/sites/qai/2022/10/03/kim-kardashian-fined-for-cryptocurrency-promotion-heres-what-it-means-for-crypto/?sh=d7cef2e39356) by the US Securities and Exchange Commission (SEC) for not disclosing that she received payment for an ad about crypto token EthereumMax on her social media accounts.

This might indicate that the SEC plans to impose more restrictions on the cryptocurrency industry.
Unexpectedly, Kim Kardashian was penalised by the SEC for allegedly participating in this cryptocurrency "pump and dump" scheme. 

## Kim Kardashian barred from endorsing cryptocurrencies for three years

This became a legal issue because the Kim Kardashian crypto ad was a planned marketing strategy. One more surprising factor is that the lengthy list of influencers endorsing cryptocurrencies has been condensed.

Since it may cause additional problems for other celebrities who have supported cryptocurrency or wish to do so in the future, this story has attracted much media attention.

The $1.26 million amount accounts for the $250,000 she received for the marketing and interest and a $1 million penalty. She also consented to refrain from promoting cryptocurrency assets for three years while helping with the current inquiry. 

The crypto industry is facing a strong bear market. There is a fear that we could see more legal disputes and litigation in the future, ultimately leading to more blood baths in the crypto space.

## A long list of celebrities has faced similar controversies

[Elon Musk has been sued for $258 billion](/news/article/elon-musk-dogecoin) over allegations that he created a pyramid scheme to market Dogecoin. Also, Floyd Mayweather Jr. and DJ Khaled have been charged with promoting initial coin offerings (ICOs) without letting their followers know they had been paid to do so.

## What does this controversy mean for the Bitcoin and crypto industry?

The SEC released a video advising the public to exercise caution when following investment advice from well-known people and social media influencers.

Other celebrities and influencers could also avoid advertising ICOs due to the Kim Kardashian crypto ad controversy, which could somewhat mean lower exposure to new coins.

However, this news doesn't mean anything to Bitcoin prices and other crypto coins. But we could soon see more [regulations from the SEC](/news/article/us-sec-regulation).


Kim Kardashian Crypto Ad Controversy

Cryptocurrencies have digitised a significant amount of global monetary flow in a matter of years. But unfortunately, this transition has also provided a medium for scammers. Many criminals take advantage of blockchains to launder money. Because of this reason, anti-money laundering (AML) laws have become more relevant today.

Investors are at more risk of fraud from Ponzi scheme-based projects than ever. That’s why introducing such laws in crypto has become crucial to keep investors and the overall industry safe. 

In this article, we will learn about the role of AML in crypto and why it has become necessary for the regulatory authorities.

## Understanding AML in crypto

Money laundering is defined as an illegal act of cleaning money that is obtained through illicit means. Fraudsters conceal their actual source of earnings and change it to a legal one to escape from laws. To impede such crimes, governments have AML laws.
 
AML for crypto is the set of similar regulations that applies to the traditional laundering of money. These help stop the fraudulent conversion of illegally gained digital assets into fiat currencies. 

In many countries where crypto is regulated, AML is supervised by financial crime authorities. For instance, in the United States, [FinCEN](https://www.fincen.gov/) handles AML. Likewise, in the United Kingdom, [FCA](https://www.fca.org.uk/) ensures accountability.

## How does AML work in crypto?

The Financial Action Task Force [(FATF)](https://www.fatf-gafi.org/) is a global organisation. It defines the rules each country has to follow to prevent the misuse of finances. In 2014, the organisation also incorporated virtual assets into its code. Following that, the financial authorities of many countries included it in their regulations. 

Authorities are working with virtual asset service providers (VASPs) to implement these laws. VASPs include cryptocurrency exchanges, NFT marketplaces, token issuers, and some DeFi firms. These are required to register themselves to the regulatory bodies. 

Furthermore, they must follow the know-your-customer (KYC) standard to get user information. This way, regulators can easily track suspicious transactions as they have access to necessary user information. 

## AML and KYC for crypto

The KYC procedure is one of the most critical parts of identifying illegal transfers. The decentralised distributed ledgers maintain transparency and traceability. That’s why they allow irregularities to be easily spotted. Once the authorities know the public wallet address, they can track down the person or entity behind it through blockchains. 

However, digital asset companies have a different KYC standard than traditional firms. Here, face and biometric verification are not required. Instead, you must provide your legal name, authentic address, and ID card. But, these standards differ from one service provider to another. The reason is that not all of them are regulated by one authority.

## AML Consulting services for crypto 

In the digital assets market, anti-money laundering (AML) measures have become so necessary that now there are consultants in this domain. Various firms have emerged that provide P2P services for compliance with laws. These firms operate to ensure compliance with AML and protection against terrorist financing regulations. 

One leading firm among them is the [Digital Officer](https://digiofficer.com/about-us), a team of specialists in the AML domain. The firm can protect you against scams and assist in complying with the set code by the local authorities and FATF. Their services cater for both P2P and B2B, such as VASPs. 

