News Weekly | US judge denies SBF’s request for prosecutor to review FTX debtor’s request

US judge rejects SBF's request for prosecutor to review FTX debtor's request in News Weekly.

Blocking Weekly is a blockchain industry summary program launched by Blocking, covering industry dynamics such as key news, mining information, project dynamics, and technological progress every week. This article is the news weekly, taking you through the major events in the blockchain industry this week.

Headlines

▌ Forbes: Revealing the Actual CFO of Binance, the Guardian of the Treasury, Guangying Chen

Forbes published an article entitled “CEO Changpeng ‘CZ’ Zhao’s mysterious associate Guangying Chen emerges as a key player in his company’s operations, which are the subject of a recent lawsuit from the SEC.” The content mentioned that Guangying Chen, a senior executive of Binance, controls more bank accounts than any other executive other than CEO CZ. She is currently a director of eight major Binance companies and a signatory of dozens of bank accounts in 27 entities registered in 13 countries/regions, responsible for overseeing the company’s finances and handling deposits and withdrawals of $148 billion since 2019.

According to relevant documents, since 2019, Guangying Chen’s salary has reached US$32 million, and she has also signed the most important business transactions of Binance.

• Is BlackRock applying to the SEC for a Bitcoin ETF or a trust?
• Why did the SEC reject the approval of a bitcoin ETF for spot trading? Will BlackRock’s attempt be successful this time?
• Inscription 2.0 Era: Can Recursive Inscriptions Push Bitcoin On-Chain Smart Contracts to be Possible?

▌ US judge rejects SBF’s request for prosecutor to review FTX debtor

Federal Judge Lewis Kaplan in the Southern District of New York raised several questions about the defense team of FTX founder’s motion to dismiss charges of bank fraud, wire fraud, and campaign finance, while also expressing skepticism about the defense’s efforts to dismiss charges of bank and wire fraud. The judge also rejected several procedural motions made by the defense, including efforts to have the US Department of Justice review FTX documents and materials.

▌ New York prohibits CoinEx from operating and confiscates $1.7 million in encrypted assets

Cryptocurrency exchange CoinEx has been banned from operating in New York by Attorney General Letitia James. According to a June 15 announcement, the exchange’s funds worth more than $1.7 million have been seized on suspicion of not being registered as a securities and commodities broker.

The agreement settles a lawsuit filed against CoinEx in February of this year, when the state of New York accused the company of falsely claiming to be an exchange and failing to register with local authorities. Under the agreement, over $1.1 million will be returned to 4,691 New York investors, and over $600,000 will be paid as a fine to the state of New York.

▌ US Congressmen submit bill calling for firing of SEC Chairman Gensler

US Congressman Warren Davidson announced on June 12 that he has submitted the “SEC Stability Act” to the House of Representatives. One of the main provisions of the bill is to fire Gary Gensler, the chairman of the US Securities and Exchange Commission (SEC).

Davidson said in a statement that the US capital market must be protected from arbitrary chairmen, including the current chairman. That’s why I’m introducing legislation to address the abuse of power that’s happening and ensure the best interests of the market are protected in the years to come. It’s time for real reform and to fire Gary Gensler.

▌ Huang Licheng sues blockchain detective ZachXBT for defamation

“Big Brother” Huang Licheng is suing blockchain detective ZachXBT. The blockchain detective released a report last year accusing Huang of stealing millions of dollars’ worth of cryptocurrency.

The lawsuit was filed on Friday in the Western District of Texas, accusing ZachXBT of defaming MachiBigBrother and causing him “serious reputational and financial harm.” According to the complaint, ZachXBT faces one count of defamation and one count of defamation per se.

MachiBigBrother’s attorney claimed in the complaint that (ZachXBT), with reckless disregard for the potentially devastating impact the public accusations of criminal conduct would have on Plaintiff, not only continued to publish his defamatory articles on Medium.com, but also maliciously promoted that article to his more than 300,000 Twitter followers.

Policy

▌ US judge rejects SEC’s request to freeze Binance.US assets

A federal judge overseeing the US Securities and Exchange Commission’s lawsuit against Binance and Binance.US has denied a request for a temporary restraining order to freeze assets of the US trading platform.

