NEO aims to build a comprehensive "smart economy" by incorporating digital assets, digital identities, and smart contracts. 

Katherine Ross

The SEC’s lawsuit against Binance <a href="https://blockworks.co/news/sec-allegations-against-binance">makes a number of allegations against the world’s largest crypto exchange</a> as well as the other defendants – which include CEO Changpeng Zhao.&nbsp;



In the lawsuit, the <a href="https://blockworks.co/tag/SEC">SEC</a> cites internal communications, including emails and various quotes from <a href="https://blockworks.co/tag/binance">Binance</a> employees.



The SEC is <a href="https://blockworks.co/news/binance-changpeng-zhao-face-sec-charges">claiming that Binance, alongside BAM Trading and CZ</a>, violated securities laws.&nbsp;



<a href="https://blockworks.co/news/binance-pushes-back-sec-lawsuit">Binance, however, disputes the claims</a> calling them both “disheartening” and “disappointing.”



In a common US regulatory practice, the SEC in its suit refers to employees of Binance and its affiliates by their job titles — without identifying them.



Here’s what the SEC is claiming that Binance employees have said in relation to its claims.



<h2>Changpeng Zhao&nbsp;</h2>



Zhao is named throughout the suit — both in quotes, and because he’s a defendant.



He allegedly pushed Binance to “encourage customers to circumvent Binance’s geographic blocking of U.S.-based IP addresses by using a VPN service to conceal their U.S. location.” And the chief communications officer drafted a “VIP handling document” which “instructed Binance employees to make sure the U.S. customers opened new accounts ‘with no US documents allowed’ and to inform the customer ‘to keep this confidential.’”&nbsp;



“We don’t want to lose all the VIPs which actually contribute to quite a large number of volume. So ideally we would help them facilitate registering companies or moving the trading volume offshore in some way—in a way that we can accept without them being labeled completely U.S. to us,” Zhao allegedly said in June 2019 during a “weekly meeting of senior Binance officials.”



In a meeting a few days later, Zhao said, “We do need to let users know that they can change their KYC [know-your-customer information] on Binance.com and continue to use it. But the message, the message needs to be finessed very carefully because whatever we send will be public. We cannot be held accountable for it.”



“A few days later, Binance’s Chief Marketing Officer reported that the team had reached out to the top 22 U.S. VIP customers and that 19 had “already agreed to change KYC, or change their IP,” the lawsuit said in the sole mention of the CMO.



<h2>Binance’s CCO</h2>



One of the most quoted people in the 136-page lawsuit is a Binance CCO.



The quote that will probably become infamous is one from December 2018: “We are operating as a fking unlicensed securities exchange in the USA bro.”



But they also allegedly said that “we do not want [Binance].com to be regulated ever.” Going on to say, per a screenshot included in the suit, that Binance “created local entities to be registered with the regulators, and ringfence accordingly. So BAM, BAS, etc. These are entities that are regulated/licensed.”



In a communication from 2020, a screenshot shows a Binance CCO allegedly saying that “on the surface, we cannot be seen to have US users, but in reality, we should get them through other creative means.”



In relation to the alleged VIP handling, the CCO is quoted as saying, “[W]e ask them to onboard with US, and then if their volume is really very big … we will push hard on .com side to accept it on an exceptional basis … we always have a way for whales … either we do it, or [a competitor crypto trading platform] does it.”&nbsp;



The CCO allegedly went on to add, “CZ will definitely agree to this lol … I have been briefed by top management to always find a way to support biz.”



<h2>Binance CFO</h2>



A Binance chief financial officer allegedly told Zhao that the ‘first goal’ was “to protect [Binance].com from U.S. regulatory engagement.” To do so, he noted that Binance will need to launch a new US crypto asset platform, and that “the main goal for that one is to limit the loss of users from the U.S.”&nbsp;



The lawsuit also includes 2019 conversations between the CCO and the CFO over listing BNB on the Binance.US platform.



“In an internal chat in September 2019, the Binance CFO and the Binance CCO agreed that “CZ [wa]s willing to take the legal risk in listing BNB, if [they could] find a way to quantify it,” the lawsuit claims.&nbsp;



“Cutting US from .com already [cost] him an arm/leg, he’s not gonna hold back on getting that rev[enue] back somehow,” the CCO is quoted as saying in response.



In the event of either a Wells notice or subpoena — which both the CFO and the CCO allegedly acknowledged were possible following the SEC’s enforcement action against Kik Interactive — reportedly said that they would “start prepping everything” which included a “war chest.”



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Binance Executives Claimed to Operate as ‘Unlicensed Securities Exchange’: SEC Lawsuit

Ben Strack

Several miners reported higher bitcoin production in May as a result of higher transaction fees that have since returned to more normal levels.&nbsp;



The Bitcoin network has been very active over the past month due to a surge in Ordinals and BRC-20 activity, according to <a href="https://www.blockworksresearch.com/">Blockworks Research</a> Analyst <a href="https://twitter.com/0xpibblez?lang=en">Spencer Hughes</a>.&nbsp;



Ordinals, an NFT protocol that <a href="https://blockworks.co/news/cant-ignore-bitcoin-nfts">launched on Bitcoin mainnet</a> in January, contributed to <a href="https://blockworks.co/news/bitcoin-transactions-record-ordinals">bitcoin transaction increases</a> that started at the end of April.&nbsp;



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="2312" height="892" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/06/May-Block-Fees.jpg?w=1024&amp;h=1024" alt="" class="wp-image-57919" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/06/May-Block-Fees.jpg?w=2312 2312w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/May-Block-Fees.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/May-Block-Fees.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/May-Block-Fees.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/May-Block-Fees.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/May-Block-Fees.jpg?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/May-Block-Fees.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/May-Block-Fees.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/May-Block-Fees.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/May-Block-Fees.jpg?w=80 80w" sizes="(max-width: 2312px) 100vw, 2312px" /></figure>



“Speculators have been keen to mint any project that arises on Bitcoin and often set high transaction fees to prioritize their place in the mint process,” Hughes said. “As more centralized exchanges, such as Binance and OKX, add Ordinals support, it is possible that this trend is just warming up.”



Marathon Digital mined a record 1,245 bitcoins in May — up 77% month over month.



A “significant increase” in transaction fees accounted for roughly 11.8% of the total bitcoin the company earned last month, Marathon CEO Fred Thiel said in a statement.&nbsp;



“The emergence of Ordinals significantly increased transaction fees in May, which in some cases, were so high that they exceeded the <a href="https://argoblockchain.com/articles/explaining-the-bitcoin-block-reward">6.25 BTC block reward</a>,” he added. “While such abnormally high transaction fees are historically rare, we believe these events can serve as a positive sign for the future of mining economics.”



CleanSpark too saw a boost in the amount of bitcoin mined last month, as its output jumped from 524 in April to 609 in May. The company said Friday it surpassed $100 million in year-to-date revenue.



