Tag: cryptocurrency

Binance.US Said to Have Laid Off Employees After US SEC Charges

The US affiliate of crypto giant Binance has carried out a round of layoffs since regulators last week charged it with violating securities laws and sought to freeze its assets, said two people with knowledge of the dismissals and employees’ social media posts.

One of the sources said around 50 people were laid off. Reuters was unable to independently verify the number or seniority of employees affected.

A Binance.US spokesperson did not respond to emails and calls seeking comment.

Employees in Binance.US’ legal, compliance and risk departments were among those dismissed, the people told Reuters, requesting anonymity because the matter is private.

The SEC on June 5 accused Binance and its founder and CEO Changpeng Zhao of creating Binance.US as part of a “web of deception” to evade securities laws aimed at protecting US investors. Binance said it would defend itself “vigorously.”

The SEC also sued Binance.US’ operating company, BAM Trading, alleging that it misled investors about “non-existent trading” controls over its platform.

A day later, the SEC asked a federal court to freeze Binance.US’ assets, including more than $2.2 billion (nearly Rs. 18,000 crore) held in crypto and some $377 million (nearly Rs. 3,100 crore) in US dollar bank accounts. The SEC expressed concern that the exchange could move those funds offshore.

Binance.US called the request “unwarranted” and said the SEC’s allegations were “unjustified.”

Two Binance.US employees said on LinkedIn on Wednesday they were leaving the company, with one citing a “round of layoffs.”

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OKX Seeking Regulatory Approval to Operate in Dubai, Plans to Expand Middle East Operations

OKX, one of the world’s largest cryptocurrency exchanges, is seeking regulatory approval to operate in Dubai as it plans to expand the company’s Middle East operations, an executive told Reuters on Thursday.

Regulation is an industry trend, OKX Global Head of Government Relations Tim Byun said.

“We would like to get ahead of that curve and be regulated in a sound manner,” he said.

Earlier this month, the US Securities and Exchange Commission (SEC) sued Binance and Coinbase, another two of the largest crypto exchanges, for allegedly breaching its rules.

Byun said he believed the SEC’s move would push more applicants towards innovative regulators like Dubai’s Virtual Asset Regulatory Authority (VARA).

OKX plans to hire 30 staff, Byun said, after opening an office last month in the Dubai World Trade Center in the business and financial hub of the United Arab Emirates.

OKX Middle East said on Thursday it had received a preparatory licence from Dubai’s regulator, a first step towards securing an operating licence that would allow it to serve institutional clients and investors.

“If we expand Dubai to offer services in Saudi Arabia or Bahrain, to jurisdictions where there is no domestic framework required, then those domestic populations are actually getting a windfall benefit because we are regulated by an international regulator,” Byun said.

OKX is regulated in the Bahamas and currently does not allow customers from the United States to use its platform due to regulatory issues.

VARA was formed in March 2022 to regulate the emerging virtual asset sector in the emirate – excluding the Dubai International Financial Centre financial free zone — as the UAE pushes to become a global hub for the industry.

No firm has yet been licensed under VARA’s full market product (FMP) stage — which would permit the serving of retail clients, regulator information shows. OKX plans to apply for such a licence, Byun said.

“If territories are willing to come up with a balanced clear transparent approach, OKX would like to be regulated and licensed and operate in that jurisdiction,” Byun said.

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Binance CEO Says Firm Did Not Sell Bitcoin or Binance Coin

Cryptocurrency exchange Binance has not sold either bitcoin or Binance Coin, its native token, the company’s CEO Changpeng Zhao tweeted on Tuesday.

Last week, Binance was sued by the US Securities and Exchange Commission, which listed 13 charges against the company, Zhao and the operator of its purportedly independent US exchange.

The lawsuits against Binance and Coinbase Global have increased fears the crypto market’s ordeal could be prolonged further after the sector was battered by a string of meltdowns including the bankruptcy of FTX, Binance’s biggest competitor, last year.

Binance Coin has lost more than 20 percent in value since the SEC‘s action.

It was previously reported that Binance would swap 750 million tether-tron token pairs for tether-ether in an attempt to maintain the stablecoin’s liquidity.

The move comes amid renewed regulatory scrutiny at the world’s largest cryptocurrency exchange and will help cushion some of the fallout from recent blows, including Binance being sued by the US Securities and Exchange Commission.