That will allow the company’s US subsidiary to continue its business while discussing limitations with regulators.

If the parties are able to come to an agreement on limitations, Judge Amy Berman Jackson of the District of Columbia said there was “absolutely no need” for a restraining order. The judge also ordered Binance.US to provide a list of its business expenses to the court and ordered the parties to continue negotiating. The latest development will be released by the end of Thursday.

▌ The US audit watchdog will increase its supervision of auditors involved in cryptocurrency transactions when reviewing the financial statements of companies involved with cryptocurrencies. The Public Company Accounting Oversight Board (PCAOB) published a high-level summary of inspection results on Wednesday, evaluating how auditors test their clients’ transactions or holdings of assets. As part of a cross-company review targeting emerging audit risks, the board will increase its scrutiny of auditors’ responses to fraud risks with clients having significant cryptocurrency transactions or holdings. The board’s inspection division director, Botic, said that if cryptocurrency had a significant impact on a company’s financial statements or activities, it would be checked.

▌ The US House of Representatives Financial Services Committee Chairman, Mike Henry, said at a hearing on Tuesday that he intends to hold a committee vote in the coming weeks on comprehensive legislation to establish a regulatory framework for cryptocurrency products. He said that a bill is expected to be submitted for the committee’s consideration after members return on July 11. Earlier this month, Henry and others introduced a discussion draft that would clarify regulatory oversight of cryptocurrency products and provide a registration pathway for cryptocurrency companies and exchanges with these agencies.

▌ After adding a few more to the lawsuit against cryptocurrency exchanges Binance and Coinbase, 67 cryptocurrencies are now marked as securities by the US Securities and Exchange Commission. In the case against Binance, the US Securities and Exchange Commission classified 10 cryptocurrencies as securities, while naming 13 cryptocurrencies in its Coinbase lawsuit. The security label now applies to over $1 trillion worth of the market, about 10% of the total $10.9 trillion cryptocurrency market capitalization.

▌ The European Parliament has passed a new Artificial Intelligence (AI) regulation bill.

As the US takes a strong stance on tech regulation, the EU is taking another major step towards large-scale tech regulation in the field of artificial intelligence (AI). The European Parliament on Wednesday overwhelmingly passed a new draft law on artificial intelligence with 499 votes in favor, 28 against, and 93 abstentions. The final version of the law is expected to be voted on at some point by the end of 2023.

If passed, the law will impose a comprehensive risk-based regulatory regime on artificial intelligence systems. Artificial intelligence that poses an “unacceptable risk” to people’s safety, livelihoods, or human rights, such as artificial intelligence used for biometric monitoring, will be completely banned.

▌ Bank of England Deputy Governor: UK may need to issue digital pound

Bank of England Deputy Governor Jon Cunliffe said the UK may need to issue a digital pound; views on digital pounds have not changed since February; will make final decisions on central bank digital currencies in the coming years; central bank digital currencies are an important anchor of currency confidence; the need for public debate to provide confidence in central bank digital currencies.

▌ FCA UK includes Bitstamp and Interactive Brokers in registered crypto companies list

According to the FCA’s registered crypto asset company page, the regulator has added Bitstamp and online broker Interactive Brokers to its registered crypto asset company list.

▌ Insider: Thailand’s CBDC digital baht pilot is underway

According to local insiders, the Bank of Thailand has started working with three domestic payment service providers to launch the country’s retail central bank digital currency, the digital baht. Testing is being conducted in a regulatory sandbox and is expected to last until August this year, involving up to 10,000 participants. While the central bank has not committed to formally launching the decision, it is still studying potential use cases to improve payment efficiency and increase the country’s push for digitization.

Blockchain Applications

▌ Nostr has launched a decentralized social application with new Bitcoin features

Video game payment company Zebedee today migrated its main ZBD application to Nostr, a decentralized platform that competes with Twitter. This move will eventually enable Zebedee’s users to seamlessly transition from the ZBD app to any of the existing dozens of applications in Nostr. Unlike traditional social networks that control user identities, integrating with the open-source Nostr protocol can significantly drive adoption by allowing any of the registered 18 million Nostr users to join the application. Zebedee’s co-founder and CTO Andre Neves said the ZBD app is now a full-featured Nostr client.