CleanSpark CEO Zach Bradford said transaction fees were elevated because of increased interest in Ordinals for about five days in May. The company’s daily bitcoin production nearly doubled from 18 BTC to 30 BTC at the peak of this spike, but have since normalized. 



Nishant Sharma, founder of bitcoin mining research and consulting firm BlocksBridge, told Blockworks: “Although the unusual on-chain acidity resulted only in a temporary surge in transaction fees, the event gave us a glimpse of the future when transaction fees form the major portion of rewards for miners.”&nbsp;



While higher transaction counts, block congestion and transaction urgency drove up fees paid to miners as high as 40% of total miner revenue in early May, the “speculative frenzy of ordinals/BRC-20 inscription” cooled off later in the month, Compass Point Research &amp; Trading Analysts Chase White and Joe Flynn wrote in a May 26 research note.



Miner fee revenue had dropped back down to about 7% of total miner revenue at that point, they added.&nbsp;



“But we view ordinals/inscriptions as a positive development that has the potential to address long-term security concerns as it relates to the security of the BTC network and the incentivization of BTC miners, post halving events,” White and Flynn wrote.&nbsp;



Riot Platforms produced 676 BTC in May, which was roughly 6% higher than its generation of 639 BTC in April.



Core Scientific, a crypto mining company that <a href="https://blockworks.co/news/bitcoin-miner-core-scientific-to-file-bankruptcy-stock-tanks-30">filed for bankruptcy</a> in December, self-mined 1,314 in May — up nearly 17% from April.&nbsp;&nbsp;



The two companies did not mention transaction fees in their monthly production reports. Spokesperson for the firms did not immediately return requests for comment.



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Higher Bitcoin Transaction Fees Spur Good Month for Miners

Casey Wagner

As the European Union was busy passing landmark policy to bring crypto markets under government regulation, some lawmakers in the United Kingdom are ramping up demands for urgent action.&nbsp;



When the EU moved forward with its Markets in Crypto Assets (<a href="https://blockworks.co/tag/mica">MiCA</a>) regulation, the UK only fell further behind, putting the country at risk of missing out on innovation and jeopardizing its chance at becoming a global leader in the space. 



“With the adoption of MiCA, the EU has solidified its position as a regulatory leader for years to come,” local crypto advocacy group Crypto UK said in April.&nbsp;



Some UK leaders are trying to start the conversation around digital asset regulation with the hopes of getting bills drafted and passed within the next two years.&nbsp;



The UK’s All Party Parliamentary Group for Crypto and Digital Assets released a report Monday calling for a crypto legislative package to pass immediately. The multiparty group is chaired by Scottish National Party member Lisa Cameron. 



Monday’s report sets a deadline of 2025 for crypto regulation in the UK and advocates for a “crypto tsar,” who will be responsible for coordinating efforts across regulatory groups.&nbsp;



The Scottish National Party has historically been on the forefront of crypto asset regulation advocacy, <a href="https://www.buzzfeed.com/jamieross/scotpounds#.roN74ooBZ">first suggesting</a> a type of central bank digital currency in 2015. Cameron herself is a self-titled crypto advocate, she said earlier this <a href="https://cointelegraph.com/news/british-mp-lisa-cameron-is-not-invested-personally-in-crypto-but-advocates-for-regulation">month</a>, and has been more urgently trying to get policy through since the 2022 crypto market crash.



The crypto and digital asset parliamentary group was established in January 2022 with the mission to support innovation while protecting consumers, CryptoUK <a href="https://cryptouk.io/appg/">said</a>.&nbsp;



Cameron and her fellow group members are not the only UK regulators considering crypto policy.&nbsp;



In an April <a href="https://www.fca.org.uk/news/speeches/regulation-digital-assets-uk">speech</a>, Financial Conduct Authority executive director of markets Sarah Pritchard noted that even the recent chaos in crypto markets has not stopped investors from engaging with the asset class, so lawmakers need to act swiftly.&nbsp;



“Despite the recent crypto winter, where massive losses were sustained, the take up of crypto is on the rise year-on-year,” Pritchard said. “With more consumers and investors piling in, the risks also grow exponentially in our interconnected systems. That is why things have to change.”



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UK Considers ‘Crypto Tsar’ to Head Up Regulation

Jon Rice

Gary Gensler is the chair of the SEC, and he is not a popular man. While rumor has it that he seeks Janet Yellen’s Treasury role at some point, sources on Capitol Hill suggest that he has absolutely no chance — because he’s not just unpopular with cryptocurrency enthusiasts, but with most of the US government too.



Popularity isn’t a prerequisite for the office he’s currently occupying. Competence, however, is.



And <a href="https://blockworks.co/tag/gary-gensler">Gary Gensler</a>’s competence is notable only for its continuing absence.



The SEC under Gensler has become a weapon for government Luddites who fear the hegemony of the US dollar is under threat.



Yet it is precisely this weaponization of the <a href="https://blockworks.co/tag/sec">SEC</a> that is threatening the future of the US as an economic power.&nbsp;



Digital assets are inevitable, and in the technological revolution that financial markets will eventually have to embrace, America has two choices: Lead, or follow.



Gensler’s SEC has chosen to ignore progress, to stifle innovation, and to drive our best and brightest offshore. Thanks to Gensler, the United States is throwing the leadership of tomorrow’s financial markets to more progressive and thoughtful regimes abroad — in Europe, in the Middle East, and even in countries that the US considers hostile powers.



And it’s not just entrepreneurs and the national interest that are suffering.



In today’s <a href="https://blockworks.co/news/binance-changpeng-zhao-face-sec-charges">action against Binance</a>, Gensler once again proves that investor protection — one of the pillars of the SEC’s mission — is at the bottom of his list of priorities.



Read more: <a href="https://blockworks.co/news/sec-allegations-against-binance">The SEC Allegations Against Binance: How Bad Is It?</a>



Millions of Americans hold cryptocurrencies. Millions of Americans likely hold the tokens that he <a href="https://blockworks.co/news/sec-10-tokens-securities">unilaterally declared</a> to be securities today. Those Americans are harmed, repeatedly, by the SEC’s refusal to enter into good faith discussions about what is, and is not, a security.



As <a href="https://blockworks.co/news/markets-red-after-sec-binance">markets slide on Gensler’s actions</a> once more, we are served a timely reminder that the laws he believes govern cryptocurrencies were passed over 90 years ago. In fact, rather than engage meaningfully with token issuers, Gensler spends his time creating soporific videos like <a href="https://www.sec.gov/news/sec-videos/securities-act-1933">this</a> to defend his belief that all digital assets are securities, which is a nonsense few apart from Gensler himself seem to believe.



It’s an oft-cited fact that Gensler is an unelected bureaucrat, and there is a certain laziness in that characterization. It’s easy to blame things you don’t like on people with whom you disagree.



