SEC Obtains Restraining Order Against Utah Firm Accused of Defrauding Investors in $49M Crypto Scheme
The SEC has obtained a temporary restraining order against a Utah-based company called "DEBT Box" and its principals, accusing them of defrauding investors of at least $49 million in a crypto scheme. The Anderson brothers and 15 others raised millions in bitcoin and ether from hundreds of US investors by selling unregistered securities called "node licenses" that they claimed would generate crypto asset tokens through mining activity. However, the funds were instead used for personal expenses such as luxury cars and vacations. The SEC has also obtained a temporary asset freeze and other emergency relief, and has previously cracked down on the crypto industry by labeling some cryptocurrencies as securities.
SEC receives diverse comments on proposed spot bitcoin ETFs
The SEC has received letters from a diverse group of individuals, including a musician, former cricket player, city planner, mechanic, and physicist, regarding eight applications for spot bitcoin ETFs currently under review. The regulator has an initial 45-day period to rule on the proposals, although it can delay that period as it did for an earlier request. While the excitement over the possibility of a spot fund triggered a rally in the price of bitcoin, SEC Chair Gary Gensler has repeated concerns about fraud and manipulation in the sector. The comment period for the proposed funds ends next week, with the SEC accepting letters for the final funds through Aug. 11.
US DoJ Concerned About Potential Bank Run if Fraud Charges Brought Against Binance
The US Department of Justice is considering bringing fraud charges against Binance, but is concerned about the potential impact on the exchange's customers and the wider crypto market. Prosecutors are exploring alternative measures, such as deferred agreements and fines, to hold Binance accountable for alleged violations without risking consumer funds. This comes after the SEC accused Binance of violating various laws, including mishandling customer funds and faking trading volume. Binance has denied the allegations and accused regulators of issuing false and misleading statements.
TradFi Giant Direxion Files for Bitcoin and Ether Futures ETF
ETF issuer Direxion has filed for a Bitcoin and Ether futures ETF, joining a crowded field of companies hoping to launch similar crypto-related trading products in the US. According to a filing with the Securities and Exchange Commission (SEC), the Direxion Bitcoin Ether Strategy ETF would invest in bitcoin and ether futures contracts, subject to regulatory approval.
Founder of failed stablecoin Terra faces charges of forging official documents, as judge rejects crypto defense theory
Do Kwon, the creator of the failed Terra stablecoin, is facing charges of forging official documents in Montenegro. U.S. District Judge Jed Rakoff has rejected a crypto defense theory that could have shut down the SEC's enforcement campaign. Rakoff refused to dismiss the SEC's securities fraud case against Terraform Labs and its founder Do Kwon, stating that the government adequately alleged that the defendants sold unregistered digital assets and deceived investors about the stability of the TerraUSD and Luna algorithmic stablecoins. Rakoff's ruling is the first to address the issue of the "major questions" doctrine not applying to the cryptocurrency industry, and future judges will have to consider his concern that allowing crypto to invoke the doctrine would disrupt routine economic regulation.
Founder of HEX, PulseChain, and PulseX Projects Hit with SEC Fraud Charges
Richard Heart, the founder and promoter of Hex, PulseChain, and PulseX projects, has been charged by the SEC for allegedly "recycling" investor funds during the initial presale of HEX. This helped him deceive investors about the success of the sale and attract more victims. The SEC also accuses Hex of having a fake HEX "staking" program, which was primarily intended to manipulate the token's price higher. The flawed financial models of HEX and Terra relied on leverage, lockups, and cults of personality, and both were later accused of being explicit frauds. As a result of these charges, the tokens associated with these projects have dropped by 50% or more.
US House Oversight Committee Probes SEC's Potential Violation of Intergovernmental Personnel Act
The US Securities and Exchange Commission (SEC) is being investigated by a key oversight committee of the US House of Representatives for potential violation of the Intergovernmental Personnel Act (IPA), which allows federal regulatory agencies to temporarily hire workers from non-federal government departments. The SEC's hirings of division heads in long-term positions appear to undermine the IPA, according to the Committee Chair James Comer. The SEC's use of the IPA is being scrutinized by the Committee on Oversight and Accountability of the House of Representatives, which has asked the SEC to submit related documents. The SEC's Crypto Assets and Cyber Unit, responsible for protecting investors in crypto markets and from cyber-related threats, has not been mentioned in the investigation.
Galaxy Digital's Nasdaq Listing Plan May Face Further Delays Due to Class Action Lawsuit and SEC Scrutiny
Galaxy Digital's plans to gain a Nasdaq listing may be further delayed due to a pending class action lawsuit in Canada related to the failed luna cryptocurrency. The lawsuit alleges that Galaxy failed to comply with reporting requirements on its holdings of luna and that CEO Mike Novogratz made misrepresentations regarding the company’s exposure to the cryptocurrency prior to its collapse in May 2022. Galaxy plans to fight the charges but may be required to disclose the suit to the market if it is certified as a class action, which could have repercussions for its listing plans. The SEC may closely scrutinize all crypto-related suits, and Galaxy's complex business may face scrutiny even without complications from the lawsuit.
US SEC Cracks Down On Richard Heart's Alleged $1 Billion Crypto Fraud Scheme
The US Securities and Exchange Commission (SEC) has filed a lawsuit against Richard Schueler, also known as Richard Heart, and his three crypto-asset offerings for conducting unregistered offerings of crypto asset securities that raised more than $1 billion in crypto assets from investors. The SEC alleges that Schueler conducted unregistered crypto securities sales and orchestrated a multimillion-dollar fraud scheme, misappropriating investor funds for a luxurious lifestyle and extravagant purchases. The lawsuit accuses Schueler of marketing Hex tokens as an Ethereum-based "Certificate of Deposit" with the promise of a 38% annual return, but the Commission contends that this promise was nothing more than a smokescreen for an elaborate scheme designed to deceive investors. The SEC has demanded a jury trial to hold Schueler accountable for the alleged securities fraud, seeking a permanent ban on Schueler and his projects from selling crypto asset securities, recouping ill-gotten gains, securing prejudgment interest, and imposing civil penalties. It is important to remember that at this stage, the allegations against Schueler have not been proven, and there is no concrete evidence yet to definitively label him as a criminal.
GameStop to Drop Crypto Wallets, Cites ‘Regulatory Uncertainty’
GameStop Corp. is ending its support for cryptocurrency wallets due to "regulatory uncertainty." The company will remove its iOS and Chrome Extension wallets from the market on November 1. This move indicates that GameStop is stepping back from its crypto strategy, which was part of Chairman Ryan Cohen's efforts to expand digital services and revive the struggling video-game retailer. GameStop launched an NFT marketplace a year ago but has not mentioned NFTs or crypto in recent investor calls. Regulatory agencies such as the SEC have been increasing their enforcement efforts in the crypto space, causing companies like GameStop to reevaluate their involvement.