The swap, set to start after 12 pm UTC (05:30 pm IST) on Monday, will be held directly with the tether team, the tweet said.

Tether is the largest stablecoin that aims to maintain a 1:1 peg with the US dollar. Tron is the ninth largest cryptocurrency with a $6.3 billion (nearly Rs. 51,900 crore) market value, while ether is the largest after bitcoin, with its $210 billion (nearly Rs. 17,30,500 crore) market capitalization.

Last week, the SEC sued Binance, its CEO and founder Changpeng Zhao, and Binance.US’s operation alleging in 13 charges that Binance had engaged in a “web of deception,” artificially inflated trading volumes and diverted customer funds, and that Binance and Zhao were secretly controlling the US entity while publicly claiming that it was independent.

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Binance CEO’s Trading Firm Received $11 Billion via Client Deposit Company, Claims SEC

Merit Peak, an offshore trading company controlled by Binance CEO Changpeng Zhao, received around $11 billion (nearly Rs. 90,890 crore) of client assets through a Seychelles-based firm set up to take customer deposits, a US Securities and Exchange Commission filing shows.

The SEC filing, which on Tuesday asked a US court to freeze Binance’s US assets, came a day after the SEC sued Binance, its billionaire CEO Zhao, and the operator of its US affiliate exchange, for allegedly operating a “web of deception.”

In its 13 charges, the SEC alleged that Binance and Zhao used Merit Peak and Sigma Chain, another trading firm controlled by Zhao, to commingle corporate funds with client assets and use the monies “as they please.” This put customers’ assets at risk while Binance sought to “maximize” its profits, the SEC wrote in its civil complaint on Monday.

In response to the SEC’s lawsuit, Binance said it would defend its platform vigorously. “All user assets on Binance and Binance affiliate platforms, including Binance.US, are safe and secure,” it said in a statement on Monday. 

The funds received by British Virgin Islands-based Merit Peak between 2019 and 2021 flowed from Key Vision Development Ltd, also controlled by Zhao, the SEC filing on Tuesday showed.

The $11 billion sent from Key Vision to Merit Peak form part of the $22 billion (nearly Rs. 1,81,780 crore) in assets — mostly belonging to Binance and its US affiliate — that Merit Peak received between 2019 and 2021, the SEC filing on Tuesday showed.

Binance did not respond to Reuters’ emailed questions on the filing, and a spokesperson did not respond to a voice message.

Reuters reported last month that Key Vision and Merit Peak, along with Binance’s Cayman Islands holding company, formed the core of the global crypto exchange’s financial network. 

In response to that article, Binance denied mixing customer deposits and company funds, saying users who sent money were not making deposits but rather buying Binance’s bespoke dollar-linked crypto token. 

The SEC said in its lawsuit that Merit Peak, which described itself as trading with the “self-made wealth” of Zhao, operated on both the Binance.com and Binance.US platforms. 

The SEC said in the filing on Tuesday it could not determine why an entity “purportedly trading” on Binance.US with Zhao’s personal funds “acted as a ‘pass through’ account for billions of dollars of Binance Platforms customers’ funds.” 

Between 2019 and 2023, Sigma Chain’s US bank accounts received almost $500 million (nearly Rs. 4,130 crore), mostly from Binance and BAM Trading, with $15 million (nearly Rs. 120 crore) coming from Key Vision, the SEC’s Tuesday filing said. 

FX wires

The SEC’s filing on Tuesday gave further examples of how Binance and Zhao, one of the most prominent figures in crypto, allegedly moved “billions of dollars” through the United States.

Some Zhao-owned accounts have sent monies “offshore” over the last few months, the SEC wrote in the filing. 

Through 2022, a US account for a company called Swipewallet, of which Zhao is the beneficial owner, sent $1.5 billion (nearly Rs. 12,400 crore) in foreign exchange wires offshore, the SEC said in the filing without elaborating. The SEC said in such processes, dollars are converted to a foreign currency before transmitting to a beneficiary. 

Binance acquired Swipe, a digital wallet and debit card platform, in 2020. There have been no public posts on Swipe’s social media accounts since early last year. Swipe did not respond to a request for comment.