But Gensler is well aware that <a href="https://blockworks.co/news/crypto-lawmakers-securities-bill">bipartisan opposition</a> to his agenda is at an all-time high. Congress should be making rules that <a href="https://blockworks.co/news/house-republicans-referee-cftc-sec">define participation in our capital markets</a>, not bureaucrats, no matter how lofty their office. And Congress is expressing a deep and urgent desire to do exactly that.



For Gensler to continue on his current path is nothing less than a dereliction of the duty even unelected bureaucrats have to our democratic norms.&nbsp;



The financial markets of the future will be tokenized. They will use blockchain technology. They will consist of new and unique entities, some of which will have decentralized elements that don’t fit neatly into existing securities laws.



But one government agency has taken it upon themselves to block this progress. To ensure that America is not a leader in the development of the future global financial system, but an unwilling and reluctant participant… if a participant at all.



Gary Gensler is damaging American innovation, American investors, and American interests.



It’s time for him to go.



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Gary Gensler Is a National Disgrace: It’s Time to Rein Him In

James Cirrone

The Reserve Bank of Australia has published its submission into an inquiry for a digital assets <a href="https://parlinfo.aph.gov.au/parlInfo/download/legislation/bills/s1376_first-senate/toc_pdf/23S1220.pdf;fileType=application%2Fpdf">bill</a>, which seeks to regulate crypto exchanges, custody services and the issuing of stablecoins.



Lodged in late May, the central bank’s <a href="https://www.rba.gov.au/publications/submissions/payments-system/pdf/digital-assets-bill-senate-economics-legislation-committee-may-2023.pdf">submission</a> focused heavily on stablecoins. The RBA sees the potential in the new form of currency while recognizing they need a strong regulatory framework.



“Stablecoin activity in Australia has been relatively limited to date, although there is potential for stablecoins to play a more prominent role in the financial system in the future,” the bank wrote.&nbsp;



“The RBA supports the development of regulatory arrangements for stablecoins that support innovation while providing appropriate safeguards and protections for investors and users.”



Even though the RBA said <a href="https://blockworks.co/tag/stablecoins">stablecoin</a> activity is limited right now, it mentioned that across jurisdictions — not just in <a href="https://blockworks.co/tag/australia">Australia</a> — governments are considering regulation based on the possibility that stablecoins could “become widely used for payments.”



The RBA also commented on central bank digital currencies (<a href="https://blockworks.co/tag/cbdc">CBDCs</a>), making clear that no decision has been made on implementation of a digital Australian dollar. It is however “actively engaging” in research on CBDCs. 



Some of that research led the central bank to another potential use case. The RBA pointed out that most of the nations that have issued CBDCs (overwhelmingly Caribbean countries) use them to “improve the efficiency” of their domestic payment systems.&nbsp;



The RBA sees a world where CBDCs could be used by people outside of the currency’s country of origin.



“It is possible that in the future, CBDCs could be issued to, or accessible by, non-residents, and potentially used outside of the issuing jurisdiction,” the central bank wrote.&nbsp;



<h2>Australian access to foreign CBDCs</h2>



The RBA also provided some insight into the bill’s proposed method of getting actionable information about how Australians would use foreign CBDCs.



This would involve collecting data from authorized deposit-taking institutions (ADIs), such as banks and credit unions.



However, if digital wallet services for CBDCs were provided by institutions other than banks or credit unions, like Big Tech, financial tech or foreign central banks, the RBA pointed out that the government wouldn’t be getting the entire picture of how foreign CBDCs are being used by its citizens.&nbsp;



The RBA was decidedly more neutral in tone than Kenya’s central bank, which said last week “<a href="https://blockworks.co/news/cbdc-kenya-central-bank">the allure of CBDCs is fading</a>” on the global stage.&nbsp;



Even though the RBA isn’t completely sold, there is no denying that advanced economies around the world are taking a strong look at the potential of a digitally issued government currency. 



Seven central banks, including the Fed, the Bank of Japan, the European Central Bank, and the Bank of England, partnered with one another <a href="https://blockworks.co/news/banks-pen-paper-cbdc-implementation">to write a paper on CBDCs</a> in late May.



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Stablecoins Could Play ‘More Prominent’ Role in Economy: Australian Central Bank

Binance claims that it is “disappointed” with the SEC’s allegations that the exchange mishandled funds, operated as an unregistered exchange and sold unregistered securities.&nbsp;



The SEC’s <a href="https://blockworks.co/news/binance-changpeng-zhao-face-sec-charges">recent lawsuit names Binance, CEO Changpeng Zhao</a>, Binance.US and BAM Trading as defendants.&nbsp;



“Most recently, we have engaged in extensive good-faith discussions to reach a negotiated settlement to resolve their investigations.  But despite our efforts, with its complaint today the SEC abandoned that process and instead chose to act unilaterally and litigate.  We are disheartened by that choice,” Binance <a href="https://www.binance.com/en/blog/ecosystem/sec-complaint-aims-to-unilaterally-define-crypto-market-structure-8707489117122437402">said</a> in its statement.



Read more: <a href="https://blockworks.co/news/sec-allegations-against-binance">The SEC Allegations Against Binance: How Bad Is It?</a>



In a separate tweet, Binance.US said, “Simply put, today’s filing is unjustified by the facts, by the law, or by the Commission’s own precedent.”



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Today, the SEC filed civil claims against <a href="https://t.co/AZwoBOgsqS">https://t.co/AZwoBOgsqS</a> in what is the latest example of regulation by enforcement under the current Commission. To be clear, we believe the lawsuit is baseless and we intend to defend ourselves vigorously. However, we want to address…&mdash; Binance.US 🇺🇸 (@BinanceUS) <a href="https://twitter.com/BinanceUS/status/1665754230471229440?ref_src=twsrc%5Etfw">June 5, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Binance <a href="https://blockworks.co/news/sec-responds-to-coinbase-request-for-action-no">alluded to Coinbase’s ongoing legal battle with the SEC</a>, saying that the lawsuit is another example of the Commission regulating “with the blunt weapons of enforcement and litigation rather than the thoughtful, nuanced approach demanded by this dynamic and complex technology. Unilaterally labeling certain tokens and services as securities – even ones over which other U.S. authorities have asserted jurisdiction – only compounds these problems.”



<a href="https://www.coinbase.com/blog/we-asked-the-sec-for-reasonable-crypto-rules-for-americans-we-got-legal">Coinbase</a> and the SEC are currently locked in a legal battle over defining crypto regulation.



The exchange directly opposed the <a href="https://blockworks.co/news/sec-allegations-against-binance">SEC’s allegations that Binance.US commingled</a> user funds, and said that user assets are “safe and secure.”



“Through accounts owned and controlled by Zhao and Binance, billions of U.S. dollars of customer funds from both Binance Platforms were commingled in an account held by a Zhaocontrolled entity (called Merit Peak Limited), which funds were subsequently transferred to a third party apparently in connection with the purchase and sale of crypto assets,” the SEC’s lawsuit claimed.