▌ Base Publishes Basic Governance Proposal Guidelines to Guide and Assist Community Members in Writing Relevant Proposals

Base, the Layer2 network led by Coinbase, has published basic governance proposal guidelines. The reason for this guide is that for most Dapps, especially those managed by DAOs, a formal governance proposal process is required to be deployed on Base. In order to support community members who share Base’s vision and are willing to participate in its construction, Base has released these guidelines, which break down the reasons, content, and methods of introducing Dapps or protocols to Base. Community members who are considering writing governance proposals can use the language or content in this guide or refer to more mature proposals.

▌ Game-focused Layer 3 Project Xai to Launch on Arbitrum

Xai is a Layer 3 network designed for gaming that leverages the technology stack of Arbitrum Orbit and is expected to launch later this year.

The blockchain is led by the Xai Foundation and is being developed in collaboration with Arbitrum developer Offchain Labs and web3 game developer Ex Populus.

▌ Decentralized Social Media Platform Lens Protocol Releases Open Governance Model

Lens Improvement Proposals (LIPs), the decentralized social media platform on Aave, has introduced a new open governance model where community members can propose improvements to the protocol. Lens was inspired by the Ethereum and Aave improvement proposal models and is trying to create a framework for developers, creators, and users to participate in the decision-making process for Len’s future development.

According to the announcement, there are currently three real-time proposals. The first proposal establishes an open governance model, while the second and third proposals are centered around open standards. The second proposal “will encourage the integration of third-party algorithms and machine learning (ML) services into the Lens Protocol,” while the third proposal defines “how metadata is categorized, organized, and labeled in Lens.”

▌ Blockchain Development Platform Alchemy Launches AI Development Tool AlchemyAI

Blockchain development platform Alchemy has launched an AI development tool called AlchemyAI, which will consist of two flagship products, ChatWeb3 and Alchemy ChatGPT Plugin, and will be launched in the coming weeks. ChatWeb3 is an AI chatbot supported by ChatGPT and is currently in testing.

▌Polygon partners with online shopping platform Flipkart

Polygon Labs has announced that Indian multinational online shopping platform Flipkart is now its new partner. Polygon and Flipkart are launching a brand loyalty programme called FireDrops 2.0, which aims to completely change brand marketing, storytelling, and customer engagement on the Polygon network. Specifically, users will benefit from lifelong discounts, membership passes, and other rewards that can be earned through incentives and tasks.

▌DeFi platform EigenLayer launches Restaking protocol on Ethereum mainnet

According to a press release, DeFi platform EigenLayer has deployed its restaking protocol on the Ethereum mainnet. The protocol allows those who have staked ETH to restake by depositing liquid staking tokens on EigenLayer, including Lido stETH (stETH), Rocket Pool ETH (rETH), and Coinbase Wrapped Staked ETH (cbETH).

EigenLabs, the developers of EigenLayer, has raised a total of $64.5 million in a series of investment rounds, including a $50 million Series A round in March, with a valuation of $500 million.

▌Web3 developer platform Thirdweb announces game division

Web3 developer platform Thirdweb has announced it will establish a game division, with Atif Khan, who has over 15 years of experience at Facebook and Stardust, becoming Vice President of Thirdweb’s gaming business.

▌Polygon to unveil Polygon 2.0

Ethereum scaling solution Polygon is set to unveil the blueprint for its 2.0 version in the coming weeks. It says this will cover themes including “the future of the Polygon PoS chain, utility and evolution of the Polygon token, and transition to greater protocol and fund community governance.”

The vision for Polygon 2.0 is to create a “value layer for the internet” enabling decentralised finance, digital ownership, new coordination mechanisms, and more.

Cryptocurrencies

▌Binance US: SEC asset freeze request would harm company

Binance US is urging a federal judge to deny the US Securities and Exchange Commission’s request to freeze billions of dollars of assets at the cryptocurrency exchange, arguing the move would cripple its business and harm customers. The exchange’s lawyers said in a court filing on Monday that without the ability to pay employees, vendors, suppliers and professionals or maintain the trading platform, its operations would quickly grind to a halt. With all of the company’s assets frozen, bank partners are likely to halt requests to transfer funds for any purpose, including customer fund redemptions.