## Why does AML crypto matter?

Cryptocurrencies have reshaped the entire world economy. But, it has also posed several challenges for financial regulators. Since the dawn of blockchain technology, criminals have relied on it for their illegal activities. Financing terrorism, running Ponzi schemes, and other [scams](/news/tag/scam) have become prevalent. Definitive measures became mandatory to stop the crime. And so, AML regulations took shape. 

Now, the financial authorities in many countries have [crypto regulations](/news/article/crypto-regulations) for penalising criminals. By regulating VASPs, they get information about the investors. Then track the suspicious transactions and withdrawals to prevent crimes. 

This has opened up a new area of the market for compliance consulting business. Now many service providers specialise in anti-money laundering laws. They assist clients in complying with local and international laws and protect their funds from scammers. Make sure you're covered with crypto compliance with firms such as Digital Officer.



Crypto AML & its importance in the industry

On Thursday, the UK government released [an Economic crime and Corporate Transparency bill](https://www.gov.uk/government/news/new-crackdown-on-fraud-and-money-laundering-to-protect-uk-economy) to tackle illicit finance funnelled through the crypto ecosystem. The UK crypto bill aims to increase law enforcement's ability to target [cryptocurrencies](/articles/learn-moni/cryptocurrency-trading-strategies) used for unlawful activities to target money laundering and fraud.

As of now, the bill is scheduled to have its second hearing on Oct 13th.

##  UK crypto bill purpose

The [UK crypto](/news/article/crypto-price-uk) bill released in Parliament on Thursday strives to keep "dirty money" out of the nation. The proposed legislation included measures to reduce "red tape around confidentiality liability" and give law enforcement the power "to compel businesses to hand over information related to money laundering or terrorist financing," including crypto.

The bill specifically targets those involved in illegal activities like money laundering, drug trafficking, and cybercrime, in addition to [cryptocurrency](/articles/learn-moni/cryptocurrency-prices), which acts as a critical enabler. This bill will help the relevant authorities in their quest for cryptocurrencies that have been used fraudulently.

The bill mandates the new upcoming companies in the UK to verify their identities. This includes cross-checking data with public and private partners and listing suspicious activity to security and law enforcement agencies.

The bill is meant to build on the previous Economic Crime (Transparency and Enforcement) Act, which helped regulators impose sanctions on Russia and freeze relevant assets in the country. Regulators are concerned that some Russians use cryptocurrency to circumvent sanctions imposed by Ukraine's invasion.

## UK government active with crypto activities

According to [reports](https://www.policeprofessional.com/news/mps-makes-record-breaking-180m-cryptocurrency-seizure/), in July 2021, the Met police reportedly seized 180 million pounds in a money laundering investigation. This incident took place just after a month when Met police seized 114 million pounds in cryptocurrency linked to international money laundering.

Cryptocurrency has been a vital ground for criminals to execute their illicit activities. But, with new reforms and bills, the UK government is preparing to tackle dirty money and target unlawful crypto activities in the nation.



UK released a crypto bill to tackle illegal finance

It might seem we’ve not heard the last from the Do Kwon Terra debacle, as Interpol has issued a red notice for the arrest of the embattled founder of Terraform labs.

The South Korean security authority has been investigating the case; however, the embattled Terra founder has not been cooperating and is believed to be on the run.

With Interpol's red notice, security agencies worldwide are requested to start a search and arrest him.

## Do Kwon's statement on the Terra collapse investigation

Do Kwon, in a series of tweets via his official Twitter handle ([@stablekwon](https://twitter.com/stablekwon/status/1571197156907679745)), has denied not cooperating with the security agencies. He further claimed he’s not on the run as speculated in the media.

[Do Kwon's Terra labs collapsed earlier this year](/news/article/terra-luna-collapse), which led to the loss of investors' money estimated to be around $40 billion.

Many investors have lost their money through investment in LUNA and can’t wait to get clarity on the investigation presently being carried out. This case is one that the whole crypto community is observing with keen interest.

## Legal Issues in the cryptocurrency industry

There seem to be a lot of legal issues in the cryptocurrency industry, and Do Kwon Terra issues is not the only one taking centre stage.

Ripple labs, the parent company of Ripple, is presently embroiled in [legal issues with SEC](/news/article/xrp-court-case-update) in what seems to be the longest court case in the cryptocurrency industry's history.

A [Dogecoin](/coins/doge) investor also [sued Tesla and SpaceX CEO Elon Musk](https://news.sky.com/story/elon-musk-sued-for-258bn-over-claims-he-ran-a-pyramid-scheme-to-promote-dogecoin-12635334) for $258 billion (€245 billion) for allegedly "running a pyramid scheme to support the cryptocurrency".

In an accusation filed in Manhattan federal court, plaintiff Keith Johnson accused Musk, the electric vehicle maker and the space tourism company CEO of racketeering by touting Dogecoin and driving its price up, only to let it tumble.

Key Tech figures like Warren Buffet and Bill gates have earlier questioned the worth of Bitcoin. The major criticism of Bill Gates is the anonymity and irreversibility of transactions, while Buffet doesn’t see it as a means of utility.



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