The lawsuit also alleges that “Binance and BAM Trading, under Zhao’s leadership and control, have unlawfully offered three essential securities market functions—exchange, broker-dealer, and clearing agency—on the Binance Platforms without registering with the SEC. Acutely aware that U.S. law requires registration for these functions, Defendants nevertheless chose not to register, so they could evade the critical regulatory oversight designed to protect investors and markets.”



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Binance Pushes Back on SEC Lawsuit, Denies Commingling User Assets

In the SEC’s <a href="https://blockworks.co/news/binance-changpeng-zhao-face-sec-charges">charges against Binance</a> on Monday, the regulator advanced its constraints against cryptocurrencies, claiming 10 additional tokens were in violation of securities law.&nbsp;



In federal court documents, the <a href="https://blockworks.co/tag/sec">SEC</a> deemed the following tokens securities: SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS and COTI. The SEC refers to these ten tokens and others as “crypto asset securities” in its <a href="https://storage.courtlistener.com/recap/gov.uscourts.dcd.256060/gov.uscourts.dcd.256060.1.0.pdf">complaint</a>.&nbsp;



“Defendants have unlawfully solicited US investors to buy, sell and trade crypto asset securities through unregistered trading platforms,” the SEC wrote in the court filing.&nbsp;



The SEC has not levied any known civil suits or brought charges against any of their issuers.



The “SEC complaint against Binance and CZ alleges about every possible crypto securities law violation and loops in a ton of tokens,” Mike Selig, counsel in the Asset Management Department and a member of the Willkie Digital Works practice, said in a <a href="https://twitter.com/MikeSeligEsq/status/1665749215782268933?s=20">tweet</a>. The “SEC doesn’t mince words: defendants’ ‘blatant disregard’ of law allowed them to ‘enrich themselves by billions…placing investors’ assets at…risk.’”&nbsp;



<a href="https://blockworks.co/price/sol">SOL</a>, Solana’s native token, <a href="https://blockworks.co/prices">lost as much as 8%</a> Monday on the news of the <a href="https://blockworks.co/tag/binance">Binance</a> suit. Polygon’s <a href="https://blockworks.co/price/matic">MATIC</a> and Cardano’s <a href="https://blockworks.co/price/ada">ADA</a> were each down close to 6%. 



In its allegations against Binance, the SEC claimed the world’s largest crypto exchange exchange misappropriated user funds, in a legal action that appeared to bear some similarities to the charges brought against FTX and founder Sam Bankman-Fried.&nbsp;



<h2>SEC says Binance tokens likewise securities</h2>



The SEC also claimed that Binance and its executives engaged in unlawful trading and issuing of unregistered securities.&nbsp;



The SEC said Binance’s native <a href="https://blockworks.co/price/bnb">BNB</a> token and stablecoin <a href="https://blockworks.co/price/busd">BUSD</a> are securities, and it categorized a Binance-related staking affiliate as likewise offering unregistered securities. The SEC’s move to list additional tokens in a lawsuit against an exchange is <a href="https://blockworks.co/news/qa-the-sec-classified-9-tokens-as-securities-now-what">not new</a>. The agency listed 9 crypto tokens as securities in its <a href="https://blockworks.co/news/sec-charges-former-coinbase-product-manager-with-insider-trading">2022 lawsuit against a former Coinbase employee over insider trading</a>, which has since been settled.

SEC Labels 10 Tokens Securities in Binance Lawsuit

Crypto markets sank late Monday morning in New York on news that the largest global crypto exchange Binance is facing several charges from the SEC. 



Bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) and ether (<a href="https://blockworks.co/price/eth">ETH</a>) lost as much as 2.5% and 2%, respectively at time of publication. Binance’s native <a href="https://blockworks.co/price/bnb">BNB</a> token fell as much as 7% immediately after the lawsuit announcement.&nbsp;



<a href="https://blockworks.co/news/binance-changpeng-zhao-face-sec-charges">The SEC alleges Binance misused consumer funds</a> and engaged in unauthorized security sales, according to court documents released Monday. The agency also claims BNB and Binance’s stablecoin, <a href="https://blockworks.co/price/busd">BUSD</a>, which briefly depegged Monday, are securities.&nbsp;



“Binance and BAM Trading, under [Changpeng] Zhao’s leadership and control, have unlawfully offered three essential securities market functions—exchange, broker-dealer, and clearing agency—on the Binance Platforms without registering with the SEC. Acutely aware that U.S. law requires registration for these functions, Defendants nevertheless chose not to register, so they could evade the critical regulatory oversight designed to protect investors and markets,” the court filing read.&nbsp;



The SEC claims that BAM Trading’s staking program is an investment contract and therefore a security, which Binance failed to register with the agency.&nbsp;



Read more: <a href="https://blockworks.co/news/sec-allegations-against-binance">The SEC Allegations Against Binance: How Bad Is It?</a>



The charges are reminiscent of allegations Sam Bankman-Fried faces over his now-collapsed exchange, FTX. The SEC claims Bankman-Fried transferred consumer funds from the exchange to a trading entity he owned; Alameda.&nbsp;



The SEC uses similar language in its Binance suit, explicitly noting that consumer funds were allegedly traded with third parties.



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Markets Dip Red After SEC Sues Binance

Now that the SEC has joined the party and alleged that Binance, BAM Trading (operators of the Binance.US exchange) and the CEO of Binance, Changpeng ‘CZ’ Zhao, are in violation of securities laws, the fallout for the crypto industry could be significant.



But how serious are the allegations — and what does the <a href="https://blockworks.co/tag/sec">SEC</a> want to happen?



The markets are certainly concerned, with bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) falling as the news began to creep out. At the time of writing, the largest cryptocurrency had plunged almost $900 from $27,300 to $26,300 in a matter of minutes.



<a href="https://blockworks.co/news/binance-changpeng-zhao-face-sec-charges">The allegations</a> cover multiple points:



Firstly, the SEC names <a href="https://blockworks.co/tag/binance">Binance</a>, BAM Management, BAM Trading and <a href="https://blockworks.co/tag/changpeng-zhao">Binance CEO Changpeng Zhao</a> as defendants in its suit.



<h2>Binance, BAM Trading sold unregistered securities&nbsp;</h2>



The SEC claims that <a href="https://blockworks.co/price/bnb">BNB</a>, <a href="https://blockworks.co/price/busd">BUSD</a> and the staking investment product available on Binance.US all count as unregistered securities.&nbsp;



It also claims that BAM Trading’s staking program is an investment contract, which falls under its definition of a security.



“Binance and BAM Trading have unlawfully engaged in unregistered offers and sales of crypto asset securities, including Binance’s own crypto assets called ‘BNB’ and ‘BUSD,’ as well as Binance’s profit-generating programs called ‘BNB Vault’ and ‘Simple Earn,’ and a so-called ‘staking’ investment scheme available on the Binance.US Platform,” the filing said.