▌ Zhao Changpeng: Binance has not sold Bitcoin or BNB

Binance CEO Zhao Changpeng tweeted that Binance has not sold Bitcoin or BNB and still holds FTT.

▌ Defense counsel: Zhao Changpeng has a bank account for BAM Trading but no signature rights

Binance.US responded to the US Securities and Exchange Commission’s allegations of fraud, market manipulation, and misleading customers about asset positions and security in court. In a new court filing, Binance.US claimed that it has “made significant efforts” to cooperate with the US Securities and Exchange Commission’s investigation since December 2020.

Regarding the US Securities and Exchange Commission’s allegations that Binance.US mixed customer assets with funds controlled by Zhao Changpeng, lawyers representing BAM Trading, Binance.US’s parent company, responded that the company “keeps customer fiat in segregated accounts with banking partners, separate from any company funds.” The company acknowledged that Zhao has a bank account for BAM Trading, but claimed that he does not have signature rights to the account.

The US Securities and Exchange Commission has requested a hearing on the temporary restraining order against Binance.US, which would effectively freeze the US subsidiary’s assets, except for customer withdrawals. The US Securities and Exchange Commission also wants Binance and Binance.US to provide a comprehensive explanation of their financial condition.

▌ BlackRock may get SEC approval for spot Bitcoin ETF via regulatory sharing agreement

BlackRock’s (BLK) iShares Bitcoin Trust fund application submitted to the US Securities and Exchange Commission (SEC) this week includes a regulatory sharing agreement in its proposal that could eliminate market manipulation risks related to Bitcoin.

In page 36 of BlackRock’s 19b-4 filing submitted to the US Securities and Exchange Commission, the company said that it will introduce Nasdaq (NDAQ) to mitigate the impact of market manipulation by reaching a supervisory sharing agreement with operators of Bitcoin (BTC) spot trading platforms.

The monitoring sharing agreement allows for sharing of information on market trading activity, clearing activities, and customer identities, making market manipulation less probable.

▌ Tether issued $11.6 billion in loans between 2019 and May 2021

According to documents related to a legal settlement released this week by the New York Attorney General, Tether issued $11.6 billion in collateralized loans between June 2019 and May 2021.

Of the 694 loans, 89% of the total loan amount was issued with Bitcoin collateral, while 9% of the loans were collateralized with Ethereum. The remaining 2% was split between Tether Gold (XAUT) and unnamed securities. Tether received collateral of 450,000 BTC and 1.1 million ETH. The documents also show that $8 billion in loans were repaid during this period.

▌ Crypto lawyer: Hinman files show SEC prioritized expanding its jurisdiction over protecting investors

According to crypto lawyer Fred Rispoli, the Hinman files describe an institution prioritizing its expansion of jurisdiction over fulfilling its core responsibility of protecting American investors. “These files are damning to the SEC, but the appearance of impropriety is even greater. Taken together, they show that the SEC is obviously more concerned with expanding its own turf than fulfilling its mission to protect American investors of nearly 90 years. They display the worst side of institutional bureaucracy.” Rispoli speculates that more documents may be required to elucidate events surrounding the Hinman speech and emphasizes the various entities and individuals that may have been involved in shaping the narrative. This includes exploring SEC staff communications regarding Hinman’s exclusion of Ether from his speech despite their suggestions.

▌ Kaiko: Cryptocurrency trading volumes hit yearly low in Q2

Cryptocurrency trading volumes hit a yearly low in Q2 across the board due to decreased trading volumes from market makers, according to data from Kaiko. In Q2 2023, the top 10 tokens (excluding stablecoins) had an average daily trading volume of $10 billion, compared to $18 billion in Q1 of this year.

As far as trading volume share of individual token markets in the entire Q2 was concerned, Bitcoin has lost around 20 percentage points since its peak in late March. Ethereum has performed better than Bitcoin, with a gain of 5 percentage points in trading volume share. Binance’s BNB has risen from 2% of trading volume to over 7% in the past few days, amid fears of Binance’s regulation.