In some of the most detailed examples of the fund transfers by Binance and Zhao, the SEC’s filing on Tuesday alleged that on January 1 this year, $840 million (nearly Rs. 6,940 crore) was deposited into eight companies owned by Binance and Zhao, with $899 million (nearly Rs. 7,430 crore) withdrawn from those accounts “during that same time frame.” At the end of March, all but one of the accounts had a balance of zero, the SEC said. 

The SEC’s filing also said between January and March this year, multiple Binance bank accounts then wired over $162 million (nearly Rs. 1,340 crore) offshore to a foreign account belonging to a Singapore company beneficially owned by Binance’s back office manager, Guangying Chen, a close associate of Zhao. 

Binance did not respond to requests for comment on these alleged transfers.

Some money was also sent from Sigma Chain to Chen, the SEC said, without elaborating. Chen did not respond to Reuters’ requests for comment.

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Coinbase CEO Says the Crypto Exchange Has Been Always Transparent With US SEC

Coinbase Global’s CEO Brian Armstrong said on Wednesday that the crypto exchange has a long history of being transparent with the US Securities and Exchange Commission.

Armstrong was speaking in an interview with CNBC, a day after the company was sued by the US securities regulator on allegations it failed to register as an exchange.

“The SEC allowed us to become a public company … so, its not great to have a regulator come back and say, actually, we changed our mind,” Armstrong said.

The Securities and Exchange Commission (SEC) alleged Coinbase traded at least 13 crypto assets that are securities that should have been registered, including tokens such as Solana, Cardano and Polygon.

Coinbase shares rebounded on Wednesday to rise nearly 1 percent to $52.03 (nearly Rs. 4,000).

The stock has declined about 20 percent since the SEC sued Coinbase and rival Binance alleging securities law violations, wiping roughly $3 billion (nearly Rs. 24,800 crore) from Coinbase’s market value.

Short sellers have raked in roughly $463 million (nearly. Rs. 3,800 crore) in paper profits betting against Coinbase over the past two sessions, according to data from analytics firm Ortex.

Meanwhile, the US Securities and Exchange Commission have accused the company of operating illegally because it failed to register as an exchange. The lawsuit is the SEC’s second in two days against a major crypto exchange, following its case against Binance, the world’s largest cryptocurrency exchange, and founder Changpeng Zhao.

Crypto companies say the SEC rules are unclear, and that the agency is overreaching by trying to regulate them. On the other hand, ten US states led by California also on Tuesday accused Coinbase of securities law violations concerning its staking rewards program.

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Blockchain.com CEO Says US Debt Default Would Hit Cryptocurrencies Initially

A US government default would trigger an initial pull-back from cryptocurrencies followed by a “push upward” the CEO of London-based crypto firm Blockchain.com said on Thursday.

The US government could fall behind on its bills next month – and even default on its debt – if Congress does not raise a $31.4 trillion (roughly Rs. 2,59,54,29,80 crore) cap on government borrowing, a failure that could trigger economic calamity and panic on global financial markets.

In the short term, “a US default or a US recession is probably bad for crypto. These are risk assets, and you want to take risk off,” Blockchain.com CEO Peter Smith said at the Qatar Economic Forum, organised by Bloomberg.

“On a long horizon, these are probably good for crypto…If the US government defaults, we’ll probably see a quick pull-back and then a very strong push upward in the crypto market.”

The cryptocurrency market has followed cyclical patterns and while 2022 was “quite painful”, it is recovering this year and 2024 will be “another exponential year”, Smith said.

Blockchain.com, which offers users a crypto wallet and is also a crypto exchange, is considering an expansion of its small Middle Eastern office in the commercial center of Dubai.

“The (Dubai) governments in a very healthy, consultative process with the industry and about regulations…I think so long as those end up where we think they will, we’ll probably be investing heavily in Dubai,” he said.

Last September, Blockchain.com signed an agreement with Dubai’s crypto regulator Virtual Assets Regulatory Authority (VARA) and has since opened an office and hired staff.

Currently, the company is investing most heavily to shore up operations in Singapore and Europe, Smith said. 

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FTX Seeks to Claw Back Over $240 Million From Embed Acquisition

Bankrupt crypto exchange FTX is seeking to claw back more than $240 million (nearly Rs. 2,000 crore) it paid for stock trading platform Embed, saying former FTX insiders did no investigation before buying the essentially worthless bug-ridden software platform. 