<h2>Binance commingled customer funds&nbsp;</h2>



According to the SEC, Binance evaded US regulatory oversight “put the safety of dollars of U.S. investor capital at risk and at Binance’s and Zhao’s mercy” by commingling customer funds at Binance with those of CZ’s Merit Peak Limited.



“For example, through accounts owned and controlled by Zhao and Binance, billions of U.S. dollars of customer funds from both Binance Platforms were commingled in an account held by a Zhao-controlled entity (called Merit Peak Limited), which funds were subsequently transferred to a third party apparently in connection with the purchase and sale of crypto assets,” the filing stated.



<h2>Binance operated as an unregistered exchange</h2>



The SEC said, “with respect to the Binance.US Platform, Binance acted together with BAM Trading as an exchange, BAM Trading acted as a broker, and Binance and BAM Trading each acted as a clearing agency, without registering.”



Zhao is also being charged with violating the Exchange Act “as a control person over Binance and BAM Trading.”



“Binance and BAM Trading, under Zhao’s leadership and control, have unlawfully offered three essential securities market functions — exchange, broker-dealer, and clearing agency — on the Binance Platforms without registering with the SEC,” the filing claims. “Acutely aware that U.S. law requires registration for these functions, Defendants nevertheless chose not to register, so they could evade the critical regulatory oversight designed to protect investors and markets.”



According to the complaint, Binance’s chief compliance officer told a colleague in 2018 that “we are operating as a fking unlicensed securites exchange in the USA, bro.”&nbsp;



<h2>Wash trading on Binance.US</h2>



The SEC said that Binance.US did not protect against wash trading because the “defendants failed to implement on the Binance.US Platform the trade surveillance or manipulative trading controls BAM Trading and BAM Management touted to investors. Thus, Defendants failed to satisfy basic requirements of registered exchanges.”



Sigma Chain AG, which is allegedly owned and controlled by Zhao “engaged in wash trading that artificially inflated the trading volume of crypto asset securities.”



<h2>Binance and CZ solicited US customers</h2>



Back in 2019, however, Binance claimed that it was going to implement controls that blocked US customers from operating Binance.com, pushing them to Binance.US instead.



The filing cites a quote from Binance’s CCO, “[o]n the surface we cannot be seen to have US users[,] but in reality, we should get them through other creative means.”



“As a second part of Zhao’s and Binance’s plan to shield themselves from U.S. regulation, they consistently claimed to the public that the Binance.com Platform did not serve U.S. persons, while simultaneously concealing their efforts to ensure that the most valuable U.S. customers,” the filing goes on to say.



<h2>What does the SEC want?</h2>



The SEC is pushing for significant restraints on both Zhao and Binance operating within the United States, although it appears to hold off a permanent enjoinder from having the potential for activity in the future.



The ‘permanent enjoinder’ against Binance, Zhao, and BAM Trading that the SEC does seek in the lawsuit is from violations of the acts and registration requirements already cited in the complaint, and from operating unlicensed exchanges or dealing in crypto asset securities without the appropriate licenses.



It should be noted that while the SEC often appears very clear on what it considers to be securities, the crypto industry disagrees vehemently with the notion that every digital asset (with the exception of bitcoin) is a security. The SEC’s argument has yet to be put to the test with any court, although a ruling on <a href="https://blockworks.co/tag/ripple">Ripple</a> and its <a href="https://blockworks.co/price/xrp">XRP</a> token could come within weeks.



However, there could also be extremely significant monetary penalties should the allegations be proven — the SEC specifically asks that the Defendants “disgorge all ill-gotten gains, with prejudgement interest thereon.”



Given that Binance is a highly-profitable business, this has the potential to be a lucrative case for the SEC.



Updated June 5, 2023 at 12:20 pm ET: Added information on allegations of wash trading and soliciting US customers.



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The SEC Allegations Against Binance: How Bad Is It?

Bessie Liu

Sommelier has introduced five new vaults that offer holders of governance tokens an opportunity to earn passive yield ranging from 2% to 4%. Supported tokens include 1inch, ENS, LINK, SNX and UNI.



The strategy itself was designed by data research firms Seven Seas Capital and Define Logic Labs, the team behind <a href="https://blockworks.co/news/sommelier-eth-liquid-staking-vault">Real Yield ETH</a>.



Existing governance tokens in DeFi offer minimal yield opportunities. Lending these tokens out on Aave, for example, will earn holders sub 1% yield. Sommelier’s new vaults are designed to fill that void, Zaki Manian, the company’s co-founder told Blockworks.&nbsp;



These latest vaults are designed to capture the huge arbitrage opportunity in the ETH market, Manian explained.&nbsp;



“There’s a massive amount of ETH sitting idly loaned out on protocols like Aave, and the borrow cost of ETH is around 4%. Meanwhile, yield opportunities on ETH are significantly higher. At a high-level, these gov token vaults capture that arbitrage and convert it into UNI, LINK, ENS, etc. yield,” he said.



Users participate in these new vaults by leveraging their governance tokens to borrow ETH. They then deposit the borrowed ETH in Sommelier’s Real Yield ETH vault, where the assets generate yield through looped leverage and the optimization of tick range liquidity on Uni V3.



“Looped leverage does come with liquidation risk, but the Real Yield ETH vault is equipped to mitigate that risk by constantly monitoring market conditions and adjusting leverage ratios as needed,” he said.



Another important feature that these new vaults offer will be “gas holidays.”



The vault will be holding a simple position when rewards are being harvested, which means that the vault will periodically move into one associated governance token — lowering any gas costs.&nbsp;



“The first window is the first 48 hours after launch, and then depositors will be notified when there are subsequent gas holidays. As with all Sommelier vaults, they’re non-custodial, so you can enter and exit at any time, but this helps people depositing smaller amounts who are more sensitive to high gas fees,” Manian said.



The first 40 addresses to deposit over $1,000 in liquidity in each vault will each be given an additional $25 in rewards. US-based traders will not have access to Sommelier vaults.



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5 New Sommelier Vaults Now Capturing Governance Token Yield

The SEC accused Binance — the world’s largest cryptocurrency exchange — of mishandling customer funds and failing to register under securities laws in a court filing released on Monday, June 5.&nbsp;



The lawsuit also claims that <a href="https://blockworks.co/tag/binance">Binance</a> — as well as BAM Trading and Binance.US — engaged in the unlawful sale of securities and failed to register under the Exchange Act.



The <a href="https://blockworks.co/tag/sec">SEC</a> alleges that “First, Binance and BAM Trading, under Zhao’s leadership and control, have unlawfully offered three essential securities market functions—exchange, broker-dealer, and clearing agency—on the Binance Platforms without registering with the SEC. Acutely aware that U.S. law requires registration for these functions, Defendants nevertheless chose not to register, so they could evade the critical regulatory oversight designed to protect investors and markets.”