▌ BCB Group cancels acquisition of Sutor Bank

Digital asset trading firm BCB Group will no longer acquire financial institution Sutor Bank. According to an email statement, Sutor Bank withdrew from the agreement to sell shares to BCB Group after “careful analysis and consideration” on both sides. BCB cited “recent banking market events and macroeconomic changes” and said it will focus more on its European strategy by applying for an electronic money license in France and taking action to capture and serve the demand for USD payment rails.

BCB Group first announced its plan to acquire Sutor Bank in December 2021. The specific terms of the deal have not been disclosed, but previous reports said the transaction would provide “a large injection of funds.”

▌ Digital asset accounting platform Bitwave launches online certification platform BitwaveU

Digital asset accounting platform Bitwave has announced the launch of self-service online education center BitwaveU. BitwaveU offers unlimited access to more than 30 courses, over 20 CPE credits and industry-leading certifications in cryptocurrency, accounting, and finance.

As an official NASBA sponsor, BitwaveU provides continuing education credits to meet annual CPE requirements for registered accountants.

▌ Mining firm Blockstream to launch ASIC miner in Q3 2024

Bitcoin infrastructure company Blockstream expects to launch dedicated integrated circuit (ASIC) miners around Q3 2024. The company acquired Israeli miner manufacturer Spondoolies in 2021 and brought the manufacturer’s core team into Blockstream’s mining division, led by Chris Cook and with former Spondoolies CEO Assaf Gilboa as EVP. In January 2023, Blockstream raised $125m to expand its mining business and said it plans to raise more funds to finance its mining business. The new ASICs were originally planned to launch in 2022, but Back now expects the miner to go on sale in H2 2024.

▌ Bit Digital earns 362 bitcoins in Q1 2023

Digital asset mining company Bit Digital, Inc. announced its unaudited Q1 financial results as of March 31, 2023. As of March 31, 2023, the company had cash, cash equivalents and restricted cash of $29.2m, total liquidity defined as fair market value of cash equivalents and restricted cash, USDC and digital assets of around $71.3m, and total assets of $92.2m. As of March 31, 2023, shareholder equity was $87m. The company earned 362.0 bitcoins this quarter. It earned 8.7 ETH and 23.0 rETH-h on native staking and Portara liquidity staking, respectively. It holds 724.8 BTC and 9,136.2 ETH, with fair market values of approximately $20.6m and $16.6m, respectively.

▌ SEC Earns $14 Billion in Crackdown on Cryptocurrency in 2022

As the US Securities and Exchange Commission (SEC) continues to crack down on some of the largest companies in the cryptocurrency space, including lawsuits against Coinbase and Binance, it has benefited greatly from its enforcement work. According to the annual report for the 2022 fiscal year, the regulatory agency generated $14.1 billion in revenue during this period, an increase of $1.9 billion from 2021. According to the document, most of these assets came from revenues seized from SEC enforcement actions, which, according to a news release from November, increased by 9% from the previous year in 2022 as the agency brought in 760 enforcement actions.

▌ Binance US Hires Former SEC Enforcement Joint Director For Defense

Binance US has hired four lawyers from Milbank LLP, including George Canellos, former joint director of enforcement for the US Securities and Exchange Commission. Binance US is preparing to defend itself against US allegations of operating an illegal securities exchange.

Canellos is global head of Milbank’s litigation and arbitration team, and previously oversaw about 1,300 lawyers at the SEC investigating insider trading actions, including those against hedge fund managers Raj Rajaratnam and SAC Capital. Prior to that, he was chief of the major crimes unit of the US Attorney’s Office for the Southern District of New York.

▌ Coinbase International Policy VP: Building in Abu Dhabi, Canada

Hong Kong legislator Johnny Ng has invited global virtual asset trading operators, including cryptocurrency exchange Coinbase, to register in the region. A Coinbase spokesperson responded to the tweet, saying Coinbase is committed to working with high-bar regulators both in and outside the US.

Coinbase CEO Brian Armstrong said in April that if regulators continue to be unclear about how to treat cryptocurrencies, the company would consider moving out of the US, which is something the company has been pushing for. Coinbase International Policy VP Tom Duff-Gordon said in an interview that Coinbase is now looking for global expansion. The company is trying to build in Abu Dhabi, Canada, and is waiting for approval to register in Singapore. In addition, while international expansion is a focus, Coinbase is not ready to give up on the US.

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