FTX filed three lawsuits late Wednesday in US Bankruptcy Court in Delaware targeting former FTX insiders including indicted founder Sam Bankman-Fried, Embed executives including founder Michael Giles, and Embed shareholders. FTX alleged that Bankman-Fried and other FTX insiders misappropriated company funds to acquire stakes in Embed as part of the transaction.

FTX closed on the Embed acquisition just six weeks before the crypto exchange collapsed into bankruptcy in November. FTX lost billions in customer money while propping up its own risky investments, actions its current CEO John Ray called “old-fashioned embezzlement.”

FTX’s new management has been seeking to recover assets to repay customers since the bankruptcy filing. US law allows debtors to claw back payments made under certain circumstances shortly before a bankruptcy filing and use those funds to repay other creditors.

FTX recently tried to sell Embed, but the highest bidder was Giles, who offered only $1 million (nearly Rs. 8.27 crore). 

FTX’s auction “leaves no doubt” that the $220 million (nearly Rs. 1,820 crore) it spent to acquire Embed was “wildly inflated relative to the company’s fair value, which Giles well knew,” FTX wrote in its lawsuit. 

FTX intended to use Embed’s software to add stock trading to its crypto exchange platform, but Embed’s software was “essentially worthless,” the lawsuits said. FTX performed almost no investigation of Embed and “prioritized speed over all else,” they added.

Embed’s own insiders were surprised that FTX paid so much for the company after little more than a meeting with Giles, describing FTX’s approach to due diligence with a cowboy emoji in internal messages.

As part of the purchase, FTX also paid Embed employees $70 million (nearly Rs. 580 crore) in retention bonuses. Most of that went to Giles, who later worried how to explain his $55 million (nearly Rs. 455 crore) bonus to other Embed shareholders, according to the lawsuits.

FTX is seeking to recover $236.8 million (nearly Rs. 1,959 crore) from Giles and Embed insiders, and $6.9 million (nearly Rs. 57 crore) from Embed minority shareholders.

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Bankrupt Crypto Lender Voyager Digital Hopeful to Provide 35 Percent Customer Payout

Crypto lender Voyager Digital said Wednesday that customers will recover about 35 percent of their cryptocurrency deposits as the company winds down its operations after a failed buyout attempt by crypto exchange Binance.US.

US Bankruptcy Judge Michael Wiles approved Voyager’s proposed liquidation plan at a court hearing in Manhattan on Wednesday, allowing the company to return about $1.33 billion (nearly Rs. 11,000 crore) in crypto assets to customers and end its efforts to reorganize under Chapter 11.

Voyager filed for bankruptcy protection in July, citing volatility in cryptocurrency markets and a default on a large loan made to crypto hedge fund Three Arrows Capital (3AC).

Voyager suffered through two failed sale attempts during its bankruptcy. It initially sought to sell its assets for $1.42 billion (nearly Rs. 11,700 crore) to FTX, a deal that failed when FTX imploded in November. Binance.US stepped in with a $1.3 billion offer, but called off the deal on April 25, citing a “hostile and uncertain regulatory climate.”

Voyager customers’ recovery hopes are highly dependent on the outcome of litigation with FTX, which is seeking to claw back $445.8 million (nearly Rs. 3,670 crore) in loan repayments made to Voyager before FTX collapsed into bankruptcy.

If Voyager fully prevails in the FTX litigation, customers’ expected recovery would be 63.74 percent, according to Voyager’s court filings.

Voyager intends to repay customers with the same type of cryptocurrency that they had in their accounts. For deposits held in unsupported cryptocurrencies that cannot be withdrawn from Voyager’s platform and for Voyager’s proprietary VGX token, Voyager will instead repay customers using the stablecoin USDC.

Voyager was one of several crypto lenders to file for bankruptcy in 2022 after a boom in the COVID-19 pandemic. Others were Celsius Network, BlockFi, and Genesis Global Capital.

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BlockFi Gets Court’s Approval to Return $297 Million to Customers

Bankrupt crypto lender BlockFi received court permission on Thursday to return $297 million (roughly Rs. 2,439 crore) to customers with non-interest-bearing accounts, without repaying customers who had tried to move funds into those accounts at the last minute.