The SEC claims that BAM Trading’s staking program is an investment contract, which falls under its definition of a security.



Both Binance and BAM Trading “have engaged and continue to engage in unregistered offers and sales of crypto asset securities, effecting unregistered crypto asset securities transactions on the Binance Platforms.”&nbsp;



​​The SEC also claims Binance and <a href="https://blockworks.co/tag/changpeng-zhao">CEO Changpeng ‘CZ’ Zhao</a> were “intimately involved in directing BAM Trading’s U.S. business operations.”



“Zhao directed Binance to assist certain high-value U.S. customers in circumventing those controls and to do so surreptitiously because—as Zhao himself acknowledged—Binance did not want to &#8216;be held accountable&#8217; for these actions,” the filing stated.



The lawsuit claims that, through his social media usage, both Zhao and Binance “actively solicited” US investors, and Binance employees were asked to retain US investors on the Binance.com Platform despite Binance’s June 2019 announcement that “it would no longer serve U.S. investors.”



The SEC further alleges in the complaint that <a href="https://blockworks.co/price/bnb">BNB</a>, the native token of the Binance Smart Chain, is an unregistered security, and states the various Binance staking programs are also not in compliance with its registration requirements.



“We allege that Zhao and the Binance entities not only knew the rules of the road, but they also consciously chose to evade them and put their customers and investors at risk,” said Gurbir S. Grewal, director of the SEC’s enforcement division.



When reached for comment, Binance.US pointed Blockworks to its tweet on the lawsuit.&nbsp;



“While we remain open to a productive compromise that protects our customers and their digital assets, with this latest action taken against our business and following similar actions taken against Coinbase, Gemini, Kraken, and other market participants, the SEC seeks a near eradication of our industry,” the tweet said.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Today, the SEC filed civil claims against <a href="https://t.co/AZwoBOgsqS">https://t.co/AZwoBOgsqS</a> in what is the latest example of regulation by enforcement under the current Commission. To be clear, we believe the lawsuit is baseless and we intend to defend ourselves vigorously. However, we want to address…&mdash; Binance.US 🇺🇸 (@BinanceUS) <a href="https://twitter.com/BinanceUS/status/1665754230471229440?ref_src=twsrc%5Etfw">June 5, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“The SEC’s choice is disheartening for Binance, its users, and the industry as a whole.  However, this action will not stop us from continued robust collaboration with other regulators and policymakers across the globe, and we will continue to vigorously defend our business and this technology,” Binance told Blockworks in an emailed statement.



Updated June 5, 2023 at 1:25 pm ET: Added statement from Binance.



Updated June 5, 2023 at 12:49 pm ET: Added reply from Binance.US.



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Binance and Changpeng ‘CZ’ Zhao Face Multiple SEC Charges

Shalini Nagarajan

Stablecoin provider <a href="https://blockworks.co/tag/tether" target="_blank" rel="noreferrer noopener">Tether</a> is participating in a $250 million investment in a renewable energy project in El Salvador.&nbsp;



As one of a few investors participating in the project that aims to raise $1 billion, Tether will invest in a 241-megawatt renewable energy park called &#8220;Volcano Energy&#8221; in the northern city of Metapán.&nbsp;



Tether said its goal is to help create a major bitcoin mining farm by harnessing solar and wind power within the volcanic region.



The chosen site, located in the El Chiste hamlet, will have 169 megawatts of solar power and 72 megawatts of wind power, Tether said in a statement published Monday. This setup is expected to generate computing power of more than 1.3 exahash, which would be crucial for supporting operations like cryptocurrency mining.



Tether CTO Paolo Ardoino hailed &#8220;Volcano Energy&#8221; as an innovative and strategic project and expressed enthusiasm for working alongside Josue Lopez, El Salvador&#8217;s Bitcoin consul and the project’s CEO, along with his team.



Lopez mentioned that currently over 52% of bitcoin mining is done using sustainable methods. “We believe this percentage will significantly increase in the coming years through important investments like ours,” he added.



A Tether spokesperson declined to provide details on whether USDT tokens would be included in the investment, but said the investment does not utilize or impact the reserves that support the tokens.&nbsp;



“The current size of our investment in Volcano Energy is quite contained considering the profits Tether is generating every month and well within our own excess reserves. It is not taken from or affecting the reserves backing the tokens,” the spokesperson said.



El Salvador began exploring bitcoin mining using power from its volcanoes in 2021. President Nayib Bukele <a href="https://twitter.com/nayibbukele/status/1402680890057166858" target="_blank" rel="noreferrer noopener">tweeted</a> that he told the president of the state-owned geothermal electric company, La Geo, to come up with a plan to offer facilities for mining bitcoin using cheap and eco-friendly energy from the country&#8217;s volcanoes.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">I sent a drone to film one of the new wells&#8230; Nice rainbow 🙂 Bitcoin mining with the power of volcanos!<a href="https://twitter.com/hashtag/BTC?src=hash&amp;ref_src=twsrc%5Etfw">#BTC</a>🌋♻️🇸🇻 <a href="https://t.co/cEIFcf23tS">pic.twitter.com/cEIFcf23tS</a>&mdash; Nayib Bukele (@nayibbukele) <a href="https://twitter.com/nayibbukele/status/1403160745228050433?ref_src=twsrc%5Etfw">June 11, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



However, the country’s leading environmentalist Ricardo Navarro has <a href="https://www.telegraph.co.uk/world-news/2021/12/06/el-salvadors-plan-power-bitcoin-volcano-will-end-environmental/" target="_blank" rel="noreferrer noopener">reportedly</a> said that Bukele’s volcano-powered bitcoin mining plans will end in environmental disaster.



He suggested that while he would usually be all for climate-friendly geothermal energy, this policy was plain wrong.



“Talking about building this city beside a volcano is like thinking you are rich because you live next to a bank. Geothermal energy doesn’t need volcanoes. It needs groundwater, steam. But we already have problems with not enough water in El Salvador,” Navarro told The Telegraph.



In late 2021, Bukele shared a <a href="https://twitter.com/nayibbukele/status/1442949756993490945" target="_blank" rel="noreferrer noopener">teaser video</a> featuring a government-branded container filled with bitcoin mining rigs, technicians setting up miners, and scenic aerial shots of an energy factory near a volcano. But he <a href="https://twitter.com/nayibbukele/status/1443830930997719044">mentioned</a> that the volcano-powered mining project was still ongoing, with ongoing tests and installations of new mining equipment.



The country’s legislature <a href="https://www.bloomberg.com/news/articles/2023-01-11/el-salvador-passes-law-that-would-enable-bitcoin-bond-issuance" target="_blank" rel="noreferrer noopener">passed a law</a> in January to authorize the issuance. The volcano energy initiative is seen as a sign of progress, however the country has yet to issue any of the bonds which have been <a href="https://blockworks.co/news/one-year-in-el-salvadors-bitcoin-bonds-could-be-right-around-the-corner">beset by delays</a>.



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Tether Joins Volcano Energy Project in El Salvador

People who trade crypto in South Korea are far from bitcoin (<a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">BTC</a>) or ether (<a href="https://blockworks.co/price/ETH" target="_blank" rel="noreferrer noopener">ETH</a>) maxis. In fact, based on the latest data from Kaiko, they might be XRP maxis.



Outside of BTC and ETH, collective volume for the top 20 most-traded cryptocurrencies listed on South Korea’s biggest crypto exchanges — Upbit, Bithumb, Coinone and Korbit — was $201.8 billion from the start of the year up to May 30, according to Kaiko data exclusively provided to Blockworks. 



Bitcoin and ether saw $36.7 billion and $8.9 billion in trade, respectively. 



South Korea has a storied history in trading cryptocurrencies outside of the top two by market cap. Those digital assets typically account for 70% to 80% of total South Korean trade volume, according to Kaiko senior analyst Dessislava Aubert.&nbsp;



Aside from BTC, Ripple’s <a href="https://blockworks.co/price/xrp" target="_blank" rel="noreferrer noopener">XRP</a> is the most popular in South Korea by far.



<ul>
<li>XRP captured 12% of the non-BTC and ETH volume.&nbsp;</li>



<li>$24.5 billion XRP traded over the first five months of the year.</li>



<li>XRP saw 66% of bitcoin’s volume and nearly three times ether’s.</li>
</ul>



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/14020019/embed#?secret=VWiD1AgN8H" data-secret="VWiD1AgN8H" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">South Korea has traded more than $3.8 billion in Serum so far this year, one of the ill-fated ‘Sam Coins’ wrecked by the FTX scandal</figcaption></figure>



Dogecoin (<a href="https://blockworks.co/price/doge" target="_blank" rel="noreferrer noopener">DOGE</a>) was second at nearly 4%, with payments-focused network Solar (<a href="https://blockworks.co/price/sxp" target="_blank" rel="noreferrer noopener">SXP</a>) trailing with 3.4%. (Solar was rebranded from Swipe.io after Binance <a href="https://www.binance.com/en/support/announcement/binance-to-acquire-outstanding-shares-in-swipe-efa96d9a856f4620b2fa6e372edbe290" target="_blank" rel="noreferrer noopener">acquired</a> the firm in 2020). 



Ethereum Classic (<a href="https://blockworks.co/price/etc" target="_blank" rel="noreferrer noopener">ETC</a>) and metaverse play The Sandbox (<a href="https://blockworks.co/price/sand" target="_blank" rel="noreferrer noopener">SAND</a>) followed closely behind with about 3% each.



<h2>South Korea watches XRP-SEC case</h2>



To explain XRP’s dominance in the peninsula nation, Aubert said its “largely due to the surge in XRP trading volume in late March and early April, when volumes in the Korean markets hit a multi-month high.”



Also during that time, markets were anticipating that <a href="https://blockworks.co/news/ripple-sec-court-decision-xrp-price" target="_blank" rel="noreferrer noopener">Ripple’s contentious legal battle with the SEC</a> was coming to a head. In an Apr. 3 Kaiko <a href="https://blog.kaiko.com/binance-market-share-tumbles-16-fcb6d1dce7fe" target="_blank" rel="noreferrer noopener">newsletter</a>, analysts claimed traders were betting on Ripple to triumph, which sent the token soaring and led the entire altcoin sector to its peak year to date. 



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/14021076/embed#?secret=tek2eLZQQK" data-secret="tek2eLZQQK" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">‘Altcoin’ has become a derogatory term for crypto which isn’t bitcoin or ether — South Korea isn’t phased</figcaption></figure>



The case persists without any clear indication for when it might find a conclusion. Ripple Labs CEO Brad Garlinghouse in January said he anticipated the case would be resolved within the first half of the year.



As for whether the top traded cryptocurrencies are trading at a premium — as they’ve done over the years from time to time — Aubert told Blockworks that “XRP has traded at an average premium of 1.8% in Korean markets over the past year.” 



Bitcoin saw an average 1.4% premium across the same period.



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<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/14021285/embed#?secret=pzAEkL5wdg" data-secret="pzAEkL5wdg" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Dogecoin is the worst performing of South Korea’s top five most-traded</figcaption></figure>



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South Korea Has Traded Way More XRP Than Ethereum This Year

Bankrupt crypto exchange FTX has strongly refuted claims that Genesis owes it no money.



FTX claims that it is a major creditor of Genesis but was not invited to a mediation session arranged by the court in May. Genesis allegedly handpicked the participants in the mediation.



In a <a href="https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/reIlzLM9ae4Q/v0">court filing</a> published Friday, FTX indicated it was surprised at Genesis&#8217; unexpected move to <a href="https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rW3d9PSlA.U4/v0">declare FTX&#8217;s unresolved claims worthless</a>. Genesis justified this action as necessary to quickly move forward with the confirmation of a Chapter 11 plan.



Earlier in May, FTX said it is <a href="https://blockworks.co/news/genesis-clawback-claim-ftx">owed $3.9 billion</a> in cash and cryptocurrency from Genesis. “Genesis was one of the main feeder funds for FTX and instrumental to its fraudulent business model,” attorneys for FTX wrote.



But Genesis argued that pursuing FTX’s claims through the regular legal process would cause unnecessary delays in managing its administrative process. Genesis added that it aims to finalize a plan by August, before its requested extended exclusive period ends.



FTX has joined a group of other Genesis creditors who have submitted objections to extending the mediation process. These objections further complicate settlement discussions between Genesis, parent company Digital Currency Group and its other creditors.



This development follows DCG&#8217;s recent <a href="https://blockworks.co/news/dcg-genesis-gemini-debt">failure to fulfill a $630 million payment</a> owed to Genesis.



Genesis wants to extend the discussions until June 16, and there will be a hearing on Monday to decide on this extension.&nbsp;



Genesis, which used to give clients interest for lending their digital coins, <a href="https://blockworks.co/news/genesis-halts-lending">stopped allowing withdrawals</a> in November, partly due to its connection to FTX&#8217;s bankruptcy. It then <a href="https://blockworks.co/news/genesis-in-chapter-11-wont-insulate-silbert-winklevoss-says">filed for bankruptcy in January</a> and has been trying to reach a settlement with its creditors. Long delays are making some individual creditors oppose more mediation attempts.



“The mediation is a waste of estate resources without the inclusion of the FTX Debtors and should not continue without the FTX Debtors’ involvement,” FTX says.