US Bankruptcy Judge Michael Kaplan in Trenton, New Jersey ruled that customers owned their deposits in BlockFi’s Wallet program, which did not pay interest and kept customer deposits separate from BlockFi’s other funds. Customers who had interest-bearing accounts did not own their deposits, which were turned over to BlockFi for use in its broader lending business, Kaplan ruled.

BlockFi was one of several crypto lenders to go bankrupt in 2022, and questions about the ownership of customer funds have also been raised in the bankruptcies of Celsius Network and Voyager Digital. Judges have ruled in those cases that funds in interest-bearing accounts are the property of a bankrupt company, to be pooled with other assets and used to repay all creditors at a later date.

The division at BlockFi between the two account types became muddied when BlockFi froze accounts on Nov. 10 shortly before filing for bankruptcy without fully disabling customer-facing functions on its app, creating a situation that Kaplan called “confusing, misleading, and frustrating.”

About 48,000 BlockFi customers tried to transfer $375 million (roughly Rs. 3,080 crore) from interest-bearing accounts into Wallet accounts during BlockFi’s shutdown on Nov. 10, and they received in-app and email confirmation that the transfers were complete. Lawyers for those customers argued that BlockFi should honor the transfers and return funds to those customers as well.

But BlockFi never performed the back-end work that was required to complete transfers between the two account types, and its terms of service allowed it to block transfer requests as part of its broader shutdown, Kaplan ruled.

“Quite simply, a customer’s withdrawal or transfer request on the user interface did not and does not automatically transfer digital assets,” Kaplan said.

BlockFi attorney Michael Slade had argued in an earlier court hearing that allowing the $375 million (roughly Rs. 3,080 crore) in transfers would severely dilute the recovery for Wallet customers and potentially prevent BlockFi from returning any customer funds, due to the practical difficulty of sorting out how to pay the additional Wallet claims from a fixed pool of assets.

BlockFi filed for Chapter 11 protection in November, citing volatility in crypto markets and its exposure to crypto exchange FTX, which imploded amid revelations that customer funds were missing from the exchange.

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FTX Gets Court Permission to Sell Its LedgerX Business to Raise Funds for Repaying Creditors

Bankrupt crypto exchange FTX received US bankruptcy court permission on Thursday to sell its LedgerX business for $50 million (nearly Rs. 408 crore), raising additional funds to repay creditors.

At a hearing in Wilmington, Delaware, US Bankruptcy Judge John Dorsey signed off on FTX’s sale of LedgerX, its non-bankrupt crypto derivatives trading platform, to an affiliate of Miami International Holdings.

Miami International Holdings owns the Bermuda Stock Exchange and several US-registered securities exchanges, including the Miami International Securities Exchange.

FTX is attempting to repay an estimated $11 billion (nearly Rs. 89,850 crore) to customers through a combination of asset sales and clawback actions. Since filing for bankruptcy in November, FTX has recovered more than $7.3 billion (nearly Rs. 59,630 crore) in cash and liquid crypto assets, the company reported in April.

As part of that broader effort, FTX on Wednesday said it would seek repayment of nearly $4 billion (nearly Rs.  32,670 crore) from Genesis Global Capital (GGC), the bankrupt lending arm of crypto firm Genesis.

FTX said in a court filing that Genesis owes it that money as a result of transactions that took place shortly before FTX’s bankruptcy filing. Under US bankruptcy law, debtors can try to claw back payments made in the 90 days before a bankruptcy filing so that those funds can be more equitably distributed among creditors.

Genesis was a primary “feeder fund” for FTX-affiliated hedge fund Alameda Research, loaning Alameda crypto assets that it used for further loans and investments, according to FTX.

At one point, Alameda held $8 billion (nearly Rs. 65,340 crore) in loans provided by Genesis, according to FTX. Genesis, unlike other creditors, was largely repaid before FTX went bankrupt, FTX said.

Companies in the crypto lending industry were highly intertwined during a turbulent 2022 that saw many tumble into bankruptcy. FTX, a once-prominent crypto exchange, filed for Chapter 11 amid allegations that founder Sam Bankman-Fried used FTX customers’ money to prop up Alameda‘s balance sheet.

Bankman-Fried has been indicted on fraud charges for his role in the company’s collapse, and he has pleaded not guilty. Former members of his inner circle have pleaded guilty and agreed to cooperate with prosecutors.

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