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FTX Challenges Genesis’ Zero Debt Claim

Around nine crypto startups raised approximately $126 million this week, though one company clearly stood out.&nbsp;



Wallet-as-a-service provider Magic Labs snagged $52 million in a strategic round led by PayPal Ventures. Other investors included Cherubic, Synchrony, KX, Northzone and Volt Capital, <a href="https://www.prnewswire.com/news-releases/magic-announces-52m-strategic-funding-round-led-by-paypal-ventures-301838352.html">according</a> to a press release.&nbsp;



With the latest round, the San Francisco-based firm has raised over $80 million and was bumped up to a valuation of just under $500 million, Fortune <a href="https://fortune.com/crypto/2023/05/31/magic-raises-52m-to-grow-crypto-wallet-as-a-service-used-by-corporate-clients-like-mattel-macys/">reported</a>.&nbsp;



Magic Labs’ business model can be summed up in a few words. Software development kits, of SDKs. Magic Labs gives their wallet SDKs to their clients, many of which are Fortune 500 companies. The clients then customize their crypto wallet to their liking and offer it to their customers via their app.



The retail giant Macy’s is one of Magic Labs’ biggest clients. Hot Wheels toy manufacturer Mattel, which <a href="https://blockworks.co/news/mattel-marketplace-barbie-hot-wheels-nfts">launched a peer-to-peer NFT marketplace</a> for its virtual collectibles in April, also uses Magic as its wallet as a service provider.&nbsp;



Alan Du, a partner at PayPal Ventures, said Magic is a “safe and simple solution” to facilitate mass adoption of Web3.



“Magic&#8217;s wallet creation service allows companies to reach millions of users on their apps and onboard customers who are new to [Web3],” Du said in a statement.&nbsp;



So far, Magic has generated over 20 million unique wallets, per a company release.&nbsp;



<h2>Multimillion-dollar fundraises in blockchain tech and digital payments</h2>



The Anoma Foundation brought in $25 million this week with crypto-focused venture capital firm CMCC Global at the helm.&nbsp;



The Anoma Foundation oversees Anoma, a blockchain protocol dedicated to helping developers build decentralized projects, including decentralized exchanges (DEXs) and decentralized apps (dapps).



This is the foundation’s third time raising venture money, and the capital will go toward ongoing research and development initiatives, helping developers build apps and cultivating partnerships, according to a press release from the foundation.



In the digital payments realm, fiat-crypto ramp provider Transak raised $20 million from over a dozen prominent investors, including <a href="https://blockworks.co/tag/animoca-brands">Animoca Brands</a> and Axelar.&nbsp;



Transak’s solution is supported by over 150 countries and more than 160 cryptocurrencies, according to a company <a href="https://transak.com/blog/transak-series-a">statement</a>.&nbsp;



<h2>Other notable fundraises</h2>



<ul>
<li>NFT platform Tabi, formerly known as Treasureland, <a href="https://twitter.com/Tabi_NFT/status/1663168387328139266">netted</a> $10 million in an angel round with Animoca Brands leading and Binance Labs participating.&nbsp;</li>



<li>Fusionist, a Web3 gaming firm, <a href="https://www.binance.com/en/blog/ecosystem/binance-labs-coleads-a-$66m-seed-round-for-fusionist-to-further-support-earlystage-web3-gaming-innovation-4375527738929774082">raised</a> $6.6 million to accelerate game development and hire more experts in the field to join their team. Binance Labs was a strategic investor.</li>



<li>Privacy-focused Demox Labs raised $4.5 million to build a new wallet for zero-knowledge proof blockchain Aleo, Axios <a href="https://www.axios.com/2023/06/01/demox-labs-funding-raise-crypto-wallet">reported</a>. Aleo is still in beta and plans to have a mainnet <a href="https://twitter.com/AleoHQ/status/1617624972406448128">launch</a> in July.</li>
</ul>



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Crypto Funding: Wallet Provider Magic Labs Takes the Cake in $126M Week

Cash has no intent. Cash is neutral.



Bank notes are, in fact, non-sentient, and undiscerning about their ownership.



A twenty spot doesn’t care if you buy gasoline with it, bribe a border control officer with it, or shove it up your nose and snort cocaine with it. (Not life advice.)



And nobody in the US government is trying to ban cash. Because that would be idiotic.



Cash can be used in criminal activities. But cash is not criminal. Criminals are criminal, and sometimes criminals use cash, so we’ve found lots of ways as a society to make trade-offs with cash, like putting limits on how much you can carry in and out of the country.



This makes it somewhat harder for criminals to use, without making it impossible for the vast majority of us who simply find it handy to occasionally buy stuff with bits of paper.



If it seems obvious where I’m heading with this, consider yourself smarter than some of the people in Congress who haven’t yet grasped the logic of my parallel argument.



Here it is:



Crypto has no intent. Crypto is neutral.



Crypto is, in fact, non-sentient, and undiscerning about its ownership.



<s>And nobody in the US government is trying to ban crypto. Because that would be idiotic.</s>



Crypto can be used in criminal activities. But crypto is not crim… okay, you get the point.



Here at Blockworks, we have an editorial policy that you may find interesting.



For the most part, we do not cover conventional crimes in which the only connection to our industry is the fact that crypto is used as a means of value exchange.



Why not? For the same reason that American Banker does not cover crimes in which cash is used as a means of value exchange.



It’s irrelevant. It’s not novel, or interesting. Almost without exception, the crime is the story, not the way value is extracted or exchanged.&nbsp;



And we’re not a news outlet that covers crime for titillation.



The fact is, criminals need to exchange value, just like the rest of us. They will use cash when it’s convenient. Diamonds. Bearer bonds. Cryptocurrencies. They will barter away secrets, trade in weapons, even traffic human beings.



Because criminals are criminal.



But diamonds, bearer bonds, and cryptocurrencies are not criminal. They are simply things of value.



So when Elizabeth Warren (yes, <a href="https://blockworks.co/news/elizabeth-warren-crypto-web3">her again</a>) starts up with her <a href="https://markets.businessinsider.com/news/currencies/crypto-fentanyl-china-overdoses-us-opoid-crisis-elizabeth-warren-2023-6">hyperbolic nonsense</a> about how crypto enables the Fentanyl trade, you can be sure that this is as idiotic as it sounds.



And since Elizabeth Warren is not an idiot, you can only assume that her rationale for saying such an idiotic thing is malintent.



It’s fair to say that some criminals use cryptocurrency in the course of their criminal actions.



And as Senator Warren is well aware, it’s also fair to say that some criminals use cash to finance their operations. And some use credit cards. And some use offshore bank transfers. And so on. (At least blockchain gives law enforcement a path right to the criminals’ money, in many cases.)



Crypto is a neutral technology.



But people can be good or bad.



And people can also be downright dumb, like the fearmongers who would have you believe that if you ban crypto, there’s no Fentanyl trade.



I grew up with Miami Vice.



Pretty sure there was no crypto in those days. Pretty sure there were plenty of drugs.



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This op-ed was originally published in the Blockworks newsletter: Subscribe below